Community Financial Shares, Inc. Announces Second Quarter 2007 Operating Results

Business Wire, July 31, 2007

GLEN ELLYN, Ill. -- Scott W. Hamer, Chief Executive Officer of Community Financial Shares, Inc. (Pink Sheets:CFIS) (the "Company"), the holding company for Community Bank of Wheaton/Glen Ellyn (the "Bank"), reported net income (unaudited) for the Company for the three and six months ended June 30, 2007 of $405,000 and $1.3 million, respectively. This compares to $547,000 and $1.0 million for the comparable prior year periods. For the three months ended June 30, 2007 basic and diluted earnings per share both totaled $0.29. This represents a decrease of 27.5%, from $0.40 for both basic and diluted earnings per share for the comparable prior year period. In addition, for the six months ended June 30, 2007 basic and diluted earnings per share both totaled $0.94. This represents increases of 27.0% and 28.8% from basic and diluted earnings per share for the six months ended June 30, 2006 when basic and diluted earnings per share totaled $0.74 and $0.73, respectively. Earnings per share information for 2006 was adjusted to reflect the 2-for-1 stock split effective December 27, 2006.

Total assets at June 30, 2007 were $277.2 million, which represents an increase of $5.5 million, or 2.0%, compared to $271.7 million at December 31, 2006. The increase in total assets was the result of increases in investment securities available-for-sale of $7.4 million, or 21.1%, to $42.3 million at June 30, 2007 from $34.9 million at December 31, 2006, and in premises and equipment, which increased $816,000, or 6.0%, to $14.4 million at June 30, 2007 from $13.5 million at December 31, 2006. The increase in premises and equipment is primarily due to the Company's construction costs associated with its fourth full-service location in Wheaton, Illinois. This facility in north Wheaton is anticipated to open in the fourth quarter of 2007. These increases were partially offset by decreases in cash and cash equivalents of $2.6 million, or 24.6%, to $8.0 million at June 30, 2007 from $10.6 million at December 31, 2006 and cash value of life insurance of $318,000, or 5.8%, to $5.1 million at June 30, 2007 from $5.5 million at December 31, 2006. The decrease in cash value of life insurance was primarily due to the receipt of a $478,000 claim. Deposits decreased by $3.9 million, or 1.7%, to $230.8 million at June 30, 2007 from $234.7 million at December 31, 2006. Borrowed money represented by FHLB advances and federal funds purchased increased $5.0 million and $4.1 million to $15.5 million and $4.1 million, respectively at June 30, 2007 when compared to December 31, 2006.

Shareholders' equity increased $756,000, or 3.7%, to $21.4 million at June 30, 2007 from $20.6 million at December 31, 2006. The increase in shareholders' equity was primarily the result of the Company's net income for the six months ended June 30, 2007 and was partially offset by dividends paid of $166,000 and a decrease of $389,000 in the Company's accumulated other comprehensive income relating to the change in fair value of its available-for-sale investment portfolio. As of June 30, 2007 there were 1,375,278 shares of common stock outstanding, resulting in a book value of $15.53.

Net interest income before provision for loan losses decreased $104,000, or 4.2%, to $2.4 million for the three months ended June 30, 2007 and $152,000, or 3.1%, to $4.7 million for the six months ended June 30, 2007 as compared to the comparable prior year periods. These decreases are primarily due to increases in the average cost of interest-bearing liabilities of 62 and 66 basis points for the three and six months ended June 30, 2007, respectively. The average cost of interest-bearing liabilities increased to 3.49% and 3.43% for the three and six months ended June 30, 2007, respectively, from 2.87% and 2.77% for the comparable prior year periods. The effect of this increased cost was partially offset by increases in the average yield on interest-earning assets of 37 and 45 basis points for the three and six months ended June 30, 2007, respectively. The average yield on interest-earning assets increased to 7.00% and 6.94% for the three and six months ended June 30, 2007, respectively, from 6.63% and 6.49% for the comparable prior year periods. The net interest margin, expressed as a percentage of average earning assets, decreased 25 basis points to 3.87% for the three months ended June 30, 2007 from 4.12% for the three months ended June 30, 2006 and decreased 16 basis points to 3.86% for the six months ended June 30, 2007 from 4.02% for the six months ended June 30, 2006. The general shift from money market accounts to more expensive certificates of deposit contributed to the increase in the cost of average interest-bearing liabilities.

The provision for loan losses decreased $135,000 to $0 for the three months ended June 30, 2007 and $270,000 to $0 for the six months ended June 30, 2007 as compared to the comparable prior year periods. Loan portfolio quality remained very strong as nonperforming loans decreased to $152,000 at June 30, 2007 from $669,000 at December 31, 2006 and from $842,000 at June 30, 2006. The ratio of the allowance for loan losses to nonperforming loans totaled 1,021.7%, 231.4% and 198.0% for the periods ended June 30, 2007, December 31, 2006 and June 30, 2006, respectively.