Community Financial Shares, Inc. Announces Fourth Quarter and Year End 2007 Operating Results

Business Wire, Jan 31, 2008

GLEN ELLYN, Ill. -- Community Financial Shares, Inc. (OTCBB: CFIS) (the "Company"), the holding company for Community Bank of Wheaton/Glen Ellyn (the "Bank"), reported net income (unaudited) for the three months and year ended December 31, 2007 of $11,000 and $1.7 million, respectively. This compares to $605,000 and $2.2 million for the comparable prior year periods. For the three months ended December 31, 2007, basic and diluted earnings per share both totaled $0.01. This represents a decrease of 97.7% from $0.44 for the comparable prior year period. The decrease in net income for the quarter ended December 31, 2007 is primarily the result of the net effect of a $560,000 increase in the provision for loan losses, a $291,000 increase in non-interest expense and a $408,000 increase in interest expense, partially offset by a $139,000 increase in non-interest income, a $140,000 increase in interest income and a credit for income tax of $99,000 as opposed to an $287,000 expense for the comparable prior year period. In addition, for the year ended December 31, 2007 basic and diluted earnings per share both totaled $1.24, a decrease of 22.0% as compared to $1.59 earnings per share basic and diluted for the year ended December 31, 2006. Earnings per share information for 2006 were adjusted to reflect the 2-for-1 stock split effective December 27, 2006.

Total assets at December 31, 2007 were $298.3 million, which represents an increase of $26.6 million, or 9.8%, compared to $271.7 million at December 31, 2006. The increase in total assets was the result of increases in loans receivable of $27.9 million, or 14.0%, to $227.7 million at December 31, 2007 from $199.8 million at December 31, 2006, and in premises and equipment, which increased $3.0 million, or 21.9%, to $16.5 million at December 31, 2007 from $13.5 million at December 31, 2006. The increase in loans is primarily due to growth in our commercial real estate portfolio which increased from $111.3 million to $125.6 million and our home equity lines of credit which increased from $35.2 million to $47.8 million year-over-year. The growth in loans is primarily due to continued strong business relationships within our community maintained by our loan staff. 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 opened November 21, 2007. These increases were partially offset by decreases in cash and cash equivalents of $2.8 million, or 26.7%, to $7.8 million at December 31, 2007 from $10.6 million at December 31, 2006 and cash value of life insurance of $215,000, or 3.9%, to $5.2 million at December 31, 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 increased by $14.3 million, or 6.1%, to $249.0 million at December 31, 2007 from $234.7 million at December 31, 2006. Deposits increased primarily due to the success of recent promotions and the opening of the Bank's newest facility in north Wheaton. Borrowed money, consisting of FHLB advances and overnight borrowings, increased $14.5 million to $25.0 million at December 31, 2007 from $10.5 million at December 31, 2006 as these borrowings represented a cost effective means of funding loan growth.

Stockholders' equity decreased $2.0 million, or 9.8%, to $18.6 million at December 31, 2007 from $20.6 million at December 31, 2006. The decrease in stockholders' equity was primarily the result of the successful completion of the Company's tender offer announced on August 14, 2007 and completed on October 1, 2007. The tender offer resulted in the Company purchasing 125,698 shares of common stock at a price of $26.00 for a total of $3,268,148. Also contributing to the decrease was dividends paid of $323,000 and a decrease of $134,000 in the Company's accumulated other comprehensive income relating to the change in fair value of its available-for-sale investment portfolio. These decreases were partially offset by the Company's net income for the year ended December 31, 2007. As of December 31, 2007 there were 1,250,880 shares of common stock outstanding, resulting in a book value of $14.85 per share.

Net interest income before provision for loan losses decreased $268,000, or 11.3%, to $2.1 million for the three months ended December 31, 2007 and $564,000, or 5.8%, to $9.2 million for the year ended December 31, 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 35 and 56 basis points for the three months and year ended December 31, 2007, respectively, from prior year periods. The average cost of interest-bearing liabilities increased to 3.61% and 3.52% for the three months and year ended December 31, 2007, respectively, from 3.26% and 2.96% for the comparable prior year periods. The average yield on interest-earning assets decreased to 6.52% for the three months ended December 31, 2007 from 6.77% for the prior year period and increased to 6.81% for the year ended December 31, 2007 from 6.63% for the prior year end period. The net interest margin, expressed as a percentage of average earning assets, decreased 68 basis points to 3.20% for the three months ended December 31, 2007 from 3.88% for the three months ended December 31, 2006 and decreased 37 basis points to 3.63% for the year ended December 31, 2007 from 4.00% for the year ended December 31, 2006. The decreases in yield and net interest margin were primarily attributable to the decreases in the federal funds interest rate, which occurred in September, October and December, and which had a negative impact on the adjustable rate portion of our loan portfolio. In addition, the bank did not experience a similar decrease in deposit interest rates in our local competitive market, which contributed to the increase in the overall cost of average interest-bearing liabilities.