<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 JUNE 30, 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 X No
----------- ------------
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of August 9, 1996, there were issued and outstanding 671,783 shares of
the Registrant's Common Stock. As of September 30, 1995, 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. The financial information
presented herein at September 30, 1995, and for the periods ending June
30, 1995 is for First Federal Savings and Loan Association of Ironton
only.
Transitional Small Business Disclosure Format (check one):
Yes X No
------- -------
<PAGE> 2
FIRST FEDERAL FINANCIAL BANCORP, INC.
TABLE OF CONTENTS
*****************
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
<S> <C> <C>
Consolidated Balance Sheets (as of June 30,
1996 (unaudited) and September 30, 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income (for the three
months ended June 30, 1996 and 1995 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Income (for the nine
months ended June 30, 1996 and 1995 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Changes in Stockholders' Equity (for
the nine months ended June 30, 1996 (unaudited) and
the year ended September 30, 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows (for the nine
months ended June 30, 1996 and 1995 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated 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 FINANCIAL BANCORP, INC. AND SUBSIDIARY
IRONTON, OHIO
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
---------------- -----------------
(Unaudited)
ASSETS
------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 4,312,443 $ 2,528,416
INVESTMENT SECURITIES HELD
TO MATURITY 9,097,480 5,290,336
LOANS RECEIVABLE 33,464,127 32,609,321
MORTGAGE-BACKED SECURITIES
HELD TO MATURITY 5,407,838 8,567,701
MORTGAGE-BACKED SECURITIES
AVAILABLE FOR SALE 2,665,121 989,994
FORECLOSED REAL ESTATE 33,367 -
ACCRUED INTEREST RECEIVABLE 367,381 304,753
OFFICE PROPERTIES AND EQUIPMENT 960,509 904,014
OTHER ASSETS 86,536 101,801
--------------- ---------------
$ 56,394,802 $ 51,296,336
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
DEPOSITS $ 45,277,736 $ 46,197,820
DEFERRED FEDERAL INCOME TAXES PAYABLE 79,175 69,578
ACCRUED INTEREST PAYABLE 3,232 6,519
OTHER LIABILITIES 90,993 93,555
--------------- ---------------
Total liabilities 45,451,136 46,367,472
--------------- ---------------
STOCKHOLDERS' EQUITY:
Common stock 6,718 -
Employee stock ownership plan (527,910) -
Additional paid-in capital 6,281,070 -
Retained earnings-substantially restricted 5,190,582 4,938,274
Unrealized holding loss on mortgage-backed
securities available for sale, net of taxes (6,794) (9,410)
--------------- ---------------
Total stockholders' equity 10,943,666 4,928,864
--------------- ---------------
$ 56,394,802 $ 51,296,336
=============== ===============
</TABLE>
- 3 -
<PAGE> 4
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
IRONTON, OHIO
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For The Three Months Ended
------------------------------------------
June 30, June 30,
1996 1995
--------------- ---------------
INTEREST INCOME: (Unaudited) (Unaudited)
<S> <C> <C>
Loans receivable-
First mortgage loans $ 651,862 $ 610,475
Consumer and other loans 26,733 28,041
Mortgage-backed and related securities 125,698 142,913
Investment securities 127,960 67,585
Other interest-earning assets 45,299 23,591
-------------- -------------
Total interest income 977,552 872,605
-------------- -------------
INTEREST EXPENSE:
Interest-bearing checking 3,898 3,448
Passbook savings 85,653 89,635
Certificates of deposit 498,376 419,422
Advances from Federal Home
Loan Bank - 13,367
-------------- -------------
Total interest expense 587,927 525,872
-------------- -------------
Net interest income 389,625 346,733
PROVISION FOR LOAN LOSSES 2,000 3,000
-------------- -------------
Net interest income after provision
for loan losses 387,625 343,733
-------------- -------------
NON-INTEREST INCOME:
Losses on foreclosed real estate - -
Other 10,025 9,371
-------------- -------------
Total non-interest income 10,025 9,371
-------------- -------------
NON-INTEREST EXPENSE:
Compensation and benefits 99,000 94,189
Occupancy and equipment 25,202 20,657
SAIF deposit insurance premium 26,343 23,367
Directors' fees and expenses 10,578 10,566
Ohio franchise tax 19,110 17,550
Data processing 14,976 13,516
Advertising 11,427 12,701
Other 41,146 42,110
-------------- -------------
Total non-interest expense 247,782 234,656
-------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES 149,868 118,448
PROVISION FOR INCOME TAXES 43,715 36,061
-------------- -------------
NET INCOME $ 106,153 $ 82,387
============== =============
NET INCOME PER SHARE $ .17 $ N/A
============== =============
</TABLE>
- 4 -
<PAGE> 5
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
IRONTON, OHIO
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Nine Months Ended
-----------------------------------------
June 30, June 30,
1996 1995
-------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME:
Loans receivable -
First mortgage loans $ 1,959,012 $ 1,774,588
Consumer and other loans 81,929 77,671
Mortgage-backed and related
securities 399,380 413,640
Investment securities 309,766 200,044
Other interest-earning assets 107,348 50,293
-------------- -------------
Total interest income 2,857,435 2,516,236
-------------- -------------
INTEREST EXPENSE:
Interest-bearing checking 11,356 11,485
Passbook savings 248,155 331,474
Certificates of deposit 1,513,443 1,012,693
Advances from Federal Home
Loan Bank - 67,513
-------------- -------------
Total interest expense 1,772,954 1,423,165
-------------- -------------
Net interest income 1,084,481 1,093,071
PROVISION FOR LOAN LOSSES 14,000 10,000
-------------- -------------
Net interest income after
provision for loan losses 1,070,481 1,083,071
-------------- -------------
NON-INTEREST INCOME:
Losses on foreclosed real estate (1,000) -
Other 29,894 24,524
-------------- -------------
Total non-interest income 28,894 24,524
-------------- -------------
NON-INTEREST EXPENSE:
Compensation and benefits 308,277 284,217
Occupancy and equipment 65,539 62,659
SAIF deposit insurance premium 77,988 71,210
Directors' fees and expenses 46,471 44,084
Ohio franchise tax 55,577 51,335
Data processing 44,472 39,413
Advertising 37,554 39,544
Other 117,352 112,038
-------------- -------------
Total non-interest expense 753,230 704,500
-------------- -------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 346,145 403,095
PROVISION FOR INCOME TAXES 93,837 119,894
-------------- -------------
NET INCOME $ 252,308 $ 283,201
============== =============
NET INCOME PER SHARE $ .41 $ N/A
============== =============
</TABLE>
- 5 -
<PAGE> 6
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
IRONTON, OHIO
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Employee
Stock Additional
Common Ownership Paid-in
Stock Plan Capital
----- ------ -------
<S> <C> <C> <C>
BALANCES,
September 30, 1994 $ - $ - $ -
NET INCOME, year ended
September 30, 1995 - - -
CHANGE IN UNREALIZED HOLDING
LOSS ON MORTGAGE-BACKED
SECURITIES AVAILABLE FOR SALE,
net of income tax
benefit of $5,839 - - -
--------- -------------- ---------------
BALANCES,
September 30, 1995 - - -
NET INCOME, nine months ended
June 30, 1996 (unaudited) - - -
COMMON STOCK ISSUED,
$.01 par value (unaudited) 6,718 (537,430) 6,281,070
ESOP SHARES RELEASED,
952 shares (unaudited) - 9,520 -
CHANGE IN UNREALIZED HOLDING
LOSS ON MORTGAGE-BACKED
SECURITIES AVAILABLE FOR SALE,
net of income tax benefit of $1,347
(unaudited) - - -
--------- ------------- ---------------
$ 6,718 $ (527,910) $ 6,281,070
========= ============= ===============
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Holding Loss
Retained On Mortgage-Backed
Earnings- Securities Total
Substantially Available Stockholders'
Restricted For Sale Equity
---------- -------- ------
<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 AVAILABLE FOR SALE,
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, nine months ended
June 30, 1996 (unaudited) 252,308 - 252,308
COMMON STOCK ISSUED,
$.01 par value (unaudited) - - 5,750,358
ESOP SHARES RELEASED,
952 shares (unaudited) - - 9,520
CHANGE IN UNREALIZED HOLDING
LOSS ON MORTGAGE-BACKED
SECURITIES AVAILABLE FOR SALE,
net of income tax benefit of $1,347
(unaudited) - 2,616 2,616
-------------- ---------- --------------
$ 5,190,582 $ (6,794) $ 10,943,666
============== ========== ==============
</TABLE>
- 6 -
<PAGE> 7
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
IRONTON, OHIO
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------------------
June 30, June 30,
1996 1995
------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 252,308 $ 283,201
Adjustments to reconcile net income to net cash
provided by operating activities -
Losses on foreclosed real estate 1,000 -
Provision for loan losses 14,000 10,000
Depreciation 37,903 37,446
FHLB stock dividends (21,700) (18,900)
Amortization and accretion, net 24,251 32,575
ESOP compensation 9,520 -
Change in -
Accrued interest receivable (62,628) (13,078)
Other assets 14,969 12,675
Deferred Federal income taxes 8,249 10,107
Accrued interest payable (3,287) (2,946)
Other liabilities (2,562) (6,424)
------------- ---------------
Net cash provided by operating activities 272,023 344,656
------------- ---------------
INVESTING ACTIVITIES:
Net increase in loans (902,874) (2,966,551)
Proceeds from maturities of investment securities held to maturity 1,447,000 691,000
Purchases of investment securities held to maturity (5,229,382) (586,824)
Principal collected on mortgage-backed securities held to maturity 903,849 793,865
Principal collected on mortgage-backed securities available for sale 557,535 35,908
Purchases of office properties and equipment (94,398) (77,844)
------------- ---------------
Net cash used for investing activities (3,318,270) (2,110,446)
------------- ---------------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits (920,084) 2,493,334
Proceeds from FHLB advances - 5,600,000
Payments on FHLB advances - (5,600,000)
Proceeds from issuance of common stock 5,750,358 -
------------- ---------------
Net cash provided by financing activities 4,830,274 2,493,334
------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS 1,784,027 727,544
CASH AND CASH EQUIVALENTS, beginning of period 2,528,416 983,017
------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 4,312,443 $ 1,710,561
============= ===============
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate $ 34,367 $ -
Unrealized holding loss on mortgage-backed
securities available for sale 10,294 29,558
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 71,885 63,661
Interest paid 1,776,241 1,426,111
</TABLE>
- 7 -
<PAGE> 8
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
IRONTON, OHIO
NOTES TO CONSOLIDATED 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" (the "Bank") and the issuance of the
Bank'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"). For
purposes of this Form 10-QSB, the financial statements at September 30, 1995,
and for the three and nine months ended June 30, 1995, are for the Association
only, because as of September 30, 1995, the Company had not yet been formed or
issued any stock. The Management's Discussion and Analysis of Financial
Condition and Results of Operations presented herein is for the Company as of
June 30, 1996, and for the three and nine months then ended, as compared to the
Association at September 30, 1995, and for the three and nine months ended June
30, 1995. 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 nine months ended June 30, 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 Bank
which conducts business from its main office located in Ironton, Ohio, and one
full-service branch located in Chesapeake, Ohio. The Bank's deposits are
insured by the Savings Association Insurance Fund ("SAIF") to the maximum
extent permitted by law. The Bank is subject to examination and comprehensive
regulation by the Office of Thrift Supervision ("OTS"), which is the Bank's
chartering authority and primary regulator. The Bank 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 Bank is a member of the Federal Home
Loan Bank of Cincinnati ("FHLB").
- 8 -
<PAGE> 9
Principles of Consolidation
The consolidated financial statements at June 30, 1996, and for
the three and nine month periods then ended, include the accounts of the
Company and the Bank. The financial statements at September 30, 1995, and for
the three and nine month periods ended June 30, 1995, include only the accounts
of the Bank. All significant intercompany transactions and balances have been
eliminated in consolidation. Additionally, certain reclassifications may have
been made in order to conform with the current period's presentation. The
accompanying financial statements have been prepared on the accrual basis.
(2) CONVERSION TRANSACTION
On June 3, 1996, (i) the Association converted from a federally
chartered mutual savings and loan association to a federally chartered stock
savings bank to be named "First Federal Savings Bank of Ironton", and (ii) the
Company acquired all of the common stock of the Bank in the Conversion. As
part of the Conversion, the Company issued 671,783 shares of its Common Stock.
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 Bank and retained the balance of the proceeds.
(3) COMMON STOCK ACQUIRED BY THE EMPLOYEE STOCK OWNERSHIP PLAN
The Company has established an ESOP for employees of the Company
and the Bank which became effective upon the Conversion,. Full time employees
of the Company and the Bank 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 loaned the ESOP $537,430 for the
initial purchase of the ESOP shares. The loan is due and payable in
forty-eight (48) equal quarterly installments of $11,200 beginning June 29,
1996, plus interest at the rate of 8.75% per annum. 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 12 years. The Company
accounts 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 reports compensation
expense equal to the average market price of the shares during the period.
ESOP compensation expense recorded during the three and nine month periods
ended June 30, 1996 was $9,520 for each period.
(4) NET INCOME PER SHARE
Net income per share for the three and nine month periods ended
June 30, 1996, was calculated by dividing the consolidated net income by the
weighted average number of shares outstanding (618,040). Shares which have not
been committed to be released to the ESOP are not considered to be outstanding
for purposes of calculating net income per share.
- 9 -
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
ASSETS. Total assets increased $5.1 million, or 9.9%, from
$51.3 million for the Association at September 30, 1995 to $56.4 million for
the Company at June 30, 1996. The increase consisted primarily of increases in
investment securities held to maturity of $3.8 million, cash and cash
equivalents of $1.8 million, and loans receivable of $.9 million, offset by a
decline in mortgage-backed securities (held to maturity and available for sale)
of $1.5 million.
CASH AND CASH EQUIVALENTS. The $1.8 million increase in cash and
cash equivalents, or 72.0%, resulted from Conversion proceeds temporarily
invested in overnight deposit funds. $2.6 million of conversion proceeds were
still on deposit with the Bank at June 30, 1996, and are eliminated in
consolidation. Such funds were subsequently invested in investment securities.
INVESTMENT SECURITIES. Investment securities increased $3.8
million, or 71.7%, from $5.3 million at September 30, 1995, to $9.1 million at
June 30, 1996. The Bank primarily invests in U.S. Treasury and U.S. government
agency securities. To a lesser extent, the Bank invests in municipal
securities and in certificates of deposit in other insured financial
institutions (in amounts up to $99,000 at any one institution). Cash generated
for the increase in the investment portfolio was primarily from principal
payments received on mortgage-backed securities.
LOANS RECEIVABLE. Loans receivable increased a modest 2.8%, from
$32.6 million at September 30, 1995, to $33.5 million at June 30, 1996. The
majority of the increase is attributed to variable rate mortgage loan
originations.
MORTGAGE-BACKED SECURITIES. The Bank 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 $1.5 million, or
15.6%, from $9.6 million at September 30, 1995 to $8.1 million at June 30,
1996, due to scheduled principal payments. There were no new purchases of
mortgage-backed securities during the nine months ended June 30, 1996. On
December 31, 1995, the Bank elected to redesignate $2.2 million in
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 Bank purchased land for
future drive-through facilities expansion during the nine months ended June 30,
1996 at a cost of $66,265. The remainder of the increase is attributable to
equipment purchases.
DEPOSITS. Deposits decreased by $.9 million, or 2.0%, from $46.2
million at September 30, 1995, to $45.3 million at June 30, 1996. Of the $.9
million net decrease, $.8 million related to withdrawals by customers to
purchase stock in connection with the Conversion. The Bank continues to offer
competitive interest rates on deposits, but due to adequate liquidity levels,
has found it unnecessary at this time to actively solicit new deposit accounts.
STOCKHOLDERS' EQUITY. Stockholders' equity totaled $10.9 million
at June 30, 1996 for the Company, as compared to $4.9 million in retained
earnings for the Association (in its mutual form) at September 30, 1995. The
increase of $6.0 million, or 122%, resulted from net Conversion proceeds of
$5.7 million, and the addition of net income for the period.
- 10 -
<PAGE> 11
RESULTS OF OPERATIONS-THREE MONTHS ENDED JUNE 30, 1996 AS
COMPARED TO THREE MONTHS ENDED JUNE 30, 1995.
Net income increased $23,766, or 28.8%, from $82,387 for the
quarter ended June 30, 1995, to $106,153 for the quarter ended June 30, 1996.
The increase resulted from a $42,892, or 12.4%, increase in net interest
income, and a $1,000 decrease in the provision for loan losses, which was
offset by increases in non-interest expense and the provision for income taxes
of $13,126 and $7,654, respectively.
Total interest income increased $104,947, or 12.0%, from $872,605
for the three months ended June 30, 1995, to $977,552 for the comparable 1996
period. The increase was largely due to increases in interest on investment
securities and loans receivable of $60,375 and $40,079, respectively, and to a
lesser extent interest on other interest-earning assets of $21,708, offset by a
reduction in interest income on mortgage-backed securities of $17,215. The
increases were primarily due to increased levels of interest-earning assets
during the period. Interest income on mortgage-backed securities decreased due
to lower volumes during the 1996 period as compared to 1995.
Total interest expense increased by $62,055, or 11.8%, from
$525,872 for the three months ended June 30, 1995, to $587,927 for the three
months ended June 30, 1996. The increase resulted primarily from increases in
market rates of interest, offset by a small decline in the volume of deposits.
Advances from the Federal Home Loan Bank in the amount of $2,000,000 were paid
off during the three months ended June 30, 1995.
The provision for loan losses decreased $1,000 for the 1996 three
month period as compared to 1995. Management has determined that the allowance
for loan losses is adequate for all periods presented and such decrease is not
indicative of any change in the composition or quality of the loan portfolio.
Non-interest expense increased $13,126, or 5.6%, from $234,656
for the three months ended June 30, 1995, to $247,782 for the comparable 1996
quarter. The increase consisted primarily of increases in compensation and
benefits of $4,811, occupancy and equipment expenses of $4,545, and SAIF
deposit insurance premiums of $2,976. Other increases and decreases were
relatively insignificant between periods.
The increase in compensation and benefits was due to $9,520 in
ESOP expense recorded in the 1996 period, with no comparable expense for 1995,
offset by a reduction in expenses associated with the Bank's defined benefit
pension plan. The Bank is in the process of terminating the defined benefit
pension plan since the ESOP has been adopted. The increase in occupancy and
equipment is attributable to increased maintenance costs on equipment and
increased depreciation charges. Savings Association Insurance Fund ("SAIF")
deposit insurance premiums increased due to increased levels of insured
deposits during the measurement period for insurance.
The provision for taxes increased due to increased net income.
The effective tax rates were 29.2% and 30.4%, for the three months ended June
30, 1996 and 1995, respectively.
- 11 -
<PAGE> 12
RESULTS OF OPERATIONS-NINE MONTHS ENDED JUNE 30, 1996 AS COMPARED
TO NINE MONTHS ENDED JUNE 30, 1995.
Net income decreased $30,893, or 10.9%, from $283,201 for the
nine months ended June 30, 1995, to $252,308 for the comparable 1996 period.
The decrease resulted from a slight decrease for the period in net interest
income of $8,590, and increases in the provision for loan losses and
non-interest expense of $4,000 and $48,730, respectively, offset by an increase
in non-interest income of $4,370 and a reduction in the provision for income
taxes of $26,057.
Total interest income increased $341,199, or 13.6%, from
$2,516,236 for the nine months ended June 30,1995, to $2,857,435 for the
comparable 1996 period. The increase was largely due to increases in interest
on investment securities and loans receivable of $109,722 and $188,682,
respectively, and to a lesser extent interest on other interest-earning assets
of $57,055, offset by a reduction in interest income on mortgage backed
securities of $14,260. The increases were primarily due to increased levels of
interest-earning assets during the period. Interest income on mortgage-backed
securities decreased due to lower volumes during the 1996 period as compared to
1995.
Total interest expense increased by $349,789, or 24.6%, from
$1,423,165 for the nine months ended June 30, 1995, to $1,772,954 for the nine
months ended June 30, 1996. The increase resulted primarily from increases in
market rates of interest, offset by a small decline in the volume of deposits.
Advances from the Federal Home Loan Bank in the amount of $5,600,000 were paid
off during the nine months ended June 30, 1995.
The provision for loan losses increased $4,000 for the 1996 nine
month period as compared to 1995. Management has determined that the allowance
for loan losses is adequate for all periods presented and such increase is not
deemed to be significant.
The $4,370 increase in non-interest income is attributable to
increased service charges on demand accounts and increased mortgage life
insurance premiums, partially offset by losses on foreclosed real estate.
Non-interest expense increased $48,730, or 6.9%, from $704,500
for the nine months ended June 30, 1995, to $753,230 for the comparable 1996
nine month period. The increase consisted primarily of increases in
compensation and benefits of $24,060 and SAIF deposit insurance premiums of
$6,778. Other increase and decreases were relatively insignificant between
periods.
The increase in compensation and benefits was due to $9,520 in
ESOP expense recorded in the 1996 period, with no comparable expense for 1995,
and annual salary increases given to employees. SAIF deposit insurance
premiums increased due to increased insured deposits during the measurement
period for insurance.
The provision for taxes decreased due to decreased net income.
The effective tax rates were 27.1% and 29.7%, for the nine months ended June
30, 1996 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Bank 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
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<PAGE> 13
to provide a source of relatively liquid funds upon which the Bank 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 Bank, as measured by the ratio of cash, cash
equivalents, qualifying investments, mortgage-back 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 21.7% at June 30, 1996, as compared to 10.6% at
September 30, 1995. At June 30, 1996, the Bank's "liquid" assets totalled
approximately $10.7 million, which was $8.2 million in excess of the current
OTS minimum requirement.
The Bank's liquidity, represented by cash and cash equivalents,
is a product of its operating, investing and financing activities. The Bank'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 generally interest rates, economic conditions and
competition. The Bank 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 Bank maintains a strategy of investing in loans and
mortgage-backed securities. The Bank uses its sources of funds primarily to
meet its ongoing commitments, to pay maturing savings certificates and savings
withdrawals, fund loan commitments and maintain a portfolio of mortgage-backed
and investment securities. At June 30, 1996, the total approved loan
commitments outstanding amounted to $462,000. Certificates of deposit
scheduled to mature in one year or less at June 30, 1996, totaled $20.8
million. The Bank 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.
At June 30, 1996, the Bank had regulatory capital which was well
in excess of applicable limits At June 30, 1996, the Bank was required to
maintain tangible capital of 1.5% of adjusted total assets, core capital of
3.0% of adjusted total assets and risk-based capital of 8.0% of adjusted
risk-weighted assets At June 30, 1996, the Bank's tangible capital was $8.3
million or 14.7% of adjusted total assets, core capital was $8.3 million or
14.7% of adjusted total assets and risk-based capital was $8.6 million or 36.5%
of adjusted risk-weighted assets, exceeding the requirements by $7.5 million,
$6.6 million and $6.7 million, respectively.
The Company, as a separately incorporated holding company, has no
significant operations other than serving as sole stockholder of the Bank. On
an unconsolidated basis, the Company has no paid employees. The Company's
assets consists of its investment in the Bank, 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 the Bank. The only significant expenses expected to be
incurred by the Company will relate to its reporting obligations under federal
securities laws and related expenses as a publicly traded company. The Company
retained 50% of the net Conversion proceeds, and management believes that the
Company will have adequate liquidity available to respond to liquidity demands.
Although the Company has made no 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
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<PAGE> 14
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
Bank.
RECAPITALIZATION OF SAIF AND RELATED LEGISLATIVE PROPOSALS
The deposits of the Bank are currently insured by the 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 Bank 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.
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 recapitalization
of the SAIF, premiums paid by SAIF-insured institutions would be reduced to
match those currently being assessed BIF-insured commercial banks. The
proposed legislation also provided for the merger of the BIF and 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 Bank.
If legislation were to be enacted in the future which would
assess a one-time special assessment of 85 basis points, the Bank would (based
upon the Bank's SAIF-insured deposits as of June 30, 1996) pay approximately
$254,000 net of related tax benefits. In addition, the enactment of such
legislation might have the effect of immediately reducing the Bank'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 Bank's financial condition.
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<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: August 9, 1996 By:/s/ I. Vincent Rice
------------------------- -------------------------------------
I. Vincent Rice, President
Date: August 9, 1996 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 Financial Bancorp, Inc. and Subsidiary Consolidated Balance Sheet as of
June 30, 1996 and the Consolidated Statement of Income for the nine months ended
June 30, 1996 and is qualified in its entirety by reference to such Consolidated
Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 110,571
<INT-BEARING-DEPOSITS> 4,201,872
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,665,121
<INVESTMENTS-CARRYING> 14,505,318
<INVESTMENTS-MARKET> 14,346,920
<LOANS> 33,747,366
<ALLOWANCE> 283,239
<TOTAL-ASSETS> 56,394,802
<DEPOSITS> 45,277,736
<SHORT-TERM> 0
<LIABILITIES-OTHER> 173,400
<LONG-TERM> 0
0
0
<COMMON> 6,718
<OTHER-SE> 10,936,948
<TOTAL-LIABILITIES-AND-EQUITY> 56,394,802
<INTEREST-LOAN> 2,040,941
<INTEREST-INVEST> 709,146
<INTEREST-OTHER> 107,348
<INTEREST-TOTAL> 2,857,435
<INTEREST-DEPOSIT> 1,772,954
<INTEREST-EXPENSE> 1,772,954
<INTEREST-INCOME-NET> 1,084,481
<LOAN-LOSSES> 14,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 753,230
<INCOME-PRETAX> 346,145
<INCOME-PRE-EXTRAORDINARY> 252,308
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 252,308
<EPS-PRIMARY> .0
<EPS-DILUTED> .0
<YIELD-ACTUAL> 2.75
<LOANS-NON> 96,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 277,937
<CHARGE-OFFS> 8,698
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 283,239
<ALLOWANCE-DOMESTIC> 283,239
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
