First Keystone Financial, Inc. (NASDAQ:FKFS), the holding company for
First Keystone Bank (the “Bank”),
reported today net income for the quarter ended March 31, 2008 of
$207,000, or $0.09 per diluted share, compared to $167,000, or $0.07 per
diluted share, for the same period last year. Net income for the six
months ended March 31, 2008 was $439,000, or $0.19 per diluted share, as
compared to $255,000, or $0.12 per diluted share, for the same period in
2007.
“We are pleased to report improvement in our
earnings in the second quarter of fiscal 2008 as compared to the same
quarter in fiscal 2007. Furthermore, we continue to make significant
progress in implementing our improved loan underwriting and credit
review processes, as evidenced by the significant reduction in
non-performing assets from fiscal year-end. Although we have much more
work ahead, including challenges to increase our net income and reduce
operating expenses, we are pleased that our numbers are beginning to
reflect the positive changes we have implemented,”
said President Thomas Kelly.
Net interest income for the three months ended March 31, 2008 decreased
$119,000, or 4.5%, to $2.5 million as compared to the same period in
2007. The decrease in net interest income was primarily the result of a
$536,000, or 7.4%, decrease in interest income for the quarter ended
March 31, 2008 due to a 46 basis point decrease in the weighted average
rate earned on interest-earning assets. However, the decrease in
interest income was partially offset by a $417,000, or 9.1%, decrease in
interest expense for the quarter ended March 31, 2008 as compared to the
second quarter of fiscal 2007 primarily due to a decrease of 34 basis
points in the weighted average rate paid on interest-bearing
liabilities. The Company’s net interest margin
decreased by 10 basis points in the second quarter of fiscal 2008 to
2.11%, as compared to 2.21% for the second quarter of fiscal 2007.
On a linked quarter basis, net interest income increased $34,000, or
1.4%, primarily due to the $2.3 million increase in average net
interest-earning assets. However, partially offsetting the growth in the
average balance was the 27 basis point decrease in the yield earned on
average interest-earning assets experienced during the second quarter of
fiscal 2008 which was substantially offset by a 22 basis point decrease
in the rates paid on interest-bearing liabilities. The Company’s
net interest margin decreased 5 basis points due to the recent
reductions in the prime rate as a result of the Federal Reserve’s
actions, reducing the yield earned on our interest-earning assets
partially offset by a decline in the Company’s
cost of funds.
At March 31, 2008, non-performing assets decreased $3.5 million to $1.2
million, or 0.2%, of total assets, from $4.7 million at September 30,
2007. During the second quarter, the Company experienced a decrease of
$600,000 in non-performing assets which was primarily the result of $1.0
million in commercial loans that had been previously designated as 90
days delinquent and still accruing because the loans had exceeded their
contractual maturities being returned to performing status. This return
to performing status was the result of a $618,000 commercial real estate
loan being renewed with an extended term and four commercial lines of
credit aggregating $427,000 being renewed. This decrease was partially
offset by the inclusion in non-performing loans of a $500,000
construction-related line of credit that has exceeded its contractual
maturity, but, because it is otherwise continuing to pay in accordance
with its terms, is designated as 90 days past due and still accruing.
For the three months ended March 31, 2008 as compared to the three
months ended March 31, 2007, the provision for loan losses decreased
$86,000 to $14,000. The decrease in the provision for loan losses was
based on the Company’s quarterly review of the
credit quality of its loan portfolio, the level of criticized and
classified assets, the amount of net charge-offs incurred during the
second quarter of fiscal 2008 and other factors. The Company's coverage
ratio, which is the ratio of the allowance for loan losses to
non-performing loans, was 284.5% and 189.1% at March 31, 2008 and
December 31, 2007, respectively.
For the quarter ended March 31, 2008, non-interest income decreased
$145,000 to $708,000 as compared to the same period last year. The
decrease was primarily the result of decreases of $120,000, $61,000, and
$8,000 in gains on sales of investment securities, real estate owned,
and loans, respectively. No sales of assets occurred during the quarter
ended March 31, 2008. These decreases were partially offset by increases
of $31,000 and $13,000 in earnings on bank owned life insurance and
other non-operating income, respectively.
Non-interest expense decreased $271,000 to $3.0 million for the quarter
ended March 31, 2008 as compared to the same period last year. The
decrease for the quarter ended March 31, 2008 was primarily due to
decreases of $234,000, $33,000, and $28,000 in professional fees,
salaries and employee benefits, and other non-interest expense,
respectively. These decreases were partially offset by $13,000 increases
in both federal deposit insurance premiums and occupancy and equipment
costs.
The Company recognized an income tax expense of $5,000 and an income tax
benefit of $48,000 for the quarters ended March 31, 2008 and 2007,
respectively. The $53,000 increase in the income tax expense was a
result of the increase in the Company’s pretax
income combined with the decrease in the tax-exempt income from
municipal securities.
The Company’s total assets decreased by $5.3
million from $524.9 million at September 30, 2007 to $519.6 million at
March 31, 2008. Cash and cash equivalents decreased by $24.8 million to
$28.1 million at March 31, 2008 from $52.9 million at September 30, 2007
primarily due to purchases of mortgage-related securities available for
sale, and, to a lesser extent, a reduction in deposits. Loans receivable
decreased by $14.0 million, from $292.4 million at September 30, 2007 to
$278.4 million at March 31, 2008 primarily as a result of the Company’s
experiencing repayments within the commercial real estate and business
loan portfolios while only originating a limited amount of such loans.
This resulted from the Company’s self-imposed
curtailment of such lending activity during the process of implementing
a substantially enhanced credit review and administration
infrastructure. However, in view of the significant progress achieved in
enhancing and improving the Company’s credit
review and administration, and in order to be able to actively engage in
commercial real estate and business lending, the Company recently hired
an experienced commercial lending officer. Deposits decreased $5.9
million, or 1.7%, from $353.7 million at September 30, 2007 to $347.8
million at March 31, 2008. The decrease in deposits primarily resulted
from a $4.8 million, or 2.5%, decrease in certificates of deposit
combined with a $1.1 million, or 0.7%, decrease in core deposits (which
consist of passbook, money market, NOW and non-interest bearing
accounts). This decline in certificates of deposit was primarily due to
the runoff of higher interest-bearing deposits as part of the Company’s
management of its cost of funds.
Stockholders' equity increased $1.2 million to $36.0 million primarily
due to a $715,000 improvement in other comprehensive loss combined with
net income of $439,000 for the six months ended March 31, 2008.
First Keystone Bank, the Company's wholly owned subsidiary, serves its
customers from eight full-service offices in Delaware and Chester
Counties.
Certain information in this release may constitute forward-looking
statements as that term is defined in the Private Securities Litigation
Act of 1995. Such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from
those estimated due to a number of factors. Persons are cautioned that
such forward-looking statements are not guarantees of future performance
and are subject to various factors, which could cause actual results to
differ materially from those estimated. These factors include, but are
not limited to, changes in general economic and market conditions and
the development of an interest rate environment that adversely affects
the interest rate spread or other income from the Company's and the
Bank's investments and operations. The Company does not undertake and
specifically disclaims any obligation to publicly release the result of
any revisions which may be made to any forward-looking statements to
reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
FIRST KEYSTONE FINANCIAL, INC.
SELECTED OPERATIONS DATA
(In thousands except per share data)
(Unaudited)
Three Months Ended
March 31,
Six Months Ended
March 31,
2008
2007
2008
2007
Net interest income
$2,500
$2,619
$4,967
$5,081
Provision for loan losses
14
100
56
175
Non-interest income
708
853
1,470
1,600
Non-interest expense
2,982
3,253
5,924
6,390
Income before taxes
212
119
457
116
Income tax expense (benefit)
5
(48
)
18
(139
)
Net income
$ 207
$ 167
$ 439
$ 255
Basic earnings per share
$ 0.09
$ 0.07
$ 0.19
$ 0.12
Diluted earnings per share
0.09
0.07
0.19
0.12
Number of shares outstanding at end of period
2,427,988
2,427,988
2,427,988
2,427,988
Weighted average basic shares outstanding
2,317,080
2,303,333
2,315,988
2,146,185
Weighted average diluted shares outstanding
2,317,337
2,323,978
2,316,311
2,166,137
FIRST KEYSTONE FINANCIAL, INC.
SELECTED FINANCIAL DATA
(In thousands except per share data)
(Unaudited)
March 31,
September 30,
2008
2007
Total assets
$519,551
$524,881
Loans receivable, net
278,410
292,418
Investment and mortgage-related securities available for sale
145,103
108,462
Investment and mortgage-related securities held to maturity
31,750
34,550
Cash and cash equivalents
28,104
52,935
Deposits
347,771
353,708
Borrowings
113,196
115,384
Junior subordinated debt
15,264
15,264
Loan loss allowance
3,377
3,322
Total stockholders' equity
35,900
34,694
Book value per share
$14.76
$14.26
FIRST KEYSTONE FINANCIAL, INC.
OTHER SELECTED DATA
(Unaudited)
At or for the
At or for the
Three Months Ended
Six Months Ended
March 31,
March 31,
2008
2007
2008
2007
Return on average assets (1)
0.16
%
0.13
%
0.18
%
0.10
%
Return on average equity (1)
2.28
%
1.94
%
2.46
%
1.61
%
Interest rate spread (1)
2.04
%
2.16
%
2.07
%
2.10
%
Net interest margin (1)
2.11
%
2.21
%
2.13
%
2.13
%
Interest-earning assets/interest-bearing liabilities
102.03
%
101.33
%
101.81
%
100.61
%
Operating expenses to average assets (1)
2.34
%
2.55
%
2.37
%
2.49
%
Ratio of non-performing assets to total assets at end of period
0.23
%
0.49
%
0.23
%
0.49
%
Ratio of allowance for loan losses to gross loans receivable at
end of period
1.20
%
1.12
%
1.20
%
1.12
%
Ratio of allowance for loan losses to non-performing loans at end of
period
284.48
%
136.57
%
284.48
%
136.57
%
(1) Annualized.
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