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CFS Bancorp, Inc. Reports Fourth Quarter 2012 Net Income of $1.6 Million and a 26% Reduction in Non-Performing Loans

CFS Bancorp, Inc. Reports Fourth Quarter 2012 Net Income of $1.6 Million and a 
26% Reduction in Non-Performing Loans 
MUNSTER, IN -- (Marketwire) -- 01/29/13 --  CFS Bancorp, Inc.
(NASDAQ: CITZ), the parent of Citizens Financial Bank, today reported
net income of $1.6 million, or $.14 per diluted share, for the fourth
quarter of 2012, compared to a net loss of $(12.6) million, or
$(1.17) per share, for the fourth quarter of 2011. The Company's net
income for the year ended December 31, 2012 was $4.7 million, or $.43
per diluted share, compared to a net loss of $(10.5) million, or
$(.98) per share, for the year ended December 31, 2011.  
Financial results for the quarter include: 


 
--  Non-performing loans decreased $9.6 million, or 26.3%, to $26.9
    million at December 31, 2012 from $36.6 million at September 30, 2012
    and $18.7 million, or 40.9%, from $45.6 million at December 31, 2011;
--  Non-performing assets decreased $3.7 million, or 6.9%, to $50.3
    million at December 31, 2012 from $54.0 million at September 30, 2012
    and $14.4 million, or 22.3%, from $64.7 million at December 31, 2011;
--  Net charge-offs for the fourth quarter of 2012 totaled $1.0 million, a
    modest increase from $863,000 for the third quarter of 2012 and a
    significant decrease from $17.3 million for the fourth quarter of
    2011;
--  Core deposits increased to 65.1% of total deposits compared to 63.3%
    and 61.1% of total deposits at September 30, 2012 and December 31,
    2011, respectively;
--  Net interest margin decreased to 3.38% during the fourth quarter of
    2012 from 3.47% in the third quarter of 2012 and was stable with 3.38%
    for the fourth quarter of 2011;
--  The Company's shareholders' equity to total assets ratio increased to
    9.83% at December 31, 2012 compared to 9.66% at September 30, 2012 and
    8.99% at December 31, 2011; and
--  The Bank's Tier 1 core capital ratio was 8.81% at December 31, 2012,
    which was relatively stable with 8.85% at September 30, 2012 and an
    increase from 8.26% at December 31, 2011; the Bank's total risk-based
    capital ratio increased to 14.06% from 13.82% at September 30, 2012
    and 12.65% at December 31, 2011.

  
Chief Executive Officer's Comments  
"We are extremely pleased with our positive results in 2012, our
fourth consecutive profitable quarter, continued reduction of our
non-performing loans and assets, and improved capital ratios," said
Daryl D. Pomranke, Chief Executive Officer. "The reduction of
non-performing loans through repayments and transfers to other real
estate owned are a result of our focus to improve asset quality. The
transfers to other real estate owned during the quarter moved these
assets into the final stage of resolution, giving us the ability to
sell the collateral. During the fourth quarter, we transferred 14
properties totaling $7.5 million to other real estate owned and sold
11 properties totaling $1.2 million realizing $376,000 in net gains
on the sales. We expect to make additional progress in reducing
non-performing assets in 2013." 
"We continued to execute our consistent strategic objectives during
2012. Overall non-performing assets are down from 2011, targeted loan
growth segments and core deposits continued to increase, and
non-interest expense decreased over 10% from 2011 as a result of
lower credit related costs and various cost reduction initiatives
implemented during the year. As a result, our pre-tax, pre-provision
earnings, as adjusted, increased 29.6% to $12.3 million for 2012
compared to $9.5 million during 2011. As we move into 2013, we will
continue to focus on opportunities for additional strategic
improvements," added Pomranke.  
"We are also once again proud and honored to be named by the Chicago
Tribune as one of Chicago's Top 100 Workplaces in 2012," continued
Pomranke. "It is truly an honor to receive this distinguished award
for the third year in a row. The receipt of this award is indicative
of the culture of our great organization that empowers our employees,
values their contributions, and confirms the level of satisfaction
and engagement experienced by all of our employees. We sincerely
thank our employees for their continued dedication, loyalty, and
commitment to High Performance."  
Update on Strategic Growth and Diversification Plan  
Our ratio of non-performing loans to total loans decreased to 3.89%
at December 31, 2012 from 5.19% at September 30, 2012 and 6.41% at
December 31, 2011. The decrease was primarily due to repayments
totaling $5.2 million of commercial real estate owner occupied and
non-owner occupied loans. In addition, $6.3 million of commercial
real estate loans and $882,000 of commercial construction and land
development loans were transferred to other real estate owned. The
ratio of non-performing assets to total assets decreased to 4.42% at
December 31, 2012 compared to 4.83% at September 30, 2012 and 5.63%
at December 31, 2011. See the Asset Quality table in this press
release for more detailed information. 
We also remain focused on reducing non-interest expense. Non-interest
expense for the fourth quarter of 2012 was $9.1 million compared to
$9.0 million for the third quarter of 2012 and $10.9 million for the
fourth quarter of 2011. The $1.8 million decrease from the fourth
quarter of 2011 is due to a $1.4 million decrease in severance and
early retirement expense related to the 2011 retirement of our former
Chief Executive Officer, a $325,000 decrease in credit related costs,
and $229,000 of lower writedowns of future branch sites. These
decreases were partially offset by increased marketing expenses
related to our High Performance Checking (HPC) product and higher
medical costs. As a result of our Voluntary Early Retirement Program
and the closing of two banking centers earlier in the year, our
number of FTE employees decreased to 261 at December 31, 2012 from
303 at December 31, 2011. See the "Non-Interest Income and
Non-Interest Expense" section in this press release for more detailed
information.  
We continue to target specific segments in our loan portfolio for
growth, including commercial and industrial, owner occupied
commercial real estate, and multifamily, which, in the aggregate,
comprised 59.2% of the commercial loan portfolio at December 31,
2012, compared to 56.5% at September 30, 2012 and 53.0% at December
31, 2011. Our focus on deepening client relationships continues to
emphasize core deposits. Total core deposits at December 31, 2012
increased by $26.7 million from September 30, 2012 and represent
65.1% of total deposits at December 31, 2012 compared to 63.3% at
September 30, 2012 and 61.1% at December 31, 2011, primarily due to
an increase in non-interest bearing accounts and the continued
shrinkage in certificates of deposit in this low interest rate
environment.  
Pre-tax, Pre-Provision Earnings, As Adjusted(1)  
Pre-tax, pre-provision earnings, as adjusted, decreased to $2.9
million for the fourth quarter of 2012 from $3.5 million for the
third quarter of 2012 and increased compared to $2.8 million for the
fourth quarter of 2011. The decrease from the third quarter of 2012
was primarily due to a $287,000 increase in medical expenses and a
$234,000 increase in professional fees.  
The pre-tax, pre-provision earnings, as adjusted, for the year ended
December 31, 2012 increased $2.8 million, or 29.6%, to $12.3 million
compared to $9.5 million for 2011. The increase was due to increases
in gains on sales of loans held for sale of $741,000 and income from
bank-owned life insurance of $268,000 as a result of the deaths of
two insured during 2012 combined with decreases of $1.7 million of
compensation and employee benefits, $346,000 of professional fees,
$334,000 of writedowns on future branch sites, and $194,000 of FDIC
insurance premiums and regulatory assessments. These favorable
variances were partially offset by a $448,000 increase in marketing
expenses and a $493,000 decrease in net interest income. 
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, as adjusted, is provided on the last
page of the attached tables. 
Net Interest Income and Net Interest Margin 


 
                                                                            
                                              Three Months Ended            
                                  ----------------------------------------- 
                                  December 31,  September 30,  December 31, 
                                      2012           2012          2011     
                                  ------------  -------------  ------------ 
                                            (Dollars in thousands)          
Net interest margin                       3.38%          3.47%         3.38%
Interest rate spread                      3.31           3.41          3.29 
Net interest income               $      8,642  $       8,849  $      8,966 
Average assets:                                                             
Yield on interest-earning assets          3.88%          4.02%         4.04%
  Yield on loans receivable               4.61           4.60          4.72 
  Yield on investment securities          2.90           3.21          3.12 
Average interest-earning assets   $  1,018,360  $   1,014,769  $  1,053,452 
Average liabilities:                                                        
Cost of interest-bearing                                                    
 liabilities                               .57%           .61%          .75%
  Cost of interest-bearing                                                  
   deposits                                .47            .51           .66 
  Cost of borrowed funds                  2.25           2.29          2.10 
Average interest-bearing                                                    
 liabilities                      $    902,746  $     909,841  $    931,800 

  
The net interest margin decreased nine basis points to 3.38% for the
fourth quarter of 2012 compared to 3.47% for the third quarter of
2012 and was stable compared to the fourth quarter of 2011. Net
interest income decreased to $8.6 million for the fourth quarter of
2012 compared to $8.8 million for the third quarter of 2012 and $9.0
million for the fourth quarter of 2011. The net interest margin was
negatively impacted by loans comprising a smaller proportion of
interest-earning assets and the Bank having a higher level of
liquidity. Management believes that higher levels of liquidity,
modest loan demand, reduced but still elevated level of
non-performing assets, the continued low interest rate environment,
and significant narrowing of spreads available on new investment
security purchases will continue to create pressure on our net
interest margin for the foreseeable future. The fourth quarter 2012
decrease in yields on investment securities compared to the third
quarter of 2012 was primarily related to prepayments and maturities
of higher-yielding investment securities with the proceeds reinvested
at lower rates. The level of non-performing loans continues to
negatively affect the yield on loans receivable. Also, the net
interest margin was positively affected during the fourth quarter of
2012 by a four basis point decrease in the cost of interest-bearing
liabilities from the third quarter of 2012 and an 18 basis point
decrease compared to the fourth quarter of 2011. 
Interest income totaled $9.9 million for the fourth quarter of 2012,
a decrease of 3.0% from $10.2 million for the third quarter of 2012
and 7.4% from $10.7 million for the fourth quarter of 2011. The
decreases are primarily related to the reinvestment of proceeds from
sales and maturities of investment securities in lower yielding
investments, lower loan balances, and maintaining higher levels of
short-term liquid investments due to the lack of suitable higher
yielding investment alternatives in the current low interest rate
environment combined with modest loan demand.  
Interest expense decreased 7.0% to $1.3 million for the fourth
quarter of 2012 compared to $1.4 million for the third quarter of
2012 and 26.4% from $1.8 million for the fourth quarter of 2011. Our
continuing success in increasing the proportion of low-cost core
deposits to total deposits and continued disciplined pricing on new
and renewing certificates of deposit contributed to the decrease in
interest expense during the fourth quarter of 2012. 
Non-Interest Income and Non-Interest Expense 
Non-interest income increased $478,000, or 15.8%, to $3.5 million for
the fourth quarter of 2012 compared to the third quarter of 2012
primarily due to a $398,000 increase in gains on sales of investment
securities, a $76,000 increase in income from bank-owned life
insurance, and a $58,000 increase in net gains on the sale of loans
held for sale. These increases were partially offset by a $49,000
decrease in net gains on sales of other real estate owned.  
Non-interest income increased $976,000, or 38.5%, from $2.5 million
for the fourth quarter of 2011 primarily due to a $327,000 increase
in net gains on the sale of investment securities, a $313,000
increase in net gains on the sale of other real estate owned, and a
$197,000 increase in net gains on the sale of loans held for sale due
to our expanded residential loan origination and mortgage banking
activities.  
Non-interest expense for the fourth quarter of 2012 increased
$113,000, or 1.3%, to $9.1 million compared to $9.0 million for the
third quarter of 2012. The fourth quarter of 2012 included increases
of $133,000 in compensation and employee benefits as a result of a
$287,000 increase in medical insurance expense, $234,000 in
professional fees, and $153,000 in loan collection expense. These
increases were partially offset by a $572,000 decrease in other real
estate owned expense due to $696,000 of lower net realizable value
writedowns.  
Non-interest expense during the fourth quarter of 2012 decreased $1.8
million, or 16.6%, to $9.1 million from $10.9 million for the fourth
quarter of 2011 due to the absence of $1.4 million of early
retirement expense related to the former Chief Executive Officer's
2011 early retirement combined with a decrease of $404,000 of other
real estate owned expense and $296,000 of other general and
administrative expenses. These decreases were partially offset by a
$109,000 increase in marketing expenses and a $79,000 increase in
loan collection expense.  
Income Tax Expense  
During the fourth quarter of 2012, we recorded income tax expense of
$658,000, equal to an effective tax rate of 29.6%, compared to
$493,000, or an effective tax rate of 28.1%, for the third quarter of
2012. During the fourth quarter of 2011, the Company recorded income
tax expense of $638,000, which included $6.3 million of a valuation
allowance related to a portion of its deferred tax assets.  
Asset Quality 


 
                                                                            
                                  December 31,  September 30,  December 31, 
                                      2012           2012          2011     
                                  ------------  -------------  ------------ 
                                            (Dollars in thousands)          
Non-performing loans (NPLs)       $     26,933  $      36,567  $     45,587 
Other real estate owned                 23,347         17,447        19,091 
                                  ------------  -------------  ------------ 
Non-performing assets (NPAs)      $     50,280  $      54,014  $     64,678 
                                  ============  =============  ============ 
                                                                            
Allowance for loan losses (ALL)   $     12,185  $      12,359  $     12,424 
Provision for loan losses for the                                           
 quarter ended                             850          1,160        12,542 
Loan charge-offs (recoveries):                                              
  Gross loan charge-offs          $      1,082  $       1,261  $     17,355 
  Recoveries                               (58)          (398)          (51)
                                  ------------  -------------  ------------ 
Net charge-offs for the quarter                                             
 ended                            $      1,024  $         863  $     17,304 
                                  ============  =============  ============ 
                                                                            
NPLs / total loans                        3.89%          5.19%         6.41%
NPAs / total assets                       4.42           4.83          5.63 
ALL / total loans                         1.76           1.76          1.75 
ALL / NPLs                               45.24          33.80         27.25 

 
Total non-performing loans decreased $9.6 million, or 26.3%, to $26.9
million at December 31, 2012 from $36.6 million at September 30, 2012
and 40.9% from $45.6 million at December 31, 2011. The decrease in
the fourth quarter of 2012 is primarily due to loan repayments of
$5.2 million of commercial real estate owner occupied and non-owner
occupied loans, transfers to other real estate owned totaling $6.2
million of commercial real estate non-owner occupied and $882,000 of
commercial construction and land development loans, and gross loan
charge-offs of $1.08 million. Partially offsetting these decreases,
commercial and retail loans transferred to non-accrual status during
the quarter totaled $3.1 million and $1.1 million, respectively. Of
the total non-accrual loans at December 31, 2012, $6.7 million, or
24.7%, are current and performing in accordance with their loan
agreements. The ratio of non-performing loans to total loans
decreased to 3.89% at December 31, 2012 from 5.19% and 6.41% at
September 30, 2012 and December 31, 2011, respectively.  
The provision for loan losses decreased to $850,000 for the fourth
quarter of 2012 compared to $1.16 million for the third quarter of
2012 and $12.5 million for the fourth quarter of 2011. The
significant decrease from the fourth quarter of 2011 was related to
the significantly lower level of charge-offs during the current
quarter compared to the fourth quarter of 2011, improved asset
quality indicators, and a smaller loan portfolio.  
The ratio of the allowance for loan losses to total loans was stable
at 1.76% at December 31, 2012 and September 30, 2012, compared to
1.75% at December 31, 2011. When it is determined that a
non-performing collateral-dependent loan has a collateral shortfall,
management immediately charges-off the collateral shortfall. As a
result, we are 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 has continued to be negatively affected by
cumulative partial charge-offs of $11.0 million recorded through
December 31, 2012 on $13.1 million (net of charge-offs) of
non-performing collateral dependent loans. At December 31, 2012, the
ratio of the allowance for loan losses to non-performing loans
excluding the $13.1 million of non-performing collateral dependent
loans with partial charge-offs decreased to 88.2% compared to 105.3%
at September 30, 2012 due to a lower amount of non-performing
collateral dependent loans with partial charge-offs. 
During the fourth quarter of 2012, we transferred five commercial
real estate and three retail loan relationships totaling $7.5 million
to other real estate owned and sold 11 other real estate owned
properties aggregating $1.2 million resulting in net gains on the
sales of $376,000. We continue to explore ways to reduce our overall
exposure in our non-performing assets through various alternatives,
including using A/B-Note structures and the potential sale of certain
of these assets. We currently have contracts for the sale of certain
other real estate owned properties which will reduce non-performing
assets by $1.6 million once completed with no anticipated loss on
sale, presuming the transactions close as scheduled and pursuant to
the contract terms.  
Statement of Condition Highlights 
The table below provides a summary of the more significant items in
our statement of condition as of the dates indicated. 


 
                                                                            
                                     December 31, September 30, December 31,
                                         2012          2012         2011    
                                     ------------ ------------- ------------
                                              (Dollars in thousands)        
Assets:                                                                     
Total assets                         $  1,138,109 $   1,118,681 $  1,148,950
Interest-bearing deposits                 114,122        76,972       59,090
Investment securities                     218,748       215,988      250,752
Loans receivable, net of unearned                                           
 fees                                     692,267       703,907      711,226
                                                                            
Liabilities and Equity:                                                     
Total liabilities                    $  1,026,287 $   1,010,622 $  1,045,702
Deposits                                  965,791       951,061      977,424
Borrowed funds                             50,562        50,018       54,200
Shareholders' equity                      111,822       108,059      103,248

 
Loans Receivable 


 
                                                                            
                           December 31,     September 30,    December 31,   
                                2012             2012             2011      
                          ---------------  ---------------  --------------- 
                                     % of             % of             % of 
                           Amount   Total   Amount   Total   Amount   Total 
                          --------  -----  --------  -----  --------  ----- 
                                        (Dollars in thousands)              
Commercial loans:                                                           
  Commercial and                                                            
   industrial             $102,628   14.8% $ 93,794   13.3% $ 85,160   12.0%
  Commercial real estate                                                    
   - owner occupied         98,046   14.2    96,991   13.8    93,833   13.2 
  Commercial real estate                                                    
   - non-owner occupied    164,392   23.7   178,621   25.4   188,293   26.5 
  Commercial real estate                                                    
   - multifamily            75,228   10.9    76,549   10.9    71,876   10.1 
  Commercial construction                                                   
   and land development     20,228    2.9    21,935    3.1    22,045    3.1 
  Commercial                                                                
   participations            5,311     .8     5,671     .8    12,053    1.7 
                          --------  -----  --------  -----  --------  ----- 
    Total commercial                                                        
     loans                 465,833   67.3   473,561   67.3   473,260   66.6 
Retail loans:                                                               
  One-to-four family                                                        
   residential             175,943   25.4   178,280   25.2   181,698   25.6 
  Home equity lines of                                                      
   credit                   46,477    6.7    47,605    6.8    52,873    7.4 
  Retail construction and                                                   
   land development          1,176     .2     1,778     .3     1,022     .1 
  Other                      3,305     .5     3,238     .5     2,771     .4 
                          --------  -----  --------  -----  --------  ----- 
    Total retail loans     226,901   32.8   230,901   32.8   238,364   33.5 
                          --------  -----  --------  -----  --------  ----- 
      Total loans                                                           
       receivable          692,734  100.1   704,462  100.1   711,624  100.1 
      Net deferred loan                                                     
       fees                   (467)   (.1)     (555)   (.1)     (398)   (.1)
                          --------  -----  --------  -----  --------  ----- 
        Total loans                                                         
         receivable, net                                                    
         of unearned fees $692,267  100.0% $703,907  100.0% $711,226  100.0%
                          ========  =====  ========  =====  ========  ===== 

 
Total loans receivable decreased $11.6 million at December 31, 2012
from September 30, 2012 and $19.0 million from December 31, 2011. The
fourth quarter decrease was primarily due to repayments totaling
$32.2 million, sales of one-to-four family loans totaling $15.2
million, transfers to other real estate owned totaling $7.5 million,
and gross charge-offs of $1.08 million. Partially offsetting these
decreases, loan fundings during the fourth quarter of 2012 totaled
$43.5 million, a 16.7% increase from $37.3 million for the third
quarter of 2012 and a 33.1% increase from $32.7 million for the
fourth quarter of 2011.  
At December 31, 2012, our total commercial loans outstanding that
were originated prior to January 1, 2008 (Pre-1/1/08) decreased to
$152.4 million, or 32.7% of total commercial loans outstanding,
compared to $172.3 million, or 36.4%, at September 30, 2012 and
$202.6 million, or 42.8%, at December 31, 2011. The Pre-1/1/08
portfolio has had a significantly higher percentage of non-performing
loans and has accounted for 92.9% of all commercial loan charge-offs
in the last five years. Please refer to our Annual Report on Form
10-K for the year ended December 31, 2011 and Quarterly Report on
Form 10-Q for the quarter ended September 30, 2012 for more detailed
discussions of our Pre-1/1/08 commercial portfolio. 
During the fourth quarter of 2012, we sold $15.2 million of
conforming one-to-four family fixed-rate mortgage loans into the
secondary market and recorded a gain on sale of $385,000 compared to
loan sales and gains on sale of $17.5 million and $327,000,
respectively, in the third quarter of 2012 and $10.3 million and
$188,000, respectively, in the fourth quarter of 2011. 
Deposits 


 
                                                                            
                                                                            
                              December 31,   September 30,    December 31,  
                                  2012            2012            2011      
                             --------------  --------------  -------------- 
                                       % of            % of            % of 
                              Amount  Total   Amount  Total   Amount  Total 
                             -------- -----  -------- -----  -------- ----- 
                                         (Dollars in thousands)             
Checking accounts:                                                          
  Non-interest bearing       $107,670  11.1% $ 98,723  10.4% $ 96,321   9.9%
  Interest-bearing            185,388  19.2   177,458  18.6   175,150  17.9 
Money market accounts         182,001  18.9   179,400  18.9   192,593  19.7 
Savings accounts              153,799  15.9   146,617  15.4   133,292  13.6 
                             -------- -----  -------- -----  -------- ----- 
  Core deposits               628,858  65.1   602,198  63.3   597,356  61.1 
Certificates of deposit                                                     
 accounts                     336,933  34.9   348,863  36.7   380,068  38.9 
                             -------- -----  -------- -----  -------- ----- 
    Total deposits           $965,791 100.0% $951,061 100.0% $977,424 100.0%
                             ======== =====  ======== =====  ======== ===== 

 
During the first quarter of 2012, we implemented our HPC deposit
acquisition marketing program that targets both retail and business
clients. The program is designed to attract a younger demographic and
enhance growth in the number of checking accounts, core deposits, and
related fee income as well as to provide additional cross-selling
opportunities. In addition, core deposits during 2012 benefited from
clients moving maturing certificates of deposit into money market and
savings accounts due to the current low interest rate environment.
During 2012, we also reviewed the pricing and cross-sell potential
and decided to exit four of our larger single-service deposit
relationships resulting in a decrease of $42.0 million in core
deposits since December 31, 2011. This decision enabled us to
decrease our level of liquidity and improve our Tier 1 core capital
ratios. 
Borrowed Funds 


 
                                                                            
                                     December 31, September 30, December 31,
                                         2012          2012         2011    
                                     ------------ ------------- ------------
                                              (Dollars in thousands)        
Short-term variable-rate repurchase                                         
 agreements                          $     11,053 $      10,430 $     14,334
FHLB advances                              39,509        39,588       39,866
                                     ------------ ------------- ------------
Total borrowed funds                 $     50,562 $      50,018 $     54,200
                                     ============ ============= ============

 
Borrowed funds increased slightly during the fourth quarter of 2012
compared to the third quarter of 2012 and decreased compared to the
fourth quarter of 2011 primarily due to levels of borrowings from
repurchase agreements, which will fluctuate depending on our client's
liquidity needs. 
Shareholders' Equity 
Shareholders' equity at December 31, 2012 increased to $111.8
million, or 9.83% of assets, from $108.1 million, or 9.66% of assets,
at September 30, 2012 and $103.2 million, or 8.99% of assets, at
December 31, 2011. The increase was primarily due to net income of
$1.6 million for the quarter and an increase in accumulated other
comprehensive income, net of tax, of $2.3 million during the quarter. 
At December 31, 2012, the Bank's Tier 1 core capital ratio was
relatively stable at 8.81% compared to 8.85% at September 30, 2012
and significantly increased from 8.26% at December 31, 2011. The
Bank's total risk-based capital ratio increased to 14.06% from 13.82%
at September 30, 2012 and 12.65% at December 31, 2011. Both the Tier
1 and the total risk-based capital ratios exceeded "minimum" and
"well capitalized" regulatory capital requirements at December 31,
2012, September 30, 2012, and December 31, 2011. 
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 to be successful. We
have 20 full-service banking centers throughout adjoining markets in
Chicago's Southwest suburbs and Northwest Indiana. Citizens Financial
Bank has been recognized by the Chicago Tribune as one of Chicago's
Top 100 Workplaces for the third year in a row for 2012. Our website
can be found at www.citz.com. 
Forward-Looking Information 
This press release contains certain forward-looking statements and
information relating to us that is based on our beliefs as well as
assumptions made by and information currently available to us. These
forward-looking statements include but are not limited to statements
regarding our ability to successfully execute our strategy and
Strategic Growth and Diversification Plan, the level and sufficiency
of the Bank's current regulatory capital and equity ratios, our
ability to continue to diversify the loan portfolio, efforts at
deepening client relationships, increasing levels of core deposits,
lowering non-performing asset levels, managing and reducing
credit-related costs, increasing revenue growth and levels of earning
assets, the effects of general economic and competitive conditions
nationally and within our core market area, the ability to sell other
real estate owned properties and mortgage loans held for sale, the
sufficiency of the levels of provision for and the allowance for loan
losses, amounts of charge-offs, levels of 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, the interest rate environment, and other risk factors
identified in the filings we make 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 that are not historical or
current facts, as they relate to us, our business, prospects, or our
management, are intended to identify forward-looking statements. Such
statements reflect our current views 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.
We do not intend to update these forward-looking statements unless
required to under the federal securities laws. 


 
                                                                            
                             CFS BANCORP, INC.                              
               Consolidated Statements of Income (Unaudited)                
               (Dollars in thousands, except per share data)                
                                                                            
                         Three Months Ended                Year Ended       
                ----------------------------------- ----------------------- 
                  December   September    December    December    December  
                    31,         30,         31,         31,         31,     
                    2012        2012        2011        2012        2011    
                ----------- ----------- ----------- ----------- ----------- 
Interest income:                                                            
 Loans                                                                      
  receivable    $     8,183 $     8,237 $     8,625 $    33,049 $    35,315 
 Investment                                                                 
  securities          1,650       1,923       2,015       7,889       7,894 
 Other interest-                                                            
  earning assets        110          88          94         394         495 
                ----------- ----------- ----------- ----------- ----------- 
  Total interest                                                            
   income             9,943      10,248      10,734      41,332      43,704 
                                                                            
Interest                                                                    
 expense:                                                                   
 Deposits             1,008       1,102       1,464       4,794       6,736 
 Borrowed funds         293         297         304       1,180       1,117 
                ----------- ----------- ----------- ----------- ----------- 
  Total interest                                                            
   expense            1,301       1,399       1,768       5,974       7,853 
                ----------- ----------- ----------- ----------- ----------- 
Net interest                                                                
 income               8,642       8,849       8,966      35,358      35,851 
Provision for                                                               
 loan losses            850       1,160      12,542       4,210      17,114 
                ----------- ----------- ----------- ----------- ----------- 
Net interest                                                                
 income (loss)                                                              
 after provision                                                            
 for loan losses      7,792       7,689      (3,576)     31,148      18,737 
                                                                            
Non-interest                                                                
 income:                                                                    
 Deposit related                                                            
  fees                1,646       1,662       1,570       6,355       6,278 
 Net gain on                                                                
  sale of:                                                                  
  Investment                                                                
   securities           592         194         265       1,509       1,715 
  Loans held for                                                            
   sale                 385         327         188       1,071         330 
  Other real                                                                
   estate owned         376         425          63         840       2,562 
 Income from                                                                
  bank-owned                                                                
  life insurance        227         151         180       1,080         812 
 Other income           284         273         268       1,154       1,154 
                ----------- ----------- ----------- ----------- ----------- 
  Total non-                                                                
   interest                                                                 
   income             3,510       3,032       2,534      12,009      12,851 
                                                                            
Non-interest                                                                
 expense:                                                                   
 Compensation                                                               
  and employee                                                              
  benefits            4,315       4,182       4,319      17,677      19,423 
 Net occupancy                                                              
  expense               672         697         677       2,756       2,818 
 FDIC insurance                                                             
  premiums and                                                              
  regulatory                                                                
  assessments           474         475         483       1,927       2,121 
 Data processing        483         462         433       1,828       1,740 
 Furniture and                                                              
  equipment                                                                 
  expense               436         417         449       1,778       1,802 
 Marketing              353         283         244       1,362         914 
 Professional                                                               
  fees                  411         177         354       1,039       1,385 
 Other real                                                                 
  estate owned                                                              
  related                                                                   
  expense, net          502       1,074         906       2,510       4,123 
 Loan collection                                                            
  expense               323         170         244         730         714 
 Severance and                                                              
  retirement                                                                
  compensation                                                              
  expense                --          --       1,375         876       1,375 
 Other general                                                              
  and                                                                       
  administrative                                                            
  expenses            1,113       1,032       1,409       4,317       4,702 
                ----------- ----------- ----------- ----------- ----------- 
  Total non-                                                                
   interest                                                                 
   expense            9,082       8,969      10,893      36,800      41,117 
                ----------- ----------- ----------- ----------- ----------- 
                                                                            
Income (loss)                                                               
 before income                                                              
 tax expense          2,220       1,752     (11,935)      6,357      (9,529)
Income tax                                                                  
 expense                658         493         638       1,692         945 
                ----------- ----------- ----------- ----------- ----------- 
                                                                            
Net income                                                                  
 (loss)         $     1,562 $     1,259 $   (12,573)$     4,665 $   (10,474)
                =========== =========== =========== =========== =========== 
                                                                            
Basic earnings                                                              
 (loss) per                                                                 
 share          $       .15 $       .12 $     (1.17)$       .43 $      (.98)
Diluted earnings                                                            
 (loss) per                                                                 
 share                  .14         .12       (1.17)        .43        (.98)
                                                                            
Weighted-average                                                            
 common and                                                                 
 common share                                                               
 equivalents                                                                
 outstanding:                                                               
 Basic           10,754,739  10,747,974  10,699,996  10,737,804  10,684,133 
 Diluted         10,819,679  10,806,861  10,742,480  10,794,974  10,740,602 
                                                                            
                                                                            
                             CFS BANCORP, INC.                              
              Consolidated Statements of Condition (Unaudited)              
                           (Dollars in thousands)                           
                                                                            
                                  December 31,  September 30,  December 31, 
                                      2012           2012          2011     
                                  ------------  -------------  ------------ 
                                                                            
ASSETS                                                                      
Cash and amounts due from                                                   
 depository institutions          $     20,577  $      31,611  $     32,982 
Interest-bearing deposits              114,122         76,972        59,090 
                                  ------------  -------------  ------------ 
  Cash and cash equivalents            134,699        108,583        92,072 
                                                                            
Investment securities available-                                            
 for-sale, at fair value               203,290        202,498       234,381 
Investment securities held-to-                                              
 maturity, at cost                      15,458         13,490        16,371 
Investment in Federal Home Loan                                             
 Bank stock, at cost                     6,188          6,188         6,188 
                                                                            
Loans receivable, net of unearned                                           
 fees                                  692,267        703,907       711,226 
  Allowance for loan losses            (12,185)       (12,359)      (12,424)
                                  ------------  -------------  ------------ 
    Net loans                          680,082        691,548       698,802 
                                                                            
Loans held for sale                      1,509          2,199         1,124 
Bank-owned life insurance               36,604         36,586        36,275 
Accrued interest receivable              2,528          2,697         3,011 
Other real estate owned                 23,347         17,447        19,091 
Office properties and equipment         15,768         16,121        17,539 
Net deferred tax assets                 11,302         13,801        16,273 
Prepaid expenses and other assets        7,334          7,523         7,823 
                                  ------------  -------------  ------------ 
      Total assets                $  1,138,109  $   1,118,681  $  1,148,950 
                                  ============  =============  ============ 
                                                                            
LIABILITIES AND SHAREHOLDERS'                                               
 EQUITY                                                                     
Deposits                          $    965,791  $     951,061  $    977,424 
Borrowed funds                          50,562         50,018        54,200 
Advance payments by borrowers for                                           
 taxes and insurance                     4,734          4,075         4,275 
Other liabilities                        5,200          5,468         9,803 
                                  ------------  -------------  ------------ 
  Total liabilities                  1,026,287      1,010,622     1,045,702 
                                                                            
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;                                                
   10,874,687, 10,876,151, and                                              
   10,874,668 shares outstanding           234            234           234 
  Additional paid-in capital           187,260        187,254       187,030 
  Retained earnings                     76,914         75,461        72,683 
  Treasury stock, at cost;                                                  
   12,548,619, 12,547,155, and                                              
   12,548,638 shares                  (154,698)      (154,695)     (154,773)
  Accumulated other comprehensive                                           
   income (loss), net of tax             2,112           (195)       (1,926)
                                  ------------  -------------  ------------ 
    Total shareholders' equity         111,822        108,059       103,248 
                                  ------------  -------------  ------------ 
      Total liabilities and                                                 
       shareholders' equity       $  1,138,109  $   1,118,681  $  1,148,950 
                                  ============  =============  ============ 
                                                                            
                                                                            
                              CFS BANCORP, INC                              
                    Selected Financial Data (Unaudited)                     
               (Dollars in thousands, except per share data)                
                                                                            
                                  December 31,  September 30,  December 31, 
                                      2012           2012          2011     
                                  ------------  -------------  ------------ 
                                                                            
Book value per share              $      10.28  $        9.94  $       9.49 
Shareholders' equity to total                                               
 assets                                   9.83%          9.66%         8.99%
Tier 1 core capital ratio (Bank                                             
 only)                                    8.81           8.85          8.26 
Total risk-based capital ratio                                              
 (Bank only)                             14.06          13.82         12.65 
Common shares outstanding           10,874,687     10,876,151    10,874,668 
Employees (FTE)                            261            259           303 
Number of full service banking                                              
 centers                                    20             20            22 
                                                                            
                                                                            
                          Three Months Ended               Year Ended       
                   --------------------------------  ---------------------  
                    December   September  December    December   December   
                      31,        30,        31,         31,        31,      
                      2012       2012       2011        2012       2011     
                   ---------- ---------- ----------  ---------- ----------  
Average Balance                                                             
 Data:                                                                      
  Total assets     $1,126,087 $1,123,777 $1,161,928  $1,142,561 $1,146,118  
  Loans                                                                     
   receivable, net                                                          
   of unearned                                                              
   fees               706,066    712,663    724,562     708,218    728,811  
  Investment                                                                
   securities         222,972    234,395    253,061     242,162    249,953  
  Interest-earning                                                          
   assets           1,018,360  1,014,769  1,053,452   1,032,646  1,032,346  
  Deposits            956,561    956,939    979,320     974,884    973,641  
  Interest-bearing                                                          
   deposits           851,829    859,051    875,221     872,491    873,494  
  Non-interest                                                              
   bearing                                                                  
   deposits           104,732     97,888    104,099     102,393    100,147  
  Interest-bearing                                                          
   liabilities        902,746    909,841    931,800     923,851    919,886  
  Shareholders'                                                             
   equity             108,795    106,145    114,793     105,769    115,096  
Performance Ratios                                                          
 (annualized):                                                              
  Return on                                                                 
   average assets         .55%       .45%     (4.29)%       .41%      (.91)%
  Return on                                                                 
   average equity        5.71       4.72     (43.45)       4.41      (9.10) 
  Average yield on                                                          
   interest-                                                                
   earning assets        3.88       4.02       4.04        4.00       4.23  
  Average cost of                                                           
   interest-                                                                
   bearing                                                                  
   liabilities            .57        .61        .75         .65        .85  
  Interest rate                                                             
   spread                3.31       3.41       3.29        3.35       3.38  
  Net interest                                                              
   margin                3.38       3.47       3.38        3.42       3.47  
  Non-interest                                                              
   expense to                                                               
   average assets        3.21       3.18       3.72        3.22       3.59  
  Efficiency ratio                                                          
   (1)                  78.56      76.74      96.96       80.25      87.51  
                                                                            
Cash dividends                                                              
 declared per                                                               
 share             $      .01 $      .02 $      .01  $      .04 $      .04  
Market price per                                                            
 share of common                                                            
 stock for the                                                              
 period ended:                                                              
  Close            $     6.27 $     5.46 $     4.31  $     6.27 $     4.31  
  High                   6.41       5.75       4.89        6.41       5.90  
  Low                    5.54       4.42       4.12        4.30       4.12  
                                                                            
------------------                                                          
(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.                                    
                                                                            
                                                                            
                             CFS BANCORP, INC.                              
   Reconciliation of Income Before Income Taxes to Pre-Tax, Pre-Provision   
                            Earnings, as adjusted                           
                                (Unaudited)                                 
                           (Dollars in thousands)                           
                                                                            
                                             Three Months Ended             
                                ------------------------------------------- 
                                 December 31,  September 30,   December 31, 
                                     2012           2012           2011     
                                -------------  -------------  ------------- 
Income (loss) before income                                                 
 taxes                          $       2,220  $       1,752  $     (11,935)
Provision for loan losses                 850          1,160         12,542 
                                -------------  -------------  ------------- 
Pre-tax, pre-provision earnings         3,070          2,912            607 
                                                                            
Add back (subtract):                                                        
  Net gain on sale of                                                       
   investment securities                 (592)          (194)          (265)
  Net gain on sale of other                                                 
   real estate owned                     (376)          (425)           (63)
  Other real estate owned                                                   
   related expense, net                   502          1,074            906 
  Loan collection expense                 323            170            244 
  Severance and retirement                                                  
   compensation expense                    --             --          1,375 
                                -------------  -------------  ------------- 
Pre-tax, pre-provision                                                      
 earnings, as adjusted          $       2,927  $       3,537  $       2,804 
                                =============  =============  ============= 
                                                                            
Pre-tax, pre-provision                                                      
 earnings, as adjusted, to                                                  
 average assets (annualized)             1.03%          1.25%           .96%
                                =============  =============  ============= 
                                                                            
                                                                            
                                                        Year Ended          
                                               ---------------------------- 
                                                December 31,   December 31, 
                                                    2012           2011     
                                               -------------  ------------- 
Income (loss) before income taxes              $       6,357  $      (9,529)
Provision for loan losses                              4,210         17,114 
                                               -------------  ------------- 
Pre-tax, pre-provision earnings                       10,567          7,585 
                                                                            
Add back (subtract):                                                        
  Net gain on sale of investment securities           (1,509)        (1,715)
  Net gain on sale of other real estate owned           (840)        (2,562)
  Other real estate owned related expense,                                  
   net                                                 2,510          4,123 
  Loan collection expense                                730            714 
  Severance and retirement compensation                                     
   expense                                               876          1,375 
                                               -------------  ------------- 
Pre-tax, pre-provision earnings, as adjusted   $      12,334  $       9,520 
                                               =============  ============= 
                                                                            
Pre-tax, pre-provision earnings, as adjusted,                               
 to average assets                                      1.08%           .83%
                                               =============  ============= 

 
Our accounting and reporting policies conform to U.S. generally
accepted accounting principles (GAAP) and general practice within the
banking industry. We use certain non-GAAP financial measures to
evaluate our financial performance and have provided the non-GAAP
financial measures of pre-tax, pre-provision earnings, as adjusted,
and pre-tax, pre-provision earnings, as adjusted, to average assets.
In these non-GAAP financial measures, the provision for loan losses,
other real estate owned related income and expense, loan collection
expense, and certain other items, such as gains and losses on sales
of investment securities and other real estate owned and severance
and retirement compensation expenses, are excluded. We believe that
these measures are useful because they provide a more comparable
basis for evaluating financial performance excluding certain
credit-related costs and other non-recurring items period to period
and allows management and others to assess our ability to generate
pre-tax earnings to cover our provision for loan losses and other
credit-related costs. Although these non-GAAP financial measures are
intended to enhance investors' understanding of our business
performance, these operating measures should not be considered as an
alternative to GAAP. 
CONTACT:
Daryl D. Pomranke
President and Chief Executive Officer
219-513-5150 
Jerry A. Weberling
Executive Vice President and CFO
219-513-5103