CFS Bancorp, Inc. Announces Second Quarter 2009 Net Income and Operating Results

• Press Release
• Source: CFS Bancorp, Inc.
• On 4:00 pm EDT, Monday July 27, 2009

MUNSTER, IN--(Marketwire - 07/27/09) - CFS Bancorp, Inc. (NASDAQ:CITZ - News) (the Company), the parent of Citizens Financial Bank (the Bank), today reported net income of $670,000 for the second quarter of 2009 with diluted earnings per share of $0.06. During the second quarter of 2008, the Company reported a net loss of $2.3 million, or $(0.22) per share.

The Company's net income for the six months ended June 30, 2009 improved to $2.1 million, or $0.20 per diluted share, compared to a net loss of $516,000, or $(0.05) per share, for the six months ended June 30, 2008.

The Company's highlights for the second quarter of 2009 included:

�
--  tangible common equity improved to $115.5 million, or 10.55% of
    tangible assets at June 30, 2009 from $110.8 million or 9.96% at March 31,
    2009;
--  risk-based capital of 13.21% remains above the Federal Deposit
    Insurance Corporation (FDIC) guidelines of 10.0% to be considered "well-
    capitalized;"
--  net interest margin increased to 3.69% for the second quarter of 2009
    from 3.61% for the first quarter of 2009 and 3.26% for the second quarter
    of 2008; and
--  core deposits increased $15.6 million or 3.81%.
    

Chairman's Comments

"While positive, reported earnings were impacted by increased costs attributable to higher FDIC insurance premiums which included a special FDIC assessment on all banks, incentive compensation accruals, and credit quality related costs. Earnings benefited during the quarter from modestly higher margins, but our growth and diversification efforts have not yet resulted in sufficient earning asset growth to overcome the higher cost structure associated with executing our strategy," said Thomas F. Prisby, Chairman & CEO. "To be clear, while some might be satisfied in the current environment with achieving profitability, we do not view the reported level of earnings as adequate."

"In the current economic environment, it is challenging to find sufficient high quality credit opportunities to drive strong net loan growth, and we will not forsake quality to achieve growth. As a result, reported financial results do not yet fully reflect the progress that we have made in implementing our growth and diversification plan. As an example of the progress made during the quarter, we benefited from strong core-deposit growth as a result of both an increase in the number of business customer accounts as well as expanding the number of business owner/operator customers with whom we maintain personal deposit relationships. Notwithstanding the challenging economic environment in our core market areas, our strategic efforts to improve asset quality resulted in a modest increase in our non-performing assets," added Prisby.

"We continue to benefit from a solid capital base and ample liquidity," Prisby noted. "Despite the challenges posed by the national, regional and local economies, we remain focused on retaining capital strength, identifying and mitigating problem credits and investing in our franchise while continuing to execute our stated strategy."

Progress on Strategic Growth and Diversification Plan

The Company's Strategic Growth and Diversification Plan is built around four core objectives: decreasing non-performing loans; ensuring costs are appropriate given the Company's targeted future asset base; growing while diversifying by targeting small and mid-sized business owners for relationship-based banking opportunities; and expanding and deepening the Company's relationships with its customers by meeting a higher percentage of the customers' financial service needs.

While progress was made towards all core objectives, management is not satisfied with the rate of progress towards certain objectives. Although the ability to limit increases in non-performing assets during a period of significant economic duress is encouraging, management remains committed to the goal of aligning non-performing asset ratios with peer levels. In addition, operating costs remain relatively high, and it is increasingly clear that the Company's ability to achieve targeted earning asset levels will be hampered by current economic and regulatory conditions. As a result, management continues to focus on opportunistically cutting costs.

The Company's success in attracting new business banking clients, although not yet reflected in higher earning asset levels, played a significant role in its ability to grow deposits during 2009. Utilizing cross functional teams of business and retail calling officers, the Bank launched a dedicated effort to sell personal deposit and loan accounts to the owner/operators of its business clients, which resulted not only in strong deposit growth, but also in significant increases in the depth of the Company's relationships with this important customer segment. These achievements lead management to believe the Company is better positioned to achieve quality, relationship-based loan growth as the economy recovers.

Net Interest Income

The net interest margin increased eight basis points to 3.69% for the second quarter of 2009 from 3.61% for the first quarter of 2009 and increased 43 basis points from 3.26% for the second quarter of 2008. Net interest income increased to $9.3 million compared to $9.2 million for the first quarter of 2009 and $8.7 million for the second quarter of 2008. Net interest income for the second quarter of 2009 was positively affected by lower interest rates on interest-bearing deposits and borrowed money due to lower market rates coupled with a decrease in the amortization of the premium on the early extinguishment of Federal Home Loan Bank (FHLB) debt.

Interest income decreased 2.0% to $13.0 million for the second quarter of 2009 compared to $13.2 million for the first quarter of 2009 and 13.8% from $15.0 million for the second quarter of 2008. Interest income was negatively affected during the second quarter of 2009 due to an increase in non-performing assets. The decrease from the second quarter of 2008 was due to lower market rates of interest during the second quarter of 2009 coupled with higher non-performing assets during the period.

Interest expense decreased 10.5% to $3.6 million for the second quarter of 2009 from $4.1 million for the first quarter of 2009 and 42.7% from $6.3 million for the second quarter of 2008. Interest expense on deposits was positively affected by disciplined pricing on deposits, including certificates of deposit, as current market interest rates remain lower than during 2008. As a result, the cost of interest-bearing deposits decreased 87 basis points to 1.41%. In addition, the amortization of the premium on the early extinguishment of FHLB debt decreased $388,000 from the second quarter of 2008.

The cost of borrowed money was 2.72% for the second quarter of 2009 compared to 2.33% for the first quarter of 2009 and 4.88% for the second quarter of 2008. The increase in the cost of borrowed money from the first quarter of 2009 was a result of higher rates on FHLB borrowed money during the second quarter of 2009. The decrease from the second quarter of 2008 was a result of lower rates on FHLB borrowed money combined with decreased premium amortization which is included in total interest expense on borrowed money. The premium amortization reduced the net interest margin by three basis points for both the first and second quarters of 2009 and 17 basis points for the second quarter of 2008. The remaining premium amortization totaling $42,000 will be fully recognized as of December 31, 2009. Interest expense on borrowed money is detailed in the table below for the periods indicated.

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                                                         Change from
                            Three Months Ended          June 30, 2008
                     --------------------------------  to June 30, 2009
                      June 30,   March 31,  June 30,  -------------------
                        2009       2009       2008        $          %
                     ---------- ---------- ---------- ---------  --------
                                     (Dollars in thousands)
Interest expense on
 short-term borrowed
 money at
 contractual rates   $       20 $       33 $      124 $    (104)    (83.9)%
Interest expense on
 FHLB borrowed
 money at
 contractual rates          799        855      1,208      (409)    (33.9)
Amortization of
 deferred premium            61         72        449      (388)    (86.4)
                     ---------- ---------- ---------- ---------
Total interest
 expense on borrowed
 money               $      880 $      960 $    1,781 $    (901)    (50.6)
                     ========== ========== ========== =========

Non-Interest Income and Non-Interest Expense

Excluding available-for-sale security gains and losses, non-interest income decreased $106,000 or 4.8% from the first quarter of 2009 primarily as a result of the first quarter of 2009 increase in viatical income. Service charges and card based fee income increased $121,000 or 7.2% resulting from increased volumes.

Non-interest income increased 9.0% to $2.1 million for the second quarter of 2009 from $2.0 million for the second quarter of 2008. Non-interest income excluding available-for-sale security gains and losses decreased $407,000, or 16.1%, from the second quarter of 2008 resulting from lower income on the Company's bank-owned life insurance policy due to lower interest crediting rates and reduced service charges and other fees due to lower activity when compared to the second quarter of 2008.

Non-interest expense for the second quarter of 2009 increased 5.5% to $9.9 million compared to $9.4 million for the first quarter of 2009 primarily due to FDIC insurance premiums. The Company's overall FDIC insurance premiums increased $659,000 from the first quarter of 2009. Of this increase, $495,000, or $0.03 per diluted share, net of tax, relates to the special assessment imposed on all insured depository institutions on June 30, 2009 with the remainder attributed to changes in assessment rates industry-wide. The FDIC has advised the banking industry that it may levy another special assessment during the second half of 2009. Partially offsetting these increases, the Company's net occupancy expense decreased $147,000 resulting from lower utility costs and snow removal expenses.

Non-interest expense for the second quarter of 2009 increased $2.3 million, or 29.4%, from $7.7 million for the second quarter of 2008. FDIC insurance premiums increased $923,000 during the second quarter of 2009 from the 2008 period as a result of increased regular assessments, the aforementioned special assessment and the 2008 utilization of FDIC insurance premium credits. Compensation and employee benefits increased primarily due to higher incentive compensation accruals during the 2009 period compared to the 2008 period. In addition, retirement and stock related compensation during the second quarter of 2009 increased due to the absence of a $343,000 reduction in expense during the 2008 period related to the revaluation of the Rabbi Trust shares from the change in the Company's stock price. Professional fees also increased during the second quarter of 2009 due to increased legal and consulting fees related to a shareholder derivative demand made late in the first quarter of 2009.

The Company's efficiency ratio for the second quarter of 2009 was 86.8% compared to 77.8% for the first quarter of 2009 and 72.2% for the second quarter of 2008. The Company's core efficiency ratios were 82.0%, 82.1%, and 65.8% for the same periods. The increases from the prior two periods are primarily the result of increased non-interest expense as discussed above.

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. 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 our 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 and non-interest income as presented on the consolidated statements of income.

The Company's core efficiency ratio is calculated as non-interest expense less the FDIC special assessment divided by the sum of net interest income, 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. Management believes that, when presented along with the GAAP efficiency ratio, 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.

Asset Quality

The provision for losses on loans for the second quarter of 2009 increased to $713,000 from $624,000 for the first quarter of 2009 and decreased from $7.2 million for the second quarter of 2008. Net charge-offs for the second quarter of 2009 totaled $1.3 million compared to $710,000 for the first quarter of 2009 and $5.1 million for the second quarter of 2008. The allowance for losses on loans totaled $14.9 million at June 30, 2009 compared to $15.6 million at December 31, 2008. In the second quarter, the Company's non-performing loans decreased by $2.4 million as the migration of loans to other real estate owned more than offset increases in non-performing commercial construction and land development loans and HELOCs.

The ratio of allowance for losses on loans to total loans was 1.99% at June 30, 2009 compared to 2.07% at December 31, 2008. When management determines a non-performing collateral dependent loan has a collateral shortfall, management will immediately charge-off the collateral shortfall. As a result, the Company is not required to maintain an allowance for losses on loans 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).

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 and represents management'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. Management believes that at June 30, 2009 the allowance for losses on loans was adequate based on its review of historical loss experience, levels of delinquencies, economic conditions and the review of relevant and available information for specific loans.

Balance Sheet

At June 30, 2009, the Company's total assets were $1.09 billion compared to $1.12 billion at December 31, 2008.

The Company's loans receivable were relatively stable at $750.9 million at June 30, 2009 compared to $750.0 million at December 31, 2008. Securities available-for-sale totaled $220.3 million at June 30, 2009 compared to $251.3 million at December 31, 2008. The decrease in securities is primarily due to maturities and paydowns coupled with sales activity during the first quarter of 2009.

Deposits increased to $831.1 million at June 30, 2009 from $824.1 million at December 31, 2008 as a $15.6 million increase in non-municipal core deposit accounts more than offset a $5.4 million decline in municipal deposits and a $3.1 million decline in non-municipal certificates of deposit. Investments in the Company's branch network, technological infrastructure, human capital, and brand have enhanced its ability to translate existing and new customer relationships into deposit balances in the current environment. The decline in municipal deposits during the quarter was attributable primarily to seasonal factors. While the Company maintains strong relationships with its municipal customers, and municipal deposits continue to comprise an important funding source, management is lowering its reliance on such funds in anticipation that the recession's impact on municipalities and other government-related entities will result in lower municipal deposit levels. The Company's deposits consisted of the following as of the dates indicated:

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                                           June 30,   December 31,
                                             2009         2008
                                         ------------ ------------
                                          (Dollars in thousands)
Core deposits                            $    424,765 $    409,184
Certificates of deposit                       353,085      356,227
                                         ------------ ------------
  Subtotal - non-municipal deposits           777,850      765,411
                                         ------------ ------------
Municipal core deposits                        40,641       39,221
Municipal certificates of deposit              12,613       19,465
                                         ------------ ------------
  Subtotal municipal deposits                  53,254       58,686
                                         ------------ ------------
  Total deposits                         $    831,104 $    824,097
                                         ============ ============

The Company's borrowed money decreased to $132.3 million at June 30, 2009 from $172.9 million at December 31, 2008 as the Company utilized proceeds from its available-for-sale securities portfolio to de-leverage its balance sheet during the first quarter of 2009. The Company's borrowed money consisted of the following as of the dates indicated:

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                                                    June 30,   December 31,
                                                      2009        2008
                                                  -----------  -----------
                                                   (Dollars in thousands)
Short-term variable-rate borrowed money and
 repurchase agreements                            $    10,625  $    28,312
Gross FHLB borrowed money                             121,719      144,800
Unamortized deferred premium                              (42)        (175)
                                                  -----------  -----------
Total borrowed money                              $   132,302  $   172,937
                                                  ===========  ===========

Shareholders' equity at June 30, 2009 increased $3.6 million to $115.5 million from $111.8 million at December 31, 2008 as a result of the following:

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--  net income for the six months ended June 30, 2009 totaling $2.1
    million;
--  an increase in accumulated other comprehensive income of $1.1 million;
--  a decrease of $832,000 in the unallocated common stock held by the
    Company's Employee Stock Ownership Plan due to the release of the remaining
    shares during the first quarter of 2009; and
--  a decrease of $515,000 in Treasury Stock - Rabbi Trust, due to a
    distribution in the second quarter of 2009.
    

The regulatory capital ratios of the Bank continue to exceed all regulatory requirements. At June 30, 2009, the Bank remained "well-capitalized" under the Office of Thrift Supervision's regulatory capital guidelines with total capital to risk-weighted assets equal to 13.21%. The Company's tangible common equity increased to $115.5 million, or 10.55% of tangible assets at June 30, 2009.

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 be successful. The Bank has 22 offices throughout adjoining markets in Chicago's Southland and Northwest Indiana. The Company' website can be found at www.citz.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 current regulatory capital and equity ratios, general economic conditions, state of the banking industry, successful execution of the Company's strategy and its Strategic Growth and Diversification Plan, levels of provision for the allowance for losses on loans and charge-offs, loan and deposit growth, diversification of the loan portfolio, non-performing asset levels, interest on loans, asset yields and cost of funds, net interest income, net interest margin, non-interest income, non-interest expense, interest rate environment, bank-owned life insurance interest rates, the expected effect of amortization of deferred premium on the FHLB debt and other risk factors identified in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as amended, and other filings 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 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, 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. The Company does not intend to update these forward-looking statements.

SELECTED CONSOLIDATED FINANCIALS AND OTHER DATA FOLLOW

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


EARNINGS
 HIGHLIGHTS
 AND
 PERFORMANCE
 RATIOS (1)          Three Months Ended               Six Months Ended
           ------------------------------------   -----------------------
             June 30,    March 31,     June 30,     June 30,     June 30,
               2009         2009         2008         2009         2008
           -----------  -----------  ----------   -----------  ----------
Net
 income/
 (loss)    $       670  $     1,461  $   (2,295)  $     2,131  $     (516)
Basic
 earnings/
 (loss)
 per share        0.06         0.14       (0.22)         0.20       (0.05)
Diluted
 earnings/
 (loss)
 per share        0.06         0.14       (0.22)         0.20       (0.05)
Cash
 dividends
 declared
 per share        0.01         0.01        0.12          0.02        0.24
Return on
 average
 assets           0.24%        0.53%      (0.80)%        0.39%      (0.09)%
Return on
 average
 equity           2.41         5.27       (7.08)         3.84       (0.79)
Average
 yield on
 interest-
 earning
 assets           5.13         5.21        5.64          5.17        5.88
Average
 cost on
 interest-
 bearing
 liabilities      1.60         1.78        2.69          1.69        2.98
Interest
 rate
 spread           3.53         3.43        2.95          3.48        2.90
Net
 interest
 margin           3.69         3.61        3.26          3.65        3.24
Average
 equity to
 average
 assets
 (2)             10.15        10.09       11.29         10.12       11.34
Average
 interest-
 earning
 assets
 to
 average
 interest-
 bearing
 liabilities
 (2)            111.48       111.39      113.17        111.43      112.92
Non-interest
 expense to
 average
 assets           3.63         3.43        2.68          3.53        2.73
Efficiency
 ratio (3)       86.76        77.75       72.17         82.13       72.35
Market
 price per
 share of
 common
 stock
 for the
 period
 ended:
  Closing  $      4.23  $      3.90  $    11.79   $      4.23  $    11.79
     High         4.33         4.80       14.93          4.80       14.93
      Low         3.50         1.75       11.42          1.75       11.42

STATEMENT
 OF
 CONDITION
 HIGHLIGHTS
 (at period               June 30,    March 31,  December 31,   June 30,
 end)                       2009        2009         2008         2008
                        -----------  ----------   -----------  ----------
Total
 assets                 $ 1,094,679  $1,111,908   $ 1,121,855  $1,102,773
Loans
 receivable,
 net of
 unearned
 fees                       750,861     756,134       749,973     726,858
Total
 deposits                   831,104     863,884       824,097     848,439
Total
 shareholders'
 equity                     115,450     110,751       111,809     124,776
Book value
 per
 common
 share                        10.73       10.33         10.47       11.70
Non-performing
 loans                       52,897      55,330        54,701      34,670
Non-performing
 assets                      60,268      58,629        57,943      35,742
Allowance
 for
 losses on
 loans                       14,934      15,472        15,558      10,403
Non-performing
 loans to
 total
 loans                         7.04%       7.32%         7.29%       4.77%
Non-performing
 assets to
 total
 assets                        5.51        5.27          5.16        3.24
Allowance
 for
 losses on
 loans to
 non-performing
 loans                        28.23       27.96         28.44       30.01
Allowance
 for
 losses on
 loans to
 total
 loans                         1.99        2.05          2.07        1.43

Employees
 (FTE)                          318         324           322         307
Branches
 and
 offices                         22          22            22          22

                    Three Months Ended               Six Months Ended
           ------------------------------------   -----------------------
AVERAGE
 BALANCE    June 30,    March 31,     June 30,     June 30,     June 30,
 DATA         2009         2009         2008         2009         2008
           -----------  -----------  ----------   -----------  ----------
Total
 assets    $ 1,099,750  $ 1,114,507  $1,154,656   $ 1,107,087  $1,158,015
Loans
 receivable,
 net of
 unearned
 fees          750,861      751,910     743,097       751,383     764,986
Total
 interest-
 earning
 assets      1,013,480    1,029,626   1,071,384     1,021,509   1,071,827
Total
 liabilities   988,177    1,002,060   1,024,238       995,079   1,026,683
Total
 deposits      845,617      823,483     863,865       834,611     861,163
Interest-
 bearing
 deposits      781,108      759,634     802,249       770,431     799,343
Non-interest
 bearing
 deposits       64,509       63,849      61,616        64,180      61,820
Total
 interest-
 bearing
 liabilities   909,148      924,323     946,712       916,694     949,158
Shareholders'
 equity        111,573      112,447     130,418       112,008     131,332

(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 Six Months
                    For the Three Months Ended              Ended
                ----------------------------------  ----------------------
                 June 30,   March 31,    June 30,    June 30,    June 30,
                   2009        2009        2008        2009        2008
                ----------  ----------- ----------  ----------  ----------
Interest
 income:
 Loans          $    9,807  $     9,945 $   11,296  $   19,752  $   24,084
 Securities          3,020        3,043      3,172       6,063       6,251
 Other                 137          243        564         380       1,011
                ----------  ----------- ----------  ----------  ----------
  Total
   interest
   income           12,964       13,231     15,032      26,195      31,346

Interest
 expense:
 Deposits            2,749        3,096      4,554       5,845      10,242
 Borrowed money        880          960      1,781       1,840       3,842
                ----------  ----------- ----------  ----------  ----------
  Total
   interest
   expense           3,629        4,056      6,335       7,685      14,084
                ----------  ----------- ----------  ----------  ----------
Net interest
 income              9,335        9,175      8,697      18,510      17,262
Provision for
 losses on
 loans                 713          624      7,172       1,337       7,914
                ----------  ----------- ----------  ----------  ----------
Net interest
 income after
 provision for
 losses on
 loans               8,622        8,551      1,525      17,173       9,348

Non-interest
 income:
 Service
  charges and
  other fees         1,376        1,299      1,465       2,675       2,904
 Card-based
  fees                 432          388        415         820         795
 Commission
  income                70           71        135         141         193
 Available-for-
  sale security
  gains (losses),
  net                    -          720       (582)        720        (513)
 Other asset
  losses, net           (6)           -         (3)         (6)         (3)
 Income from
  bank-owned
  life
  insurance            156          178        371         334         780
 Other income           97          295        149         392         321
                ----------  ----------- ----------  ----------  ----------
  Total
   non-interest
   income            2,125        2,951      1,950       5,076       4,477

Non-interest
 expense:
 Compensation
  and employee
  benefits           5,078        5,175      4,179      10,253       8,515
 Net occupancy
  expense              750          897        708       1,647       1,541
 Furniture and
  equipment
  expense              520          535        543       1,055       1,094
 Data
  processing           420          419        484         839         942
 Professional
  fees                 604          350        212         954         486
 FDIC insurance
  premiums             963          304         40       1,267          80
 Marketing             218          198        178         416         386
 Other general
  and
  administrative
  expenses           1,390        1,550      1,340       2,940       2,685
                ----------  ----------- ----------  ----------  ----------
  Total
   non-interest
   expense           9,943        9,428      7,684      19,371      15,729
                ----------  ----------- ----------  ----------  ----------
Income/(loss)
 before income
 taxes                 804        2,074     (4,209)      2,878      (1,904)
Income tax
 expense/
 (benefit)             134          613     (1,914)        747      (1,388)
                ----------  ----------- ----------  ----------  ----------
Net
 income/(loss)  $      670  $     1,461 $   (2,295) $    2,131  $     (516)
                ==========  =========== ==========  ==========  ==========

Per share data:
 Basic
  earnings/
  (loss) per
  share         $     0.06  $      0.14 $    (0.22) $     0.20  $    (0.05)
 Diluted
  earnings/
  (loss) per
  share         $     0.06  $      0.14 $    (0.22) $     0.20  $    (0.05)
 Cash dividends
  declared per
  share         $     0.01  $      0.01 $     0.12  $     0.02  $     0.24

Weighted-average
 shares
 outstanding    10,590,591   10,495,835 10,290,965  10,543,475  10,339,129
Weighted-average
 diluted
 shares
 outstanding    10,697,387   10,628,901 10,553,634  10,663,333  10,605,830



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


                          June 30,    March 31,   December 31,   June 30,
                            2009         2009         2008         2008
                        -----------  -----------  -----------  -----------
ASSETS
Cash and amounts due
 from depository
 institutions           $    20,553  $    14,937  $    15,714  $    15,824
Interest-bearing
 deposits                        36       16,767        3,133        4,527
Federal funds sold              234          433          259          492
                        -----------  -----------  -----------  -----------
 Cash and cash
  equivalents                20,823       32,137       19,106       20,843

Securities
 available-for-sale, at
 fair value                 220,324      222,080      251,270      261,985
Securities
 held-to-maturity, at
 cost                         6,000        6,940        6,940        3,500
Investment in Federal
 Home Loan Bank stock,
 at cost                     23,944       23,944       23,944       23,944

Loans receivable, net
 of unearned fees           750,861      756,134      749,973      726,858
 Allowance for losses
  on loans                  (14,934)     (15,472)     (15,558)     (10,403)
                        -----------  -----------  -----------  -----------
  Net loans                 735,927      740,662      734,415      716,455

Interest receivable           3,902        4,045        4,325        4,660
Other real estate owned       7,371        3,299        3,242        1,072
Office properties and
 equipment                   19,703       19,697       19,790       19,822
Investment in
 bank-owned life
 insurance                   36,449       36,784       36,606       36,090
Prepaid expenses and
 other assets                20,236       22,320       22,217       14,402
                        -----------  -----------  -----------  -----------
   Total assets         $ 1,094,679  $ 1,111,908  $ 1,121,855  $ 1,102,773
                        ===========  ===========  ===========  ===========
LIABILITIES AND
 SHAREHOLDERS' EQUITY
Deposits                $   831,104  $   863,884  $   824,097  $   848,439
Borrowed money              132,302      124,770      172,937      113,129
Advance payments by
 borrowers for taxes
 and insurance                6,121        4,594        4,320        5,763
Other liabilities             9,702        7,909        8,692       10,666
                        -----------  -----------  -----------  -----------
 Total liabilities          979,229    1,001,157    1,010,046      977,997

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; 10,764,458,
  10,723,903,
  10,674,511 and
  10,668,489 shares
  outstanding                   234          234          234          234
 Additional paid-in
  capital                   189,004      189,367      189,211      190,093
 Retained earnings           83,455       82,894       81,525       93,994
 Treasury stock, at
  cost; 12,566,255,
  12,566,255,
  12,616,572 and
  12,625,785 shares        (156,296)    (156,296)    (155,740)    (155,843)
 Treasury stock, Rabbi
  Trust, at cost;
  92,593, 133,148,
  132,223 and
  129,032 shares             (1,212)      (1,731)      (1,726)      (1,705)
 Unallocated common
  stock held by
  Employee Stock
  Ownership Plan                  -            -         (832)      (2,970)
 Accumulated other
  comprehensive
  income/(loss), net of
  tax                           265       (3,717)        (863)         973
                        -----------  -----------  -----------  -----------
  Total shareholders'
   equity                   115,450      110,751      111,809      124,776
                        -----------  -----------  -----------  -----------
   Total liabilities
    and shareholders'
    equity              $ 1,094,679  $ 1,111,908  $ 1,121,855  $ 1,102,773
                        ===========  ===========  ===========  ===========



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


                                             Three Months Ended
                                 -----------------------------------------
                                   June 30,      March 31,      June 30,
                                     2009          2009           2008
                                 ------------  -------------  ------------

Efficiency Ratio:
Non-interest expense             $      9,943  $       9,428  $      7,684
                                 ============  =============  ============

Net interest income plus
 non-interest income             $     11,460  $      12,126  $     10,647
                                 ============  =============  ============

 Efficiency ratio                       86.76%         77.75%        72.17%

Core Efficiency Ratio:
Non-interest expense             $      9,943  $       9,428  $      7,684
Special assessment - FDIC
 insurance                               (495)             -             -
                                 ------------  -------------  ------------
 Non-interest expense - as
  adjusted                       $      9,448  $       9,428  $      7,684
                                 ============  =============  ============

Net interest income plus
 non-interest income             $     11,460  $      12,126  $     10,647

Adjustments:
 Net realized (gains)/losses on
  sales of securities
  available-for-sale                        -           (720)          582
 Net realized losses on sales of
  assets                                    6              -             3
 Amortization of deferred
  premium                                  61             72           449
                                 ------------  -------------  ------------

  Net interest income plus
   non-interest income - as
   adjusted                      $     11,527  $      11,478  $     11,681
                                 ============  =============  ============

  Core efficiency ratio                 81.96%         82.14%        65.78%



                                                     Six Months Ended
                                               ---------------------------
                                                  June 30,      June 30,
                                                    2009          2008
                                               -------------  ------------

Efficiency Ratio:
Non-interest expense                           $      19,371  $     15,729
                                               =============  ============

Net interest income plus
 non-interest income                           $      23,586  $     21,739
                                               =============  ============

 Efficiency ratio                                      82.13%        72.35%

Core Efficiency Ratio:
Non-interest expense                           $      19,371  $     15,729
Special assessment - FDIC
 insurance                                              (495)            -
                                               -------------  ------------
 Non-interest expense - as
  adjusted                                     $      18,876  $     15,729
                                               =============  ============

Net interest income plus
 non-interest income                           $      23,586  $     21,739

Adjustments:
 Net realized (gains)/losses on
  sales of securities
  available-for-sale                                    (720)          513
 Net realized losses on sales of
  assets                                                   6             3
 Amortization of deferred
  premium                                                133           976
                                               -------------  ------------

  Net interest income plus
   non-interest income - as
   adjusted                                    $      23,005  $     23,231
                                               =============  ============

  Core efficiency ratio                                82.05%        67.71%