<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/ X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
----------------------------
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________
Commission File Number 0-28020
------------------------------
FIRST FEDERAL FINANCIAL BANCORP, INC.
- -----------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 31-1456058
--------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
415 CENTER STREET, IRONTON, OHIO 45638
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(614) 532-6845
----------------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes No X
------------- -------------
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of March 31, 1996, First Federal Savings and Loan Association
of Ironton, the Registrant's wholly-owned subsidiary, had not yet
completed its mutual-to-stock conversion and reorganization into
a holding company format. Accordingly, no shares of the
Registrant's common stock were issued and outstanding as of such
date. The financial information presented herein is for First
Federal Savings and Loan Association of Ironton.
Transitional Small Business Disclosure Format (check one):
Yes No X
------------- -------------
<PAGE> 2
FIRST FEDERAL FINANCIAL BANCORP, INC.
TABLE OF CONTENTS
*****************
<TABLE>
<CAPTION>
Part I. Financial Information
<S> <C>
Item 1. Financial Statements
Balance Sheets (as of March 31,
1996 (unaudited) and September 30, 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Income (for the three
months ended March 31, 1996 and 1995 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Income (for the six
months ended March 31, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Retained Earnings (for
the six months ended March 31, 1996 (unaudited) and
the year ended September 30, 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows (for the six
months ended March 31, 1996 and 1995 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-14
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
IRONTON, OHIO
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
------------------ ------------------
(Unaudited)
ASSETS
------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 2,379,659 $ 2,528,416
INVESTMENT SECURITIES HELD TO MATURITY 7,448,177 5,290,336
LOANS RECEIVABLE 33,087,268 32,609,321
MORTGAGE-BACKED SECURITIES HELD TO MATURITY 5,642,794 8,567,701
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE 2,994,646 989,994
FORECLOSED REAL ESTATE 33,367 -
ACCRUED INTEREST RECEIVABLE 326,549 304,753
OFFICE PROPERTIES AND EQUIPMENT 909,955 904,014
OTHER ASSETS 238,198 101,801
------------------ -----------------
$ 53,060,613 $ 51,296,336
================== =================
LIABILITIES AND RETAINED EARNINGS
---------------------------------
DEPOSITS $ 47,831,205 $ 46,197,820
DEFERRED FEDERAL INCOME TAXES PAYABLE 78,783 69,578
ACCRUED INTEREST PAYABLE 3,629 6,519
OTHER LIABILITIES 65,396 93,555
------------------ -----------------
Total liabilities 47,979,013 46,367,472
------------------ -----------------
RETAINED EARNINGS:
Substantially restricted 5,084,429 4,938,274
Unrealized holding loss on mortgage-backed
securities available for sale, net of taxes (2,829) (9,410)
------------------ -----------------
Total retained earnings 5,081,600 4,928,864
------------------ -----------------
$ 53,060,613 $ 51,296,336
================== =================
</TABLE>
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<PAGE> 4
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
IRONTON, OHIO
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For The Three Months Ended
---------------------------------------------
March 31, March 31,
1996 1995
------------------ -----------------
<S> <C> <C>
INTEREST INCOME: (Unaudited) (Unaudited)
Loans receivable-
First mortgage loans $ 655,325 $ 596,351
Consumer and other loans 26,342 25,547
Mortgage-backed and related securities 135,035 137,312
Investment securities 99,813 67,908
Other interest-earning assets 27,632 15,103
------------------ -----------------
Total interest income 944,147 842,221
------------------ -----------------
INTEREST EXPENSE:
Interest-bearing checking 3,416 3,779
Passbook savings 80,459 100,234
Certificates of deposit 506,464 316,502
Advances from Federal Home
Loan Bank - 38,597
------------------ -----------------
Total interest expense 590,339 459,112
------------------ -----------------
Net interest income 353,808 383,109
PROVISION FOR LOAN LOSSES 6,000 3,000
------------------ -----------------
Net interest income after provision
for loan losses 347,808 380,109
------------------ -----------------
NON-INTEREST INCOME:
Losses on foreclosed real estate (1,000) -
Other 11,396 7,887
------------------ -----------------
Total non-interest income 10,396 7,887
------------------ -----------------
NON-INTEREST EXPENSE:
Compensation and benefits 96,283 88,905
Occupancy and equipment 21,606 21,575
SAIF deposit insurance premium 26,318 23,366
Directors' fees and expenses 14,036 14,242
Ohio franchise tax 19,110 17,550
Data processing 15,738 13,615
Advertising 13,799 14,229
Other 37,541 31,563
------------------ -----------------
Total non-interest expense 244,431 225,045
------------------ -----------------
INCOME BEFORE PROVISION FOR INCOME TAXES 113,773 162,951
PROVISION FOR INCOME TAXES 34,571 53,311
------------------ -----------------
NET INCOME $ 79,202 $ 109,640
================== =================
</TABLE>
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<PAGE> 5
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
IRONTON, OHIO
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Six Months Ended
---------------------------------------------
March 31, March 31,
1996 1995
------------------ -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME:
Loans receivable -
First mortgage loans $ 1,307,150 $ 1,164,113
Consumer and other loans 55,196 49,630
Mortgage-backed and related
securities 273,682 270,727
Investment securities 181,806 132,459
Other interest-earning assets 62,049 26,702
------------------ -----------------
Total interest income 1,879,883 1,643,631
------------------ -----------------
INTEREST EXPENSE:
Interest-bearing checking 7,458 8,037
Passbook savings 162,502 241,839
Certificates of deposit 1,015,067 593,271
Advances from Federal Home
Loan Bank - 54,146
------------------ -----------------
Total interest expense 1,185,027 897,293
------------------ -----------------
Net interest income 694,856 746,338
PROVISION FOR LOAN LOSSES 12,000 7,000
------------------ -----------------
Net interest income after
provision for loan losses 682,856 739,338
------------------ -----------------
NON-INTEREST INCOME:
Losses on foreclosed real estate (1,000) -
Other 19,869 15,153
------------------ -----------------
Total non-interest income 18,869 15,153
------------------ -----------------
NON-INTEREST EXPENSE:
Compensation and benefits 209,277 190,028
Occupancy and equipment 40,337 42,002
SAIF deposit insurance premium 51,645 47,843
Directors' fees and expenses 35,893 33,518
Ohio franchise tax 36,467 33,785
Data processing 29,496 25,897
Advertising 26,127 26,843
Other 76,206 69,928
------------------ -----------------
Total non-interest expense 505,448 469,844
------------------ -----------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 196,277 284,647
PROVISION FOR INCOME TAXES 50,122 83,833
------------------ -----------------
NET INCOME $ 146,155 $ 200,814
================== =================
</TABLE>
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<PAGE> 6
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
IRONTON, OHIO
STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Unrealized
Holding Loss
On Mortgage-Backed
Securities Total
Substantially Available Retained
Restricted For Sale Earnings
---------- -------- --------
<S> <C> <C> <C>
BALANCES, September 30, 1994 $ 4,585,470 $ (20,745) $ 4,564,725
NET INCOME, year ended
September 30, 1995 352,804 - 352,804
CHANGE IN UNREALIZED HOLDING
LOSS ON MORTGAGE-BACKED
SECURITIES, net of income tax
benefit of $5,839 - 11,335 11,335
----------------- ------------ ----------
BALANCES, September 30, 1995 4,938,274 (9,410) 4,928,864
NET INCOME, six months ended
March 31, 1996 (unaudited) 146,155 - 146,155
CHANGE IN UNREALIZED HOLDING
LOSS ON MORTGAGE-BACKED
SECURITIES, net of income tax
benefit of $3,389 (unaudited) - 6,581 6,581
----------------- ------------ -----------
BALANCES, March 31, 1996
(unaudited) $ 5,084,429 $ (2,829) $ 5,081,600
================= ============ ===========
</TABLE>
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<PAGE> 7
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
IRONTON, OHIO
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
-----------------------------------
March 31, March 31,
1996 1995
------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 146,155 $ 200,814
Adjustments to reconcile net income to net cash
provided by operating activities -
Losses on foreclosed real estate 1,000 -
Provision for loan losses 12,000 7,000
Depreciation 24,809 24,599
FHLB stock dividends (14,400) (12,400)
Amortization and accretion, net 20,109 23,363
Change in -
Accrued interest receivable (21,796) (7,393)
Other assets 1,427 13,033
Deferred Federal income taxes 5,814 7,219
Accrued interest payable (2,890) (3,548)
Other liabilities (23,100) 26,345
------------- --------------
Net cash provided by operating activities 149,128 279,032
------------- --------------
INVESTING ACTIVITIES:
Net increase in loans (524,314) (1,956,779)
Proceeds from maturities of investment securities held to maturity 1,449,000 296,000
Purchases of investment securities held to maturity (3,593,421) (190,822)
Principal collected on mortgage-backed securities held to maturity 672,572 587,352
Principal collected on mortgage-backed securities available for sale 238,525 30,075
Purchases of office properties and equipment (30,750) (2,352)
------------- ---------------
Net cash used for investing activities (1,788,388) (1,236,526)
------------- ---------------
FINANCING ACTIVITIES:
Prepaid stock conversion costs (142,882) -
Proceeds from FHLB advances - 4,600,000
Principal paid on FHLB advances - (2,600,000)
Net increase (decrease) in deposits 1,633,385 (578,338)
------------- ---------------
Net cash provided by financing activities 1,490,503 1,421,662
------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (148,757) 464,168
CASH AND CASH EQUIVALENTS, beginning of period 2,528,416 983,017
------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 2,379,659 $ 1,447,185
============= ===============
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate $ 34,367 $ -
Unrealized holding loss on investment securities
available for sale 4,286 47,522
Transfer of securities classified as held to maturity
to available for sale 2,236,147 -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Federal income taxes paid 39,250 44,250
Interest paid 1,187,917 900,841
</TABLE>
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<PAGE> 8
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
IRONTON, OHIO
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
First Federal Financial Bancorp, Inc. (the "Company") was
incorporated under Delaware law in February 1996 by First Federal Savings and
Loan Association of Ironton (the "Association") in connection with the
conversion of the Association from a federally-chartered mutual savings and
loan association to a federally-chartered stock savings bank to be known as
"First Federal Savings Bank of Ironton" and the issuance of the Association's
common stock to the Company and the offer and sale of the Company's common
stock by the Company to the members of the public, the Association's Board of
Directors, its management, and the First Federal Financial Bancorp, Inc.
Employee Stock Ownership Plan (the "ESOP") (the "Conversion"). Upon
consummation of the Conversion, the Company will become a unitary holding
company for the Association. For purposes of this Form 10-QSB, the financial
statements of the Company have been omitted because as of March 31, 1996 the
Company had not yet issued any stock, had no assets and no liabilities and had
not yet conducted any business other than of an organizational nature.
Alternatively, the unaudited financial statements and the Management's
Discussion and Analysis of Financial Condition and Results of Operations
presented herein are for the Association, which will become the subsidiary of
the Company upon consummation of the Conversion. No pro forma effect has been
given to the sale of the Company's common stock in the Conversion.
The accompanying financial statements were prepared in
accordance with instructions to Form 10-QSB, and therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, all normal, recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the financial statements, have been included. These financial statements
should be read in conjunction with the audited financial statements and the
notes thereto for the period ended September 30, 1995 contained in the
Company's Prospectus dated April 25, 1996. The results for the six months
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ended September 30, 1996.
Business
The Company's principal business is conducted through the
Association which conducts business from its main office located in Ironton,
Ohio, and one full-service branch located in Chesapeake, Ohio. The
Association's deposits are insured by the Savings Association
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<PAGE> 9
Insurance Fund ("SAIF") to the maximum extent permitted by law. The
Association is subject to examination and comprehensive regulation by the
Office of Thrift Supervision ("OTS"), which is the Association's chartering
authority and primary regulator. The Association is also subject to regulation
by the Federal Deposit Insurance Corporation ("FDIC"), as the administrator of
the SAIF, and to certain reserve requirements established by the Federal
Reserve Board ("FRB"). The Association is a member of the Federal Home Loan
Bank of Cincinnati ("FHLB").
Common Stock Acquired By The Employee Stock Ownership Plan
The Company has established an ESOP for employees of the Company
and the Association to become effective upon the Conversion. Full-time
employees of the Company and the Association who have been credited with at
least 1,000 hours of service during a twelve month period and who have attained
age 21 are eligible to participate in the ESOP. The Company will make
scheduled discretionary cash contributions to the ESOP sufficient to amortize
the principal and interest on the loan over a period of 10 years. The Company
will account for its ESOP in accordance with Statement of Position 93-6,
"Employer's Accounting For Employee Stock Ownership Plans." As shares are
committed to be released to participants, the Company will report compensation
expense equal to the average market price of the shares during the period.
(2) EARNINGS PER SHARE
Earnings per share for the three months and six months ended
March 31, 1996 is not applicable, as the Association's conversion from
mutual-to-stock form and reorganization into a holding company format was not
completed as of March 31, 1996.
(3) SUBSEQUENT EVENT
On June 3, 1996, the Company completed the sale of its common
stock. 671,783 shares of common stock were sold and issued. Total proceeds of
$6,717,830 were reduced by $537,430 for shares to be purchased by the ESOP and
by approximately $427,000 for conversion expenses. As a result of the
Conversion, the Company contributed approximately $3,145,000 of additional
capital to the Association and retained the balance of the proceeds.
- 9 -
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ASSETS. The Association's assets totaled $53.1 million at March 31,
1996, a $1.8 million, or 3.5% increase over the Association's $51.3 million in
assets at September 30, 1995. The increase was primarily attributable to
increases in investment securities and loans receivable of $2.1 million and $.5
million, respectively, offset by a $.9 million decrease in mortgage-backed
securities (both held to maturity and available for sale).
CASH AND CASH EQUIVALENTS. These balances consist of cash on hand and
interest-bearing accounts and overnight deposit accounts in other financial
institutions. The $149,000 decrease, or 5.9% from September 30, 1995 to March
31, 1996 is attributable to normal cash requirements for daily operations.
INVESTMENT SECURITIES. Investment securities consist primarily of U.S.
Treasury and U.S. government agency securities. The Association has also
invested in recent years in certificates of deposit in other insured financial
institutions (in amounts up to $99,000 at any one institution) and, to a lesser
extent, in municipal securities. Investment securities increased $2.1 million,
or 39.6%, to $7.4 million at March 31, 1996 as compared to $5.3 million at
September 30, 1995. During the six month period, purchases totaled $3.6
million while scheduled maturities totaled $1.5 million. Cash generated for
the increased volume in investment securities was primarily from increased
savings deposits and from principal payments on mortgage-backed securities.
LOANS RECEIVABLE. Loans receivable increased $478,000, or 1.5%, from
$32.6 million at September 30, 1995 to $33.1 million at March 31, 1996. The
majority of the increase is attributable to variable rate, mortgage loan
originations.
MORTGAGE-BACKED SECURITIES. The Association invests primarily in
adjustable-rate mortgage-backed securities, which are classified as either held
to maturity (carried at amortized cost), or available for sale (carried at
quoted market). Mortgage-backed securities decreased by $920,000, or 9.6%,
from $9.5 million at September 30, 1995 to $8.6 million at March 31, 1996.
Reductions were due to scheduled principal payments and were used to fund loans
and purchase investment securities. There were no new purchases of
mortgage-backed securities during the six month period ended March 31, 1996.
On December 31, 1995, the Association elected to redesignate $2.2 million of
mortgage-backed securities held to maturity to the mortgage-backed securities
available for sale classification, in accordance with Financial Accounting
Standards Board guidance.
OFFICE PROPERTIES AND EQUIPMENT. The Association purchased various
equipment during the six months ended March 31, 1996, at a cost of $30,750.
- 10 -
<PAGE> 11
DEPOSITS. Deposits increased $1.6 million, or 3.5%, from $46.2 million
at September 30, 1995 to $47.8 million at March 31, 1996. The increase was due
to rising market rates of interest during the period and the Association's
offering of competitive deposit products.
RETAINED EARNINGS. Retained earnings of $4.9 million at September 30,
1995 increased to $5.1 million at March 31, 1996. The increase was due to net
income earned during the six month period. The capital to assets ratio was
9.6% at both March 31, 1996 and September 30, 1995.
RESULTS OF OPERATIONS
Net income decreased $30,000, or 27.5%, to $79,000 for the three
months ended March 31, 1996 as compared to $109,000 for the three months ended
March 31, 1995. For the comparable six month periods, net income decreased
$55,000, or 27.4%, from $201,000 for the 1995 period to $146,000 for the 1996
period. The three month decrease resulted from increases in non-interest
expenses of $19,000 and the provision for loan losses of $3,000, and a decrease
in net interest income of $29,000, offset by a reduction in the provision for
income taxes of $19,000, and an increase in non-interest income of $2,000. The
six month decrease in net income resulted from a decrease in net interest
income of $51,000, increases in the provision for loan losses of $5,000 and
non-interest expenses of $36,000, offset by a decrease in the provision for
income taxes of $34,000. Non-interest income increased $3,000.
Total interest income increased $102,000 and $236,000 for the
three and six months ended March 31, 1996, respectively, as compared to the
comparable 1995 periods. These increases were largely due to the increase in
interest on loans and investment securities, and to a lesser extent, from
increases in interest income on other interest-earning assets.
Total interest expense increased by $131,000 for the three
months ended March 31, 1996 as compared to the three months ended March 31,
1995. For the six month periods, total interest expense increased $288,000.
The increases were largely due to increases in market rates of interest during
1996 as compared to 1995, along with increases in the balance of deposits.
The provision for loan losses increased $3,000 and $5,000 for
the three months and six months ended March 31, 1996, as compared to the prior
comparable periods, reflecting management's estimate of loan losses during the
periods. The increases are not deemed to be significant.
The increase in non-interest expense of $19,000 for the quarter
ended March 31, 1996, as compared to the 1995 quarter resulted primarily from
increases in compensation and benefits expenses of $7,000, SAIF deposit
insurance premiums of $3,000, and other miscellaneous expenses of $6,000. For
the six month period ended March 31, 1996, non-interest expenses increased by
$36,000, consisting of increases in compensation and benefits, SAIF deposit
insurance premiums, and other miscellaneous expenses of $19,000, $4,000 and
$6,000, respectively.
- 11 -
<PAGE> 12
Compensation and benefits increased due to normal salary
adjustments given to employees. SAIF insurance increased due to increases in
insured deposits. The increase in other miscellaneous expenses did not result
from any single factor.
PROVISION FOR INCOME TAXES. During the three months ended March 31,
1996, the provision for income taxes decreased by $19,000 over the prior
comparable period, due to lower pre-tax income. The Association's effective
tax rate was approximately 30.4% and 32.7% for the three months ended March 31,
1996 and 1995, respectively. During the six months ended March 31, 1996, the
provision for income taxes decreased by $34,000 due to lower pre-tax income.
The Association's effective tax rate was approximately 25.5% for the six months
ended March 31, 1996, and 29.5% for the prior comparable period. The lower tax
rates for the 1996 periods were due to greater tax free income.
LIQUIDITY AND CAPITAL RESOURCES
The Association is required under applicable federal regulations
to maintain specified levels of "liquid" investments in qualifying types of
U.S. Government and government agency obligations and other similar investments
having maturities of five years or less. Such investments are intended to
provide a source of relatively liquid funds upon which the Association may rely
if necessary to fund deposit withdrawals and for other short-term funding
needs. The required level of such liquid investments is currently 5% of
certain liabilities as defined by the OTS and may be changed to reflect
economic conditions.
The liquidity of the Association, as measured by the ratio of
cash, cash equivalents, qualifying investments, mortgage-backed securities and
interest receivable on investments, and mortgage-backed securities that would
qualify except for the maturity dates, to the sum of total deposits less any
share loans on deposits, was 14.04% at March 31, 1996, as compared to 10.6% at
September 30, 1995. At March 31, 1996, the Association's "liquid" assets
totalled approximately $6.5 million, which was $4.2 million in excess of the
current OTS minimum requirement.
The Association's liquidity, represented by cash and cash
equivalents, is a product of its operating, investing and financing activities.
The Association's primary sources of funds are deposits, prepayments and
maturities of outstanding loans and mortgage-backed securities, maturities of
short-term investments,and funds provided from operations. While scheduled
loan and mortgage-backed securities amortization and maturing short-term
investments are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions and competition. The Association generates cash through its retail
deposits and, occasionally to the extent deemed necessary, has utilized
borrowings from the FHLB of Cincinnati.
Liquidity management is both a daily and long-term function of
business management. The Association maintains a strategy of investing in
loans and mortgage-backed securities. The Association uses its sources of
funds primarily to meet its ongoing commitments, to pay maturing savings
certificates and savings withdrawals, fund loan
- 12 -
<PAGE> 13
commitments and maintain a portfolio of mortgage-backed and investment
securities. At March 31, 1996, the total approved loan commitments outstanding
amounted to $668,000. Certificates of deposit scheduled to mature in one year
or less at March 31, 1996, totaled $24.5 million. The Association believes
that it has adequate resources to fund all of its commitments and that it could
either adjust the rate of certificates of deposit in order to retain deposits
in changing interest rate environments or replace such deposits with borrowings
if it proved to be cost-effective to do so.
The Company, as a separately incorporated holding company, will
have no significant operations other than serving as sole stockholder of First
Federal. On an unconsolidated basis, the Company initially shall have no paid
employees. The Company's assets will consist of its investment in First
Federal, the Company's loan to the ESOP and the net proceeds retained from the
Conversion, and its sources of income will consist primarily of earnings from
the investment of such funds as well as any dividends from First Federal. The
only expenses expected to be incurred initially by the Company will relate to
its reporting obligations under federal securities laws and related expenses as
a publicly traded company. Upon consummation of the Conversion, in which the
Company will retain 50% of the net Conversion proceeds, management believes
that the Company will have adequate liquidity available to respond to liquidity
demands. Although the Company has made no initial determination with respect
to the initiation of a cash dividend policy, any cash dividend policy which may
be initiated by the Board of Directors will be based on a percentage of the
Company's consolidated earnings. Thus, any future dividend policy should not
have a significant impact on its liquidity. In addition, the Company also will
have the ability to obtain dividends from the Association.
RECAPITALIZATION OF SAIF AND RELATED LEGISLATIVE PROPOSALS
The deposits of the Association are currently insured by the
Savings Association Insurance Fund ("SAIF"). Both the SAIF and the Bank
Insurance Fund ("BIF"), the federal deposit insurance fund that covers
commercial bank deposits, are required by law to attain and thereafter maintain
a reserve ratio of 1.25% of insured deposits. The BIF has achieved a fully
funded status in contrast to the SAIF and, therefore, as discussed below, the
FDIC recently substantially reduced the average deposit insurance premium paid
by commercial banks to a level substantially below the average premium paid by
SAIF-insured institutions.
In late 1995, the FDIC approved a final rule regarding deposit
insurance premiums which, effective with respect to the semiannual premium
assessment beginning January 1, 1996, reduced deposit insurance premiums for
BIF member institutions to zero basis points for institutions in the lowest
risk category. Accordingly, in the absence of further legislative action, SAIF
members such as the Association will be competitively disadvantaged as compared
to commercial banks by the resulting premium differential. It is anticipated
that, under present conditions, it will be at least several years before the
SAIF reaches a reserve ratio of 1.25% of insured deposits.
- 13 -
<PAGE> 14
The U.S. House of Representatives and Senate have actively
considered legislation which would have eliminated the premium differential
between SAIF-insured institutions and BIF-insured institutions by
recapitalizing the SAIF's reserves to the required ratio. The proposed
legislation would have provided that all SAIF member institutions pay a special
one-time assessment to recapitalize the SAIF, which in the aggregate would have
been sufficient to bring the reserve ratio in the SAIF to 1.25% of the insured
deposits. Based on the current level of reserves maintained by the SAIF, it
was anticipated that the amount of the special assessment required to
recapitalize the SAIF would have been approximately 80 to 85 basis points of
the SAIF-assessable deposits. It was anticipated that after the
recapitalization of the SAIF, premiums paid by SAIF-insured institutions would
be reduced to match those currently being assessed BIF-insured commercial
banks. The legislation also provided for the merger of the BIF and the SAIF,
with such merger being conditioned upon the prior elimination of the thrift
charter.
The legislation discussed above had been, for some time,
included as part of a fiscal 1996 federal budget bill, but was eliminated prior
to the bill being enacted on April 26, 1996. In light of the legislation's
elimination and the uncertainty of the legislative process generally,
management cannot predict whether legislation reducing SAIF premiums and/or
imposing a special one-time assessment will be adopted, or, if adopted, the
amount of the assessment, if any, that would be imposed on the Association.
If legislation were to be enacted in the future which would
assess a one-time special assessment of 85 basis points, the Association would
(based upon the Association's SAIF-insured deposits as of March 31, 1996) pay
approximately $268,000, net of related tax benefits. In addition, the
enactment of such legislation might have the effect of immediately reducing the
Association's capital by such an amount. Nevertheless, management does not
believe, based upon the foregoing assumptions, that a one-time assessment of
this nature would have a material adverse effect on the Association's financial
condition.
- 14 -
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the
Issuer is a part, or to which any of their property is
subject.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
27 Financial Data Schedule.
b) No Form 8-K reports were filed during the quarter.
- 15 -
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: 7/15/96 By:/s/ I. Vincent Rice
----------------- ---------------------------------
I. Vincent Rice, President
Date: 7/15/96 By:/s/ Jeffery W. Clark
------------------ ---------------------------------
Jeffery W. Clark, Comptroller
- 16 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
FEDERAL SAVINGS AND LOAN ASSOCIATION OF IRONTON BALANCE SHEET AS OF MARCH 31,
1996 AND THE STATEMENT OF INCOME FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 46,170
<INT-BEARING-DEPOSITS> 2,333,489
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,994,646
<INVESTMENTS-CARRYING> 13,090,971
<INVESTMENTS-MARKET> 12,836,263
<LOANS> 33,375,563
<ALLOWANCE> 288,295
<TOTAL-ASSETS> 53,060,613
<DEPOSITS> 47,831,205
<SHORT-TERM> 0
<LIABILITIES-OTHER> 147,808
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 5,081,600
<TOTAL-LIABILITIES-AND-EQUITY> 53,060,613
<INTEREST-LOAN> 1,362,346
<INTEREST-INVEST> 455,488
<INTEREST-OTHER> 62,049
<INTEREST-TOTAL> 1,879,883
<INTEREST-DEPOSIT> 1,185,027
<INTEREST-EXPENSE> 1,185,027
<INTEREST-INCOME-NET> 694,856
<LOAN-LOSSES> 12,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 505,448
<INCOME-PRETAX> 196,277
<INCOME-PRE-EXTRAORDINARY> 146,155
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,155
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2.84
<LOANS-NON> 10,489
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 277,937
<CHARGE-OFFS> 1,642
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 288,295
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 288,295
</TABLE>
