Bad debt writedown sends Citizens Financial's parent to 4Q loss

MUNSTER | Citizens Financial Bank's corporate parent reported a sharply higher fourth-quarter loss as lower property valuations forced the bank to write down problem assets.

CFS Bancorp Inc. said Monday it had a net loss of $12.6 million, or $1.17 per share, for the three months that ended Dec. 31 compared to a profit of $918,000, or 9 cents per share, in the comparable 2010 period. The bank set aside $12.5 million for loan losses in the fourth quarter, compared to $825,000 in same period a year earlier.

Also in response to economic conditions, company President and CEO Daryl Pomranke said the bank also is launching a variety of efforts to reduce its costs. The bank will close two Illinois branches by March 31, reduce staff, outsource some operations and open a voluntary retirement program for employees.

Actions taken, which include a $17.4 million fourth-quarter write-off of bad debt, are important to improving the bank's credit quality, Pomranke said.

"Our fourth quarter was challenging, but we made good progress in addressing asset quality issues, and our highest priority remains reducing nonperforming assets," Pomranke said in a statement.

Pomranke said the voluntary retirement program would be open through the end of the first quarter and the bank had no plans to eliminate the existing pension plan. Without providing a specific number, Jerry Weberling, executive vice president and chief financial officer, said employment could dip below 300 positions. There were 303 employees as of Dec. 31, a total that was down by 19 from a year earlier.

After March 31, the bank will have eight locations in Illinois and 12 locations in Northwest Indiana. Land parcels in Olympia Fields and Bolingbrook, which were going to be used for future locations, along with the current Bolingbrook office, are listed for sale.

In 2011, the Munster-based company had a net loss of $10.5 million, or 98 cents per share, compared to earning $3.5 million, or 32 cents per share, in 2010.

Fourth-quarter expenses also were higher for Citizens, which included $1.4 million in compensation to former Chairman and CEO Thomas Prisby, who retired from the company Dec. 31.

The bank reduced its nonperforming loans, or those past due by 90 days or more, to $45.6 million in the fourth quarter from $59.4 million in the third quarter. Nonperforming loans were 6.4 percent of the bank's total loans held.

"If markets continue to be soft, you will see continued declines in collateral values," Pomranke said.

CFS Bancorp shares traded at $5.06 late Wednesday afternoon, up 6 cents for the day.