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CORRESP
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      Correspondence Response 10-Q 6/30/05

    August
      22, 2005

    SENT
      VIA
      EDGAR

    Ms.
      Joyce
      Sweeney

    Senior
      Accountant

    United
      States Securities and Exchange Commission

    Division
      of Corporation Finance

    Washington,
      D.C. 20549-0408

    Re: CFS
      Bancorp, Inc. Form 10-K for the Fiscal Year Ended December 31, 2004

    Forms 10-Q
      for the Quarters Ended March 31, 2005 and June 30, 2005

    File No.
      000-024611

    Dear
      Ms.
      Sweeney:

    The
      following are the responses of CFS Bancorp, Inc. (the
      Company)
      to the
      comments set forth in the letter of the staff of the Securities and Exchange
      Commission dated August 11, 2005 relating to the Company’s Form 10-K for the
      year ended December 31, 2004 (2004
      Form 10-K)
      and the
      Forms 10-Q for the quarters ended March 31, 2005 and June 30, 2005. For
      reference purposes, the text of the staff’s comment letter has been reproduced
      below in italics with the Company’s responses following immediately
      thereafter.

    Form
      10-K for the fiscal year ended December 31, 2004

    Results
      of Operations

    Interest
      Expense, page 25

    Comment
      No. 1

    We
      note your disclosure on page 21 that you anticipate the restructuring of FHLB
      borrowings will have a positive overall effect in future periods by, among
      other
      things, improving your interest rate risk profile. Please tell us and in future
      filings disclose the following:

    • The
      predominant factors that influenced your decision to restructure the debt in
      the
      fourth quarter of 2004;

    • How
      you balance incurring significant prepayment penalties to restructure debt
      with
      your desire to manage your interest rate risk profile;

          Ms.
            Joyce
            Sweeney

          August
            22, 2005

          Page
            2
of
            8

    • Describe
      the “other things” you are referring to when you disclose the anticipated
      positive overall effect in future periods;

    • Quantify
      your estimate of the expected reduction of interest expense in future periods
      as
      a result of the restructuring; and

    • Describe
      the impact on your interest rate risk profile.

    Response
      to Comment No. 1

      • Prior
        to the debt restructuring, the Company’s earnings and reported net interest
        margin were being adversely impacted by the relatively high cost of the debt.
        The debt restructuring was completed to reduce interest costs in future years,
        shorten the duration of the Company’s liabilities, reduce repricing risk, and
        eliminate the callable feature contained in the original debt. The Company
        states these reasons on page 20 of its 2004 Form 10-K in the “Overview” section
        of “Management’s Discussion and Analysis of Financial Condition and Results of
        Operations.”

      • Managing the
        Company's interest rate risk profile was only one factor in the decision
        to
        restructure the debt. In addition to considering the impact on the Company’s
        interest rate risk profile, the Company performed numerous "what-if" scenarios
        to assess the impact various restructuring alternatives would have on earnings
        and on the Company’s capital ratios over a six year period. Assumptions utilized
        in the scenarios included a projected shape of the yield curve, an expected
        level of prepayment penalties, an expected contractual interest rate of the
        new
        advances, and an expected repricing interest rate of the new advances upon
        their
        maturity.

      • Management’s
        reference to “other things” included the reduced interest costs, reduced
        repricing risk, and the elimination of the callable feature contained in
        the
        original debt.

      • The
        estimate of expected annual interest expense reduction as a result of the
        restructuring is $13.3 million, $14.8 million, $18.3 million, $21.6 million,
        $23.7 million and $6.2 million over the next 6 years. The estimated interest
        expense would also be impacted by the following:

      • the
        amount of new debt outstanding is $75.0 million less than the old
        debt;

      • the
        average term of the new debt is significantly shorter than the old
        debt;

      • $54.0
        million of the new borrowings have variable interest rates, which may change
        this estimate depending on how they reprice; and

      • new
        borrowings totaling $20.0 million were paid off prior to the end of
        2004.

      Management
        has disclosed in the Company’s Forms 10-Q for the quarters ended March 31,
        2005 and June 30, 2005 the net change in interest expense from the previous
        periods based on the restructuring and the factors listed above.
        The
        Company intends to have similar disclosures in its future filings as
        appropriate.

      • The
        debt restructuring reduced the Company’s repricing risk, shortened the duration
        of its liabilities, and eliminated the callable option. Prior to the
        restructuring, the Company had $400.0 million of callable fixed-rate advances
        with an average cost of 5.92% and an average remaining term of 64.2 months.
        These $400.0 million of

            Ms.
              Joyce
              Sweeney

            August
              22, 2005

            Page 3
              of
              8

        advances
          matured over a four month period in 2010 subjecting the Company to significant
          repricing risk. The Company replaced these advances with $271.0 million
          of
          non-callable fixed-rate advances with an average cost of 3.64% and an average
          term of 34.3 months in a laddered portfolio with maturities ranging from
          21 to
          60 months. The new advances also included $54.0 million of short-term
          variable-rate advances. In addition, the $400.0 million of prepaid advances
          contained quarterly call dates until maturity giving the issuer the option
          to
          call the debt. The issuer would typically exercise this call option when
          market
          rates of interest were higher than the stated interest rate on the debt.
          If the
          debt had been called by the issuer, the Company would need to obtain the
          necessary funds to either repay or refinance the debt at the then existing
          higher market interest rates thereby increasing the Company’s interest expense.
          The $325.0 million of new advances the Company acquired do not contain
          any call
          provisions. The Company discusses these details in its 2004 Form 10-K in
          the
“Borrowed Funds” section of “Management’s Discussion and Analysis of Financial
          Condition and Results of Operations” (page 40) and Footnote 7, Borrowed Money
          (page 65), in its audited financial statements. The Company will include
          similar
          disclosures in future filings.

    Non-Interest
      Expense, page 26

    Comment
      No. 2

    We
      note your disclosure that you wrote-down the carrying value of your viatical
      receivables by $421,000 in 2004. Please tell how you account for and determine
      the carrying and fair values of viatical receivables. Describe the changes
      in
      circumstances or other factors that indicated the receivables were impaired
      during 2004 and how you determined the amount of the impairment.

    Response
      to Comment No. 2

    During
      the third quarter of 2004, the Company completed an extensive review of its
      viatical receivable files that began during the second quarter of 2004 to
      determine if the proper documentation was available to continue to support
      the recorded asset carrying value. During the review, the Company discovered
      that not all viatical policies held as receivables named the Company as
      beneficiary on the life insurance policy.  As a result, upon
      the death
      of an insured, there is some risk that the Company would not receive the
      expected policy face value and therefore not realize the receivable.
      Accordingly, the Company wrote off the balance of any receivables that did
      not
      identify the Company as beneficiary along with any associated capitalized
      acquisition and premium costs.

    Financial
      Statements

    Consolidated
      Statements of Cash Flows, page 51

          Ms.
            Joyce
            Sweeney

          August
            22, 2005

          Page
            4
of
            8

    Comment
      No. 3

    We
      note your disclosure on page 29 that you sold $9.1 million of commercial real
      estate participations in 2004. Please tell us how the purchase or origination
      and the proceeds are reported in your statements of cash flows and your basis
      for the presentation.

    Response
      to Comment No. 3

    The
      Company does not initially acquire nor hold commercial real estate loans for
      sale. On occasion, the Company may sell a portion of its loans held for
      investment through the sale of participation interests to one or more banks.
      According to Statement of Financial Accounting Standards 102, Statement
      of Cash Flows - Exemption from Certain Enterprises and Classification of Cash
      Flows from Certain Securities Acquired for Resale - an Amendment from FASB
      Statement 95,
“cash
      receipts and cash payments resulting from the acquisitions and sales of loans
      also shall be classified as operating cash flows if those loans are acquired
      specifically for resale and are carried at market value or the lower of cost
      or
      market value.  Cash receipts resulting from sales of loans that were
      not
      specifically acquired for resale shall be classified as investing cash
      inflows.  That is, if loans were acquired for investments, cash receipts
      from sales of those loans shall be classified as investing cash inflows
      regardless of a change in the purpose for holding those loans.” Since the loans
      in question were held for investment, the Company included the amount of the
      loans originated and the amount participated to other banks as “net loan
      fundings and principal payments received” in the “Investing Activities” portion
      of its consolidated statement of cash flows on page 51 of the 2004 Form 10-K.

    Note
      7 - Borrowed Money, page 65

    Comment
      No. 4

    Please
      provide us with your comprehensive analysis of how you determined that the
      debt
      restructuring in the fourth quarter of 2004 was not considered a substantial
      modification of terms of the existing debt agreement under EITF 96-19. Tell
      us
      the principal amount and terms for each advance that was replaced and for each
      new advance as part of the $325 million debt restructuring.

    Response
      to Comment No. 4

    Exhibit 1
      provides the detailed information regarding the debt restructuring.

    In
      summary, the Company had fixed-rate advances outstanding totaling $400.0 million
      with an effective interest rate of 5.92% prior to the debt restructuring. The
      Company prepaid the $400.0 million of advances, incurred a $42.0 million
      prepayment penalty and acquired new debt totaling $325.0 million. Utilizing
      the
      guidance provided in Emerging Issues Task Force 96-19 (EITF),
      Debtor’s
      Accounting for a Modification of Exchange of Debt Instruments,
      the
      Company compared the present value of cash flows under the

        Ms.
          Joyce
          Sweeney

        August
          22, 2005

        Page
          5
of
          8

    terms
      of
      the original debt to the present value of cash flows of the new debt to
      determine if the debt instruments were substantially different.

    The
      present value of the cash flows of the original debt was $399.0 million. The
      present value of cash flows of the new debt was $423.8 million calculated as
      follows (in millions):

              Present
                Value of Cash Flows of $325.0 million discounted @ 5.92%

              $

              306.8

              Repayment
                of Debt

              75.0

              Prepayment
                Penalty Paid

              42.0

              Total

              $

              423.8

    Since
      the
      difference in the present value of cash flows of the original debt and new
      debt
      of $24.7 million did not exceed 10% of the present value of cash flows of
      the old debt of $39.9 million, the Company concluded the debt restructuring
      did not satisfy the requirements for extinguishment of debt.

    Comment
      No. 5

    Please
      tell us and in future filings disclose how you determined to expense $9.8
      million of the prepayment penalties in 2004. Explain how you determined
      anticipated additional interest expense related to the amortization of the
      remaining deferred prepayment penalties for future periods.

    Response
      to Comment No. 5

    The
      Company incurred an $8.2 million prepayment penalty when it prepaid four
      advances totaling $75.0 million during the course of the Company’s debt
      restructuring. The Company determined that the penalty would be recognized
      immediately upon the prepayment of the debt since these advances were not
      replaced with additional advances. In addition, at the end of December 2004,
      the
      Company also prepaid one $20.0 million short-term variable-rate advance that
      was
      originally part of the restructuring and which had an unamortized prepayment
      penalty of $1.6 million.

    As
      each
      of the original advances was prepaid, new advances were acquired. The prepayment
      penalty incurred on the original advance was allocated to the new advances
      based
      upon the amount of each new advance relative to the total amount of new advances
      acquired to replace the original advance. Since, as discussed above,  the
      debt restructuring did not qualify as a substantial modification of terms under
      EITF 96-19, the Company was required to amortize the prepayment penalties over
      the life of the new advances. The Company internally computed the effect of
      the
      amortization on interest expense over the life of each of the new advances.

          Ms.
            Joyce
            Sweeney

          August
            22, 2005

          Page
            6
of
            8

    Form
      10-Q for the Quarterly Period Ended March 31, 2005

    Changes
      in Financial Condition

    Securities,
      page 18

    Comment
      No. 6

    We
      note your disclosure of a $240,000 impairment in a Freddie Mac fixed-rate
      perpetual preferred stock. Please tell us and in future filings disclose how
      you
      determined the amount of the impairment and the changes in circumstances and
      other factors considered for recognizing the impairment in the first quarter
      of
      2005. Refer to Item 303(b) of Regulation S-K.

    Response
      to Comment No. 6

    On
      a
      quarterly basis, the Company evaluates all securities for determining if any
      unrealized losses are deemed other-than-temporarily impaired pursuant to
      guidelines established in EITF 03-1, The
      Meaning of Other-Than-Temporary Impairment and Its Application to Cer