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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, 1997
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 (IRS Employer
of incorporation or organization) Identification No.)
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 4, 1997, there were issued and outstanding 646,383 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 for September 30, 1995 is for First Federal Savings and
Loan Association of Ironton only.
Transitional Small Business Disclosure Format (check one):
YES X NO
----- -----
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FIRST FEDERAL FINANCIAL BANCORP, INC.
TABLE OF CONTENTS
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (as of June 30,
1997 (unaudited) and September 30, 1996).................. 3
Consolidated Statements of Income (for the
three months ended June 30, 1997
(unaudited) and 1996 (unaudited))......................... 4
Consolidated Statements of Income (for the
nine months ended June 30, 1997
(unaudited) and 1996 (unaudited))......................... 5
Consolidated Statements of Changes in
Stockholders' Equity (for the nine months
ended June 30, 1997 (unaudited) and the
year ended September 30, 1996)............................ 6
Consolidated Statements of Cash Flows (for
the nine months ended June 30, 1997
(unaudited) and 1996 (unaudited).......................... 7
Notes to Consolidated Financial Statements................ 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 11-16
Part II. Other Information
Item 1. Legal Proceedings......................................... 17
Item 2. Changes in Securities..................................... 17
Item 3. Defaults Upon Senior Securities........................... 17
Item 4. Submission of Matters to a Vote of Security Holders....... 17
Item 5. Other Information......................................... 17
Item 6. Exhibits and Reports on Form 8-K.......................... 17
Signatures .......................................................... 18
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS........................................... $ 1,561,870 $ 801,243
INVESTMENT SECURITIES HELD TO MATURITY.............................. 7,711,891 8,983,577
INVESTMENT SECURITIES AVAILABLE FOR SALE............................ 1,635,166 2,531,995
LOANS RECEIVABLE.................................................... 38,003,852 34,955,329
MORTGAGE-BACKED SECURITIES HELD TO MATURITY......................... 4,964,930 5,190,066
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE....................... 3,199,860 2,575,973
FORECLOSED REAL ESTATE.............................................. 50,046 33,367
ACCRUED INTEREST RECEIVABLE......................................... 388,444 382,997
OFFICE PROPERTIES AND EQUIPMENT..................................... 1,657,810 1,037,768
OTHER ASSETS........................................................ 140,844 144,237
------------- -------------
$ 59,314,713 $ 56,636,552
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS............................................................ $ 45,864,760 $ 44,809,072
ADVANCES FROM FEDERAL HOME LOAN BANK................................ 2,800,000 500,000
DEFERRED FEDERAL INCOME TAXES PAYABLE............................... 94,128 84,015
ACCRUED INTEREST PAYABLE............................................ 12,201 5,224
ACCRUED SAIF SPECIAL ASSESSMENT..................................... -- 269,363
OTHER LIABILITIES................................................... 114,771 85,360
------------- --------------
Total liabilities............................................. 48,885,860 45,753,034
------------- --------------
STOCKHOLDERS' EQUITY:
Common stock...................................................... 6,464 6,718
Employee benefit plans............................................ (763,195) (513,080)
Additional paid-in capital........................................ 6,053,878 6,280,193
Retained earnings-substantially restricted........................ 5,121,023 5,111,660
Unrealized holding gain (loss) on securities available for sale,
net of taxes..................................................... 10,683 (1,973)
------------- --------------
Total stockholders' equity.................................... 10,428,853 10,883,518
------------- --------------
$ 59,314,713 $ 56,636,552
------------- --------------
------------- --------------
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
------------------------
JUNE 30, JUNE 30,
1997 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
INTEREST INCOME:
Loans receivable-
First mortgage loans .............................................................. $709,675 $ 651,862
Consumer and other loans........................................................... 34,810 26,733
Mortgage-backed and related securities............................................... 118,677 125,698
Investment securities................................................................ 147,101 127,960
Other interest-earning assets........................................................ 30,064 45,299
----------- -----------
Total interest income............................................................ 1,040,327 977,552
----------- -----------
INTEREST EXPENSE:
Interest-bearing checking............................................................ 3,530 3,898
Passbook savings..................................................................... 70,006 85,653
Certificates of deposit.............................................................. 533,233 498,376
Advances from Federal Home
Loan Bank.......................................................................... 16,624 --
----------- -----------
Total interest expense........................................................... 623,393 587,927
----------- -----------
Net interest income.............................................................. 416,934 389,625
PROVISION FOR LOAN LOSSES.............................................................. -- 2,000
----------- -----------
Net interest income after provision for loan losses.............................. 416,934 387,625
----------- -----------
NON-INTEREST INCOME:
Other................................................................................ 9,166 10,025
----------- -----------
Total non-interest income........................................................ 9,166 10,025
----------- -----------
NON-INTEREST EXPENSE:
Compensation and benefits............................................................ 115,744 99,000
Occupancy and equipment.............................................................. 23,886 25,202
SAIF deposit insurance premiums...................................................... 7,415 26,343
Directors' fees and expenses......................................................... 22,802 10,578
Ohio franchise tax................................................................... 51,918 19,110
Data processing...................................................................... 14,555 14,976
Advertising.......................................................................... 14,481 11,427
Professional services................................................................ 19,264 9,480
Other................................................................................ 42,288 31,666
----------- -----------
Total non-interest expense....................................................... 312,353 247,782
----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES............................................... 113,747 149,868
PROVISION FOR INCOME TAXES............................................................. 33,707 43,715
----------- -----------
NET INCOME............................................................................. $ 80,040 $ 106,153
----------- -----------
----------- -----------
NET INCOME PER SHARE................................................................... $ .13 $ .17
----------- -----------
----------- -----------
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1997 1996
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
INTEREST INCOME:
Loans receivable-
First mortgage loans........................................................... $ 2,087,769 $ 1,959,012
Consumer and other loans....................................................... 103,281 81,929
Mortgage-backed and related securities........................................... 345,569 399,380
Investment securities............................................................ 500,094 309,766
Other interest-earning assets.................................................... 57,796 107,348
------------ ------------
Total interest income........................................................ 3,094,509 2,857,435
------------ ------------
INTEREST EXPENSE:
Interest-bearing checking........................................................ 9,960 11,356
Passbook savings................................................................. 212,965 248,155
Certificates of deposit.......................................................... 1,559,476 1,513,443
Advances from Federal Home Loan Bank............................................. 30,151 --
------------ ------------
Total interest expense....................................................... 1,812,552 1,772,954
------------ ------------
Net interest income.......................................................... 1,281,957 1,084,481
PROVISION FOR LOAN LOSSES.......................................................... -- 14,000
------------ ------------
Net interest income after provision for loan losses.......................... 1,281,957 1,070,481
------------ ------------
NON-INTEREST INCOME:
Gains (losses) on foreclosed real estate......................................... 7,633 (1,000)
Other............................................................................ 31,273 29,894
------------ ------------
Total non-interest income.................................................... 38,906 28,894
------------ ------------
NON-INTEREST EXPENSE:
Compensation and benefits........................................................ 379,603 308,277
Occupancy and equipment.......................................................... 69,307 65,539
SAIF deposit insurance premiums.................................................. 36,010 77,988
Directors' fees and expenses..................................................... 55,562 46,471
Ohio franchise tax............................................................... 102,812 55,577
Data processing.................................................................. 44,229 44,472
Advertising...................................................................... 43,439 37,554
Professional services............................................................ 105,662 23,960
Other............................................................................ 128,941 93,392
------------ ------------
Total non-interest expense................................................... 965,565 753,230
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES........................................... 355,298 346,145
PROVISION FOR INCOME TAXES......................................................... 113,042 93,837
------------ ------------
NET INCOME......................................................................... $ 242,256 $ 252,308
------------ ------------
------------ ------------
NET INCOME PER SHARE............................................................... $ .39 $ .41
------------ ------------
------------ ------------
</TABLE>
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<PAGE>
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
HOLDING GAIN
RETAINED (LOSS) ON
EMPLOYEE ADDITIONAL EARNINGS- SECURITIES TOTAL
COMMON BENEFIT PAID-IN SUBSTANTIALLY AVAILABLE STOCKHOLDERS'
STOCK PLANS CAPITAL RESTRICTED FOR SALE EQUITY
------------------ ----------- ------------ ------------ ------------- -------------
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BALANCES,
September 30,
1995............ $-- $ -- $ -- $4,938,274 $ (9,410) $ 4,928,864
CHANGE IN
UNREALIZED
HOLDING LOSS,
net of deferred
taxes of
$3,831.......... -- -- -- -- 7,437 7,437
NET INCOME, 1996.. -- -- -- 216,648 -- 216,648
COMMON STOCK
ISSUED, $.01 par
value........... 6,718 (537,600) 6,279,293 -- -- 5,748,411
ESOP SHARES
RELEASED, 2,452
shares; $10.37
average fair
market value.... -- 24,520 900 -- -- 25,420
DIVIDENDS PAID
($.07 per
share).......... -- -- -- (43,262) -- (43,262)
------------------ ----------- ------------ ------------ ------------- -------------
BALANCES,
September 30,
1996............ 6,718 (513,080) 6,280,193 5,111,660 (1,973) 10,883,518
NET INCOME, nine
months ended
June 30, 1997
(unaudited)..... -- -- -- 242,256 -- 242,256
CHANGE IN
UNREALIZED
HOLDING LOSS,
net of deferred
taxes of $6,519
(unaudited)..... -- -- -- -- 12,656 12,656
ESOP SHARES
RELEASED, 4,377
shares; $12.45
average fair
market value
(unaudited)..... -- 43,770 10,722 -- -- 54,492
RRP SHARES
PURCHASED,
26,871 shares;
$11.75 per share
(unaudited)... -- (315,733) -- -- -- (315,733)
RRP SHARES
AMORTIZED, 1,782
shares
(unaudited)..... -- 20,938 -- -- -- 20,938
DIVIDENDS PAID
($.21 per share)
(unaudited)..... 910 199 (129,121) -- (128,012)
PURCHASE OF 25,400 --
TREASURY SHARES
(unaudited)..... (254) -- (237,236) (103,772) -- (341,262)
------------------ ----------- ------------ ------------ ------------- -------------
BALANCES, June 30,
1997
(unaudited)..... $6,464 $ (763,195) $ 6,053,878 $5,121,023 $ 10,683 $ 10,428,853
------------------ ----------- ------------ ------------ ------------- -------------
------------------ ----------- ------------ ------------ ------------- -------------
</TABLE>
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<PAGE>
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
------------------------
JUNE 30, JUNE 30,
1997 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income........................................................................... $ 242,256 $ 252,308
Adjustments to reconcile net income to net cash provided by operating activities -
(Gains) losses on foreclosed real estate........................................... (7,633) 1,000
Provision for loan losses.......................................................... -- 14,000
Depreciation....................................................................... 39,223 37,903
FHLB stock dividends............................................................... (25,400) (21,700)
Amortization and accretion, net.................................................... 8,386 24,251
ESOP compensation.................................................................. 54,492 9,520
RRP compensation................................................................... 20,938 --
Change in -
Accrued interest receivable...................................................... (5,447) (62,628)
Other assets..................................................................... 3,393 14,969
Deferred Federal income taxes.................................................... 3,594 8,249
Accrued interest payable......................................................... 6,977 (3,287)
Accrued SAIF special assessment.................................................. (269,363) --
Other liabilities................................................................ 29,411 (2,562)
----------- -----------
Net cash provided by operating activities...................................... 100,827 272,023
----------- -----------
INVESTING ACTIVITIES:
Net increase in loans................................................................ (3,098,569) (902,874)
Proceeds from maturities of investment securities available for sale................. 1,248,779 1,447,000
Proceeds from maturities of investment securities held to maturity................... 1,393,000 --
Purchases of investment securities held to maturity.................................. (99,000) (5,229,382)
Purchases of investment securities available for sale................................ (350,000) --
Purchases of mortgage-backed securities held to maturity............................. (305,248) --
Purchases of mortgage-backed securities available for sale........................... (819,463) --
Principal collected on mortgage-backed securities held to maturity................... 519,622 903,849
Principal collected on mortgage-backed securities available for sale................. 218,263 557,535
Purchases of office properties and equipment......................................... (659,265) (94,398)
Proceeds from sale of foreclosed real estate......................................... 41,000 --
----------- -----------
Net cash used for investing activities......................................... (1,910,881) (3,318,270)
----------- -----------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits.................................................. 1,055,688 (920,084)
Proceeds from FHLB advances.......................................................... 3,300,000 --
Payments on FHLB advances............................................................ (1,000,000) --
Proceeds from other borrowed funds................................................... 66,000 --
Payments on other borrowed funds..................................................... (66,000) --
Dividends paid....................................................................... (128,012) --
Purchase of RRP shares............................................................... (315,733) --
Purchase of treasury shares.......................................................... (341,262) --
Proceeds from issuance of common stock............................................... -- 5,750,358
----------- -----------
Net cash provided by financing activities...................................... 2,570,681 4,830,274
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS.................................................. 760,627 1,784,027
CASH AND CASH EQUIVALENTS, beginning of period......................................... 801,243 2,528,416
----------- -----------
CASH AND CASH EQUIVALENTS, end of period............................................... $ 1,561,870 $ 4,312,443
----------- -----------
----------- -----------
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate.............................................. $ 50,046 $ 34,367
Change in unrealized holding loss on investment securities available for sale........ 16,186 10,294
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............................................................ 59,805 71,885
Interest paid........................................................................ 1,783,141 1,776,241
</TABLE>
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<PAGE>
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
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").
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 consolidated financial statements and the notes thereto 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").
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements at June 30, 1997 and September 30,
1996, and for the three and nine months ended June 30, 1997, include the
accounts of the Company and 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.
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(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 $537,600 for shares to be purchased by
the ESOP and by approximately $432,000 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 $537,600 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 makes 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, 1997 was $18,677 and $54,492,
respectively, and for the three and nine month periods ended June 30, 1996 was
$9,520 and $9,520, respectively.
(4) STOCK OPTION PLAN
On December 16, 1996, the Stock Option Plan (the "Plan") was approved by the
Bank's stockholders. A total of 67,178 shares of common stock may be issued
pursuant to the Plan and 37,529 shares have been awarded as of June 30, 1997.
These options are subject to vesting provisions as well as other provisions of
the Plan. No options have been exercised through June 30, 1997.
(5) RECOGNITION AND RETENTION PLAN AND TRUST
On December 16, 1996, the Recognition and Retention Plan and Trust (the
"RRP") was approved by the Company's stockholders. A total of 26,871 shares of
common stock are available for awards pursuant to the RRP and 16,426 shares have
been awarded as of June 30, 1997. Awards will vest in equal installments over a
five year period, with the first installment vesting on the first anniversary
date of the grant and each additional installment vesting on the four subsequent
anniversaries of such date, subject to certain conditions as more fully
described in the plan documents. Compensation cost related to RRP shares earned
during the three month and nine month periods ended June 30, 1997 was $9,663 and
$20,938, respectively.
The Company purchased 26,871 shares of common stock during the nine months
ended June 30, 1997, to fully fund the RRP. The cost of unearned RRP shares is
recorded as a reduction of stockholders' equity.
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<PAGE>
(6) PURCHASE OF COMMON STOCK
During the nine months ended June 30, 1997, the Company purchased 25,400
shares of its outstanding common stock at an aggregate cost of $341,262. The
purchase of these shares has been recorded as a purchase of common stock shares,
which are authorized but unissued.
(7) NET INCOME PER SHARE
Net income per share for the three and nine month periods ended June 30,
1997 and 1996, was calculated by dividing the consolidated net income by the
weighted average number (614,225 and 618,040, respectively) of shares
outstanding. 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.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
ASSETS. Total assets increased $2.7 million, or 4.8%, from $56.6 million at
September 30, 1996 to $59.3 million at June 30, 1997. The increase consisted
primarily of increases in cash and cash equivalents of $.8 million, loans
receivable of $3.0 million, mortgage-backed securities (held to maturity and
available for sale) of $.4 million and office properties and equipment of $.7
million, partially offset by a decline in investment securities (held to
maturity and available for sale) of $2.2 million.
CASH AND CASH EQUIVALENTS. The $.8 million increase in cash and cash
equivalents, or 100.0%, resulted primarily from the retention of proceeds from
maturities of investment securities during the period along with the increases
in deposits and FHLB advances, partially offset by the cash outflow used to fund
loan demand.
INVESTMENT SECURITIES. Investment securities (held to maturity and
available for sale) decreased $2.2 million, or 19.1%, from $11.5 million at
September 30, 1996 to $9.3 million at June 30, 1997. The Company primarily
invests in U.S. Treasury and U.S. government agency securities, and to a
lesser extent, in municipal securities and in certificates of deposit in
other insured financial institutions (in amounts up to $99,000 at any one
institution). The decrease resulted primarily from maturities of investment
securities during the period of $2.6 million, with corresponding
reinvestments of the proceeds of $.4 million.
LOANS RECEIVABLE. Loans receivable increased $3.0 million, or 8.6%, from
$35.0 million at September 30, 1996 to $38.0 million at June 30, 1997. The
majority of the increase is attributed to variable-rate mortgage loan
originations.
LOAN CONCENTRATIONS. The Company does not have a concentration of its loan
portfolio in any one industry or to any one borrower. Real estate lending (both
mortgage and construction loans) continues to be the largest component of the
loan portfolio, representing $36.8 million, or 96.1%, of total gross loans,
while consumer loans, including installment loans and loans secured by deposit
accounts, totaled $1.5 million, or 3.9%, of total gross loans outstanding at
June 30, 1997.
The Company's lending is concentrated to borrowers who reside in and/or
which are collateralized by real estate and property located in Lawrence and
Scioto County, Ohio, and Boyd and Greenup County, Kentucky. Employment in these
areas is highly concentrated in the petroleum, iron and steel industries.
Therefore, many debtors' ability to honor their contracts is dependent upon
these economic sectors.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses as a percentage of
total loans decreased from .81% at September 30, 1996 to .74% at June 30, 1997.
The total dollar amount of the allowance remained unchanged totaling $283,000 at
both periods.
Charge-off activity for the three and nine months ended June 30, 1997
totaled $3,906 and $4,469, respectively, as compared to $7,056 and $8,698 for
the three and nine months ended June 30, 1996. Recoveries totaled $-0- and
$4,364 for the three and nine months ended June 30, 1997, respectively, and $-0-
and $-0- for the three and nine months ended June 30, 1996, respectively.
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<PAGE>
The Company had $35,000 and $109,000 of non-accrual loans at June 30, 1997
and September 30, 1996, respectively. At the same dates, there were no loans
greater than 90 days delinquent which were still accruing interest.
The Company had no troubled debt restructurings during the three or nine
month periods ended June 30, 1997 and 1996.
MORTGAGE-BACKED SECURITIES. The Company 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 increased $.4 million, or 5.1%, from
$7.8 million at September 30, 1996 to $8.2 million at June 30, 1997, due to
purchases of $1.1 million, offset by scheduled principal payments of $.7
million.
OFFICE PROPERTIES AND EQUIPMENT. The Company began construction on a
drive-through facility expansion and branch relocation during the nine months
ended June 30, 1997. Construction costs incurred during the period were
approximately $659,000. Both projects are scheduled for completion during the
quarter ending September 30, 1997.
DEPOSITS. Deposits increased by $1.1 million, or 2.5%, from $44.8 million
at September 30, 1996 to $45.9 million at June 30, 1997. The Company continues
to offer competitive interest rates on deposits which contributed to the
increase.
ADVANCES FROM FEDERAL HOME LOAN BANK. The Company obtained advances
totaling $3.3 million during the nine months ended June 30, 1997 to meet its
loan demand and other funding needs. $1,000,000 of advances were repaid during
the period. The Company has ample borrowing capacity if needed to fund future
commitments.
STOCKHOLDERS' EQUITY. Stockholders' equity totaled $10.4 million at June
30, 1997, as compared to $10.9 million at September 30, 1996. The $.5 million
decrease, or 4.6%, resulted primarily from the purchase of common shares to
fund the Recognition and Retention Plan, the purchase of treasury shares and
the payment of dividends, partially offset by net income during the nine
month period.
RESULTS OF OPERATIONS-THREE MONTHS ENDED JUNE 31, 1997 AS COMPARED TO
THREE MONTHS ENDED JUNE 30, 1996
Net income decreased $26,113, or 24.6%, from $106,153 for the quarter ended
June 30, 1996 to $80,040 for the comparable 1997 quarter. Net income per share
was $.13 and $.17 for the 1997 and 1996 quarters, respectively. The decrease in
net income resulted primarily from an increase in non-interest expense of
$64,571, or 26.1%, partially offset by an increase in net interest income of
$27,309, or 7.0%, and a decrease in the provision for income taxes of $10,008,
or 22.9%.
Total interest income increased $62,775, or 6.4%, from $977,552 for the
three months ended June 30, 1996 to $1,040,327 for the comparable 1997 period.
The increase was due to increased levels of interest earned on loan receivable
and investment securities of $65,890 and $19,141, respectively, offset by
reductions in interest earned on mortgage-backed securities and other
interest-earning assets of $7,021 and $15,235, respectively. Interest on loans
receivable increased primarily due to a higher volume of loans in the 1997
period
-12-
<PAGE>
as compared to 1996, while interest on investment securities increased
primarily due to higher market rates of interest. The decreases in interest
on mortgage-backed securities and other interest-earning assets for the 1997
quarter as compared to the 1996 quarter is primarily attributable to lower
volumes of these assets.
Total interest expense increased $35,466, or 6.0%, from $587,927 for the
quarter ended June 30, 1996 to $623,393 for the quarter ended June 30, 1997,
such increase being primarily attributable to higher volumes of interest-bearing
liabilities during the 1997 quarter as compared to the 1996 quarter.
No provision for loan losses was necessary during the 1997 quarter as
compared to a $2,000 provision during the 1996 quarter, reflecting management's
determination that the allowance for loan losses was adequate at June 30, 1997.
In making this determination, management makes a review of non-performing loans,
the overall quality of the loan portfolio, levels of past due loans, and prior
loan loss experience.
The $64,571 increase in non-interest expense, from $247,782 for the three
months ended June 30, 1996 to $312,353 for the comparable 1997 period,
consisted primarily of increases in compensation and benefits of $16,744,
Ohio franchise tax of $32,808, professional services expenses of $9,784 and
other expenses of $10,622, partially offset by a decrease in SAIF deposit
insurance premiums of $18,928. The increase in compensation and benefits was
primarily due to $18,677 and $9,644 in Employee Stock Ownership Plan ("ESOP")
and Recognition and Retention Plan ("RRP") compensation expenses,
respectively, recorded in the 1997 period, with only $9,520 in ESOP
compensation recorded in the 1996 comparable period. The Ohio franchise tax,
which is based on total stockholders' equity, increased due to the additional
stockholders' equity generated from Conversion proceeds. The increase in
professional services expenses and other expenses is due to increased costs
during the 1997 period associated with operating as a public company. The
decrease in SAIF deposit insurance premiums in 1997 as compared to 1996
reflects the consequences of the 1996 legislation which lowered the Bank's
deposit insurance assessment from $.23 per hundred of insured deposits to
$.064 per hundred. See "RECAPITALIZATION OF SAIF."
The $10,008 decrease in the provision for income taxes resulted from lower
pretax income. The effective tax rate was approximately 29.5% for both periods.
RESULTS OF OPERATIONS-NINE MONTHS ENDED JUNE 31, 1997 AS COMPARED TO NINE
MONTHS ENDED JUNE 30, 1996
Net income decreased $10,052, or 4.0%, from $252,308 for the nine months
ended June 30, 1996 to $242,256 for the comparable 1997 period. Net income per
share was $.39 and $.41 for the 1997 and 1996 nine month periods, respectively.
The decrease in net income resulted from increases in non-interest expense of
$212,335, or 28.2%, and the provision for income taxes of $19,205, or 20.5%,
offset by increases in net interest income of $197,476, or 18.2%, non-interest
income of $10,012, or 34.7%, and a reduction in the provision for loan losses of
$14,000, or 100.0%.
Total interest income increased $237,074, or 8.3%, from $2,857,435 for the
nine months ended June 30, 1996 to $3,094,509 for the comparable 1997 period.
The increase was due to increased levels of interest earned on loan receivable
and investment securities of $150,109 and $190,328, respectively, offset by
reductions in interest earned on mortgage-backed securities and other
interest-earning assets of $53,811 and $49,552, respectively. Interest on loans
receivable increased primarily due to a higher volume of loans during the 1997
period as compared to 1996,
-13-
<PAGE>
while interest on investment securities increased primarily due to higher
market rates of interest. The decreases on interest on mortgage-backed
securities and other interest-bearing assets for the 1997 nine month period
as compared to the 1996 period is primarily attributable to lower volumes of
these assets.
Total interest expense increased $39,598, or 2.2%, from $1,772,954 for the
nine months ended June 30, 1996 to $1,812,552 for the nine months ended June 30,
1997, such increase being primarily attributable to higher volumes of
interest-bearing liabilities during the 1997 period as compared to the 1996
period.
No provision for loan losses was deemed necessary during the 1997 nine month
period as compared to a $14,000 provision during the 1996 period, reflecting
management's determination that the allowance for loan losses was adequate
throughout the 1997 period.
The $10,012 increase in non-interest income from $28,894 for the nine months
ended June 30, 1996 to $38,906 for the nine months ended June 30, 1997 was
primarily due to $7,633 in gains on sales of foreclosed real estate during the
1997 period as compared to $1,000 in losses during the 1996 comparable period.
The $212,335 increase in non-interest expense from $753,230 for the nine
months ended June 30, 1996 to $965,565 for the comparable 1997 period,
consisted primarily of increases in compensation and benefits of $71,326,
Ohio franchise tax of $47,235, professional services expenses of $81,702 and
other expenses of $35,549, partially offset by a decrease in SAIF deposit
insurance premiums of $41,978. Other increases and decreases were relatively
insignificant between periods. The increase in compensation and benefits was
primarily due to $54,492 and $20,938 in ESOP and RRP compensation expense,
respectively, recorded in the 1997 period with only $9,520 in ESOP
compensation recorded in the 1996 comparable period. The Ohio franchise tax
increased due to increased stockholders' equity. The increase in professional
services and other expenses was due to increased costs during the 1997 period
as compared to 1996 associated with operating as a public company. The
decrease in SAIF deposit insurance premiums resulted from the lower
assessment rate. See "RECAPITALIZATION OF SAIF."
The provision for income taxes increased $19,205, due to increased pretax
income.
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 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-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 14.7% at June 30, 1997, as compared to 15.0% at September 30,
1996. At June 30, 1997, the Bank's "liquid" assets totalled approximately $6.6
million, which was $4.4 million in excess of the current OTS minimum
requirement.
-14-
<PAGE>
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
generally by 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, 1997, the total approved loan commitments
outstanding amounted to $1.1 million. Certificates of deposit scheduled to
mature in one year or less at June 30, 1997, totaled $29.3 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, 1997, the Bank had regulatory capital which was well in excess
of applicable limits. At June 30, 1997, 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, 1997, the Bank's tangible capital was $8.6 million, or 14.9%
of adjusted total assets, core capital was $8.6 million, or 14.9% of adjusted
total assets and risk-based capital was $8.8 million, or 34.1% of adjusted
risk-weighted assets, exceeding the requirements by $7.7 million, $6.9 million
and $6.7 million, respectively.
RECAPITALIZATION OF SAIF
The deposits of the Bank are currently insured by the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation. 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 fund met its target reserve level in September 1995, but the SAIF
was not expected to meet its target reserve level until at least 2002.
Consequently, 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 (subject to an annual minimum of
$2,000) for institutions in the lowest risk category. Deposit insurance premiums
for SAIF members were maintained at their existing levels (23 basis points for
institutions in the lowest risk category).
On September 30, 1996, President Clinton signed into law legislation which
eliminated the premium differential between SAIF-insured institutions and
BIF-insured institutions by recapitalizing the SAIF's reserves to the required
ratio. The legislation provided that all SAIF member institutions pay a one-time
special assessment to recapitalize the SAIF, which in the aggregate was
sufficient to bring the reserve ratio of the SAIF to 1.25% of insured deposits.
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.
-15-
<PAGE>
Effective October 8, 1996, FDIC regulations imposed a one-time special
assessment of 65.7 basis points on SAIF-assessable deposits as of March 31,
1995, which was collected on November 27, 1996. The Bank's one-time special
assessment amounted to $269,363 ($177,780 net of related tax benefits). The
payment of such special assessment had the effect of immediately reducing the
Bank's capital by such an amount. Nevertheless, management does not believe that
this one-time special assessment will have a material adverse effect on the
Company's consolidated financial condition or cause non-compliance with the
Bank's regulatory capital requirements.
In the fourth quarter of 1996, the FDIC lowered the assessment rates for
SAIF members to reduce the disparity in the assessment rates paid by BIF and
SAIF members. Beginning October 1, 1996, effective SAIF rates generally ranged
from zero basis points to 27 basis points, except that during the fourth quarter
of 1996, the rates for SAIF members ranged from 18 basis points to 27 basis
points in order to include assessments paid to the Financing Corporation
("FICO"). From 1997 through 1999, SAIF members will pay 6.4 basis points to fund
the FICO, while BIF member institutions will pay about 1.3 basis points. The
Bank's insurance premiums, which have amounted to 23 basis points have been
reduced to 6.4 basis points, effective January 1, 1997.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which established financial accounting and reporting standards
for stock-based compensation. The new standard defines a fair value method of
accounting for an employee stock option or similar equity instrument. This
statement gives entities the choice between adopting the fair value method or
continuing to use the intrinsic value method under Accounting Principles Board
Opinion No. 25 with footnote disclosures of the pro forma effects if the fair
value method had been adopted.
The Company will be required to adopt the provisions of Statement No. 123
effective for the fiscal year ending September 30, 1997. The adoption of this
statement, or the disclosure of pro forma information, is not expected to have a
material effect on the Company's financial statements.
-16-
<PAGE>
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 its 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:
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- --------- ----------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
3.1 Certificate of Incorporation of First Federal Financial Bancorp, Inc.(1)
3.2 Bylaws of First Federal Financial Bancorp, Inc.(1)
27 Financial Data Schedule. E-1
</TABLE>
- ------------------------
(1) / Incorporated by reference from the Registration Statement on Form S-1
(Registration No. 333-1672) filed by the Registrant with the Securities and
Exchange Commission on February 26, 1996, as amended.
b) No Form 8-K reports were filed during the quarter.
-17-
<PAGE>
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 4, 1997 By:/s/ I. Vincent Rice
------------------------------ ------------------------------
I. Vincent Rice, President
Date: August 4, 1997 By:/s/ Jeffery W. Clark
------------------------------ ------------------------------
Jeffery W. Clark, Comptroller
-18-
<TABLE> <S> <C>
<PAGE>
<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, 1997 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 140,493
<INT-BEARING-DEPOSITS> 1,376,377
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,835,026
<INVESTMENTS-CARRYING> 12,676,821
<INVESTMENTS-MARKET> 12,573,258
<LOANS> 38,287,423
<ALLOWANCE> 283,571
<TOTAL-ASSETS> 59,314,713
<DEPOSITS> 45,864,760
<SHORT-TERM> 2,800,000
<LIABILITIES-OTHER> 221,100
<LONG-TERM> 0
0
0
<COMMON> 6,464
<OTHER-SE> 10,422,389
<TOTAL-LIABILITIES-AND-EQUITY> 59,314,713
<INTEREST-LOAN> 2,191,050
<INTEREST-INVEST> 845,663
<INTEREST-OTHER> 57,796
<INTEREST-TOTAL> 3,094,509
<INTEREST-DEPOSIT> 1,782,401
<INTEREST-EXPENSE> 1,812,552
<INTEREST-INCOME-NET> 1,281,957
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 965,565
<INCOME-PRETAX> 355,298
<INCOME-PRE-EXTRAORDINARY> 355,298
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,256
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
<YIELD-ACTUAL> 2.024
<LOANS-NON> 35,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 283,676
<CHARGE-OFFS> 4,469
<RECOVERIES> 4,364
<ALLOWANCE-CLOSE> 283,571
<ALLOWANCE-DOMESTIC> 283,571
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
