<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-28020
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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
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of May 12, 1997, there were issued and outstanding 662,083 shares of
the Registrant's Common Stock. As of March 31, 1996, First Federal Savings
and Loan Association of Ironton, the Registrant's wholly-owned subsidiary,
had not yet completed its mutual-to-stock conversion and reorganization into
a holding company format. The financial information presented herein for the
periods ending March 31, 1996 is for First Federal Savings and Loan
Association of Ironton only.
Transitional Small Business Disclosure Format (check one):
Yes No X
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FIRST FEDERAL FINANCIAL BANCORP, INC.
TABLE OF CONTENTS
***************
<TABLE>
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (as of March
31, 1997 (unaudited) and September 30,
1996)........................................ 3
Consolidated Statements of Income (for
the three months ended March 31, 1997
(unaudited) and 1996 (unaudited))............ 4
Consolidated Statements of Income (for
the six months ended March 31, 1997
(unaudited) and 1996 (unaudited))............ 5
Consolidated Statements of Changes in
Stockholders' Equity (for the six months
ended March 31, 1997 (unaudited) and he
year ended September 30, 1996)............... 6
Consolidated Statements of Cash Flows
(for the six months ended March 31, 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 .................................. 11-15
Part II. Other Information
Item 1. Legal Proceedings ........................... 16
Item 2. Changes in Securities........................ 16
Item 3. Defaults Upon Senior Securities.............. 16
Item 4. Submission of Matters to a Vote of
Security Holders............................. 16
Item 5. Other Information............................ 16
Item 6. Exhibits and Reports on Form 8-K............. 16
Signatures ............................................. 17
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1997 SEPTEMBER 30,
(UNAUDITED) 1996
------------- -------------
<S> ASSETS <C> <C> <C>
CASH AND CASH EQUIVALENTS....................................................... $ 1,831,543 $ 801,243
INVESTMENT SECURITIES HELD TO MATURITY.......................................... 8,253,336 8,983,577
INVESTMENT SECURITIES AVAILABLE FOR SALE........................................ 1,523,241 2,531,995
LOANS RECEIVABLE................................................................ 37,185,312 34,955,329
MORTGAGE-BACKED SECURITIES HELD TO MATURITY..................................... 4,780,507 5,190,066
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE................................... 2,439,842 2,575,973
FORECLOSED REAL ESTATE.......................................................... 11,603 33,367
ACCRUED INTEREST RECEIVABLE..................................................... 368,530 382,997
OFFICE PROPERTIES AND EQUIPMENT................................................. 1,352,559 1,037,768
OTHER ASSETS.................................................................... 162,260 144,237
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$ 57,908,733 $ 56,636,552
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LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS........................................................................ $ 47,109,953 $ 44,809,072
ADVANCES FROM FEDERAL HOME LOAN BANK............................................ -- 500,000
OTHER BORROWED FUNDS............................................................ 66,000 --
DEFERRED FEDERAL INCOME TAXES PAYABLE........................................... 82,692 84,015
ACCRUED INTEREST PAYABLE........................................................ 2,958 5,224
ACCRUED SAIF SPECIAL ASSESSMENT................................................. -- 269,363
OTHER LIABILITIES............................................................... 92,534 85,360
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Total liabilities............................................................... 47,354,137 45,753,034
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STOCKHOLDERS' EQUITY:
Common stock.................................................................... 6,621 6,718
Employee benefit plans.......................................................... (787,469) (513,080)
Additional paid-in capital...................................................... 6,195,341 6,280,193
Retained earnings-substantially restricted...................................... 5,150,818 5,111,660
Unrealized holding gain (loss) on investment securities available for sale, net
of taxes...................................................................... (10,715) (1,973)
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Total stockholders' equity...................................................... 10,554,596 10,883,518
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$ 57,908,733 $ 56,636,552
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</TABLE>
3
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------
<S> <C> <C>
MARCH 31, MARCH 31,
1997 1996
INTEREST INCOME: (UNAUDITED) (UNAUDITED)
----------- -----------
Loans receivable-
First mortgage loans ....................................................... $696,958 $ 655,325
Consumer and other loans............................................................ 34,406 26,342
Mortgage-backed and related securities.............................................. 111,514 135,035
Investment securities............................................................... 163,756 99,813
Other interest-earning assets....................................................... 14,876 27,632
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Total interest income............................................................... 1,021,510 944,147
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INTEREST EXPENSE:
Interest-bearing checking........................................................... 2,969 3,416
Passbook savings.................................................................... 69,467 80,459
Certificates of deposit............................................................. 522,728 506,464
Advances from Federal Home
Loan Bank........................................................................... 5,828 --
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Total interest expense.............................................................. 600,992 590,339
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Net interest income................................................................. 420,518 353,808
PROVISION FOR LOAN LOSSES........................................................... -- 6,000
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Net interest income after provision for loan losses................................. 420,518 347,808
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NON-INTEREST INCOME:
Losses on foreclosed real estate.................................................... -- (1,000)
Other............................................................................... 10,784 11,396
----------- -----------
Total non-interest income........................................................... 10,784 10,396
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NON-INTEREST EXPENSE:
Compensation and benefits........................................................... 119,376 96,283
Occupancy and equipment............................................................. 22,773 21,606
SAIF deposit insurance premiums..................................................... 7,233 26,318
Directors' fees and expenses........................................................ 16,500 14,036
Ohio franchise tax.................................................................. 31,784 19,110
Data processing..................................................................... 14,790 15,738
Advertising......................................................................... 14,563 13,799
Professional services............................................................... 33,203 6,195
Other............................................................................... 40,363 31,346
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Total non-interest expense.......................................................... 300,585 244,431
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INCOME BEFORE PROVISION FOR INCOME TAXES............................................ 130,717 113,773
PROVISION FOR INCOME TAXES.......................................................... 40,911 34,571
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NET INCOME.......................................................................... $ 89,806 $ 79,202
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NET INCOME PER SHARE................................................................ $ .14 $ N/A
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</TABLE>
4
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
--------------------------
<S> <C> <C>
MARCH 31, MARCH 31,
1997 1996
(UNAUDITED) (UNAUDITED)
------------ ------------
INTEREST INCOME:
Loans receivable -
First mortgage loans............................................................... $ 1,378,094 $ 1,307,150
Consumer and other loans........................................................... 68,471 55,196
Mortgage-backed and related securities............................................. 226,892 273,682
Investment securities.............................................................. 352,993 181,806
Other interest-earning assets...................................................... 27,732 62,049
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Total interest income.............................................................. 2,054,182 1,879,883
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INTEREST EXPENSE:
Interest-bearing checking.......................................................... 6,429 7,458
Passbook savings................................................................... 142,959 162,502
Certificates of deposit............................................................ 1,026,244 1,015,067
Advances from Federal Home Loan Bank............................................... 13,527 --
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Total interest expense............................................................. 1,189,159 1,185,027
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Net interest income................................................................ 865,023 694,856
PROVISION FOR LOAN LOSSES.......................................................... -- 12,000
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Net interest income after provision for loan losses................................ 865,023 682,856
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NON-INTEREST INCOME:
Gains (losses) on foreclosed real estate........................................... 7,633 (1,000)
Other.............................................................................. 22,106 19,869
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Total non-interest income.......................................................... 29,739 18,869
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NON-INTEREST EXPENSE:
Compensation and benefits.......................................................... 263,859 209,277
Occupancy and equipment............................................................ 45,421 40,337
SAIF deposit insurance premiums.................................................... 28,595 51,645
Directors' fees and expenses....................................................... 32,760 35,893
Ohio franchise tax................................................................. 50,894 36,467
Data processing.................................................................... 29,674 29,496
Advertising........................................................................ 28,958 26,127
Professional services.............................................................. 86,398 13,920
Other.............................................................................. 86,653 62,236
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Total non-interest expense......................................................... 653,212 505,448
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INCOME BEFORE PROVISION FOR INCOME TAXES........................................... 241,550 196,277
PROVISION FOR INCOME TAXES......................................................... 79,334 50,122
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NET INCOME......................................................................... $ 162,216 $ 146,155
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NET INCOME PER SHARE............................................................... $ .26 $ N/A
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</TABLE>
5
<PAGE>
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
HOLDING GAIN
(LOSS) ON
RETAINED INVESTMENT
EMPLOYEE ADDITIONAL EARNINGS- SECURITIES TOTAL
COMMON BENEFIT PAID-IN SUBSTANTIALLY AVAILABLE STOCKHOLDERS'
STOCK PLANS CAPITAL RESTRICTED FOR SALE EQUITY
----------- ----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
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, six months ended
March 31, 1997
(unaudited)............... -- -- -- 162,216 -- 162,216
CHANGE IN UNREALIZED HOLDING
LOSS, net of deferred
taxes of $4,503
(unaudited)............... -- -- -- -- (8,742) (8,742)
ESOP SHARES RELEASED, 3,006
shares; $11.91 average
fair market value
(unaudited)............... -- 30,069 5,746 -- -- 35,815
RRP SHARES PURCHASED, 26,871
shares; $11.75 per share
(unaudited)............... -- (315,733) -- -- -- (315,733)
RRP SHARES AMORTIZED, 960
shares (unaudited)........ -- 11,275 -- -- -- 11,275
DIVIDENDS PAID
($.14 per share)
(unaudited)............... -- -- -- (85,565) -- (85,565)
PURCHASE OF 9,700 TREASURY
SHARES (unaudited)........ (97) -- (90,598) (37,493) -- (128,188)
----------- ----------- ------------ ------------ ------------ -------------
BALANCES, March 31, 1997
(unaudited)............... $ 6,621 $ (787,469) $ 6,195,341 $5,150,818 $ (10,715) $ 10,554,596
----------- ----------- ------------ ------------ ------------ -------------
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</TABLE>
6
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------
<S> <C> <C>
MARCH 31, MARCH 31,
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
OPERATING ACTIVITIES:
Net income......................................................... $ 162,216 $ 146,155
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.......................................... -- 12,000
Depreciation....................................................... 26,235 24,809
FHLB stock dividends............................................... (15,300) (14,400)
Amortization and accretion, net.................................... 2,080 20,109
ESOP compensation.................................................. 35,815 --
RRP compensation................................................... 11,275 --
Change in -
Accrued interest receivable........................................ 14,467 (21,796)
Other assets....................................................... (18,023) 1,427
Deferred Federal income taxes...................................... 2,867 5,814
Accrued interest payable........................................... (2,266) (2,890)
Accrued SAIF special assessment.................................... (269,363) --
Other liabilities.................................................. 7,173 (23,100)
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Net cash (used for) provided by operating activities............... (50,457) 149,128
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INVESTING ACTIVITIES:
Net increase in loans.............................................. (2,241,586) (524,314)
Proceeds from maturities of investment securities available for
sale............................................................. 1,000,000 --
Proceeds from maturities of investment securities held to
maturity......................................................... 846,000 1,449,000
Purchases of investment securities held to maturity................ (99,000) (3,593,421)
Principal collected on mortgage-backed securities held to
maturity......................................................... 401,882 672,572
Principal collected on mortgage-backed securities available for
sale............................................................. 136,091 238,525
Purchases of office properties and equipment....................... (341,025) (30,750)
Proceeds from sale of foreclosed real estate....................... 41,000 --
----------- -----------
Net cash used for investing activities............................. (256,638) (1,788,388)
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FINANCING ACTIVITIES:
Prepaid stock conversion costs..................................... -- (142,882)
Dividends paid..................................................... (85,565) --
Purchase of treasury shares........................................ (128,188) --
Proceeds from FHLB advances........................................ 500,000 --
Purchase of RRP shares............................................. (315,733) --
Principal paid on FHLB advances.................................... (1,000,000) --
Proceeds from other borrowed funds................................. 66,000 --
Net increase in deposits........................................... 2,300,881 1,633,385
----------- -----------
Net cash provided by financing activities.......................... 1,337,395 1,490,503
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................... 1,030,300 (148,757)
CASH AND CASH EQUIVALENTS, beginning of period..................... 801,243 2,528,416
----------- -----------
CASH AND CASH EQUIVALENTS, end of period........................... $ 1,831,543 $ 2,379,659
----------- -----------
----------- -----------
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate............................ $ 11,603 $ 34,367
Change in unrealized holding loss on investment securities
available for sale............................................... 12,931 4,286
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.......................................... 34,473 39,250
Interest paid...................................................... 1,191,425 1,187,917
</TABLE>
7
<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"). For purposes
of this Form 10-QSB, the financial statements for the three months and six
months ended March 31, 1996, are for the Bank only, because as of March 31,
1996, the Company had not yet completed its 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 March 31, 1997 and September 30,
1996, and for the three and six months ended March 31, 1997, include the
accounts of the Company and the Bank. The financial statements for the three
months and six months ended March 31, 1996 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.
8
<PAGE>
(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 six month periods ended March 31, 1997 was $18,737 and $35,815,
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 March 31, 1997.
These options are subject to vesting provisions as well as other provisions of
the Plan. No options have been exercised through March 31, 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 March 31, 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 six month periods ended March 31, 1997 was $9,509 and
$11,275, respectively.
The Company purchased 26,871 shares of common stock during the six months
ended March 31, 1997, to fully fund the RRP. The cost of unearned RRP shares
is recorded as a reduction of stockholders' equity.
9
<PAGE>
(6) PURCHASE OF COMMON STOCK
During the six months ended March 31, 1997, the Company purchased 9,700
shares of its outstanding common stock on the open market at an aggregate cost
of $128,188. 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 six month periods ended March 31,
1997, was calculated by dividing the consolidated net income by the weighted
average number (619,972) 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.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
ASSETS. Total assets increased $1.3 million, or 2.3%, from $56.6
million at September 30, 1996 to $57.9 million at March 31, 1997. The
increase consisted primarily of increases in cash and cash equivalents of
$1.0 million, loans receivable of $2.2 million and office properties and
equipment of $315,000, partially offset by a decline in mortgage-backed
securities (held to maturity and available for sale) of $.6 million and
investment securities (held to maturity and available for sale) of $1.7
million.
CASH AND CASH EQUIVALENTS. The $1.0 million increase in cash and cash
equivalents, or 125.0%, resulted primarily from the retention of proceeds from
maturities of investment securities and principal reductions on mortgage-backed
securities during the period along with the increase in deposits, partially
offset by the cash outflow used to fund loan demand.
INVESTMENT SECURITIES. Investment securities (held to maturity and
available for sale) decreased $1.7 million, or 14.8%, from $11.5 million at
September 30, 1996 to $9.8 million at March 31, 1997. 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). The decrease resulted primarily from maturities of
investment securities during the period with no corresponding reinvestment of
the proceeds.
LOANS RECEIVABLE. Loans receivable increased $2.2 million, or 6.3%, from
$35.0 million at September 30, 1996 to $37.2 million at March 31, 1997. 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 $.6 million, or 7.7%, from $7.8 million at
September 30, 1996 to $7.2 million at March 31, 1997, due to scheduled principal
payments. There were no new purchases of mortgage-backed securities during the
six months ended March 31, 1997.
OFFICE PROPERTIES AND EQUIPMENT. The Bank began construction on a
drive-through facility expansion and branch relocation during the six months
ended March 31, 1997. Construction costs incurred during the period were
approximately $339,000.
DEPOSITS. Deposits increased by $2.3 million, or 5.1%, from $44.8 million
at September 30, 1996 to $47.1 million at March 31, 1997. The Bank continues to
offer competitive interest rates on deposits which contributed to the increase.
ADVANCES FROM FEDERAL HOME LOAN BANK. The Bank repaid all outstanding
advances totaling $1.0 million during the six months ended March 31, 1997.
OTHER BORROWED FUNDS. Other borrowed funds of $66,000 represents the amount
owed for the purchase of land on which the drive-through facility expansion is
being built.
11
<PAGE>
STOCKHOLDERS' EQUITY. Stockholders' equity totaled $10.6 million at March
31, 1997, as compared to $10.9 million at September 30, 1996. The $.3 million
decrease, or 2.8%, 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 six month
period.
RESULTS OF OPERATIONS-THREE MONTHS ENDED MARCH 31, 1997 AS COMPARED TO
THREE MONTHS ENDED MARCH 31, 1996
Net income increased $10,604, or 13.4%, from $79,202 for the quarter ended
March 31, 1996 to $89,806 for the comparable 1997 quarter. The increase resulted
primarily from a $66,710, or 18.9%, increase in net interest income and a $6,000
decrease in the provision for loan losses, which was offset by increases in
non-interest expense and the provision for income taxes of $56,154 and $6,340,
respectively.
Total interest income increased $77,363, or 8.2%, from $944,147 for the
three months ended March 31, 1996 to $1,021,510 for the comparable 1997 period.
The increase was largely due to increases in interest on investment securities
and loans receivable of $63,943 and $49,697, respectively, offset by reductions
in interest on other interest-earning assets of $12,756 and interest income on
mortgage-backed securities of $23,521. The increases were primarily due to
increased levels of these interest-earning assets during the 1997 period as
compared to 1996, the result of the Conversion proceeds. Interest income on
other interest-earning assets and mortgage-backed securities decreased due to
lower volumes during the 1997 period as compared to 1996.
Total interest expense increased modestly by $10,653, or 1.8%, from
$590,339 for the three months ended March 31, 1996 to $600,992 for the six
months ended March 31, 1997. The increase is attributable to higher volumes
of interest-bearing liabilities during the 1997 three month period as
compared to 1996, and to a lesser extent, due to rising market rates of
interest.
The provision for loan losses decreased $6,000 for the 1997 three month
period as compared to the 1996 three month period. Management determined that
the allowance for loan losses was adequate at March 31, 1997 and, therefore, no
additional provision was necessary.
The $56,154, or 23.0%, increase in non-interest expense, from $244,431
for the three months ended March 31, 1996 to $300,585 for the comparable 1997
period, consisted primarily of increases in compensation and benefits of
$23,093, Ohio franchise tax of $12,674, professional services expenses of
$27,008 and other miscellaneous expenses of $9,017. The increases were
partially offset by a decrease in SAIF deposit insurance premiums of $19,085.
Other increases and decreases were relatively insignificant between periods.
The increase in compensation and benefits was primarily due to $18,020 and
$9,509 in ESOP and RRP compensation expenses, respectively, recorded in the 1997
period with no comparable expenses for 1996. 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 and other miscellaneous expenses was due to increased
costs during the 1997 period associated with operating as a public company. The
decrease in SAIF deposit insurance premiums was the result of lower assessment
rates. See "RECAPITALIZATION OF SAIF".
The provision for income taxes increased for the 1997 quarter as compared to
1996 due to increased pretax income.
12
<PAGE>
RESULTS OF OPERATIONS-SIX MONTHS ENDED MARCH 31, 1997 AS COMPARED TO SIX
MONTHS ENDED MARCH 31, 1996
Net income increased $16,061, or 11.0%, from $146,155 for the six months
ended March 31, 1996 to $162,216 for the comparable 1997 period. The increase
resulted primarily from a $170,167, or 24.5%, increase in net interest income, a
$10,870 increase in non-interest income and a $12,000 decrease in the provision
for loan losses, which was offset by increases in non-interest expense and the
provision for income taxes of $147,764 and $29,212, respectively.
Total interest income increased $174,299, or 9.3%, from $1,879,883 for the
six months ended March 31, 1996 to $2,054,182 for the comparable 1997 period.
The increase was largely due to increases in interest on investment securities
and loans receivable of $171,187 and $84,219, respectively, offset by reductions
in interest on other interest-earning assets of $34,317 and interest income on
mortgage-backed securities of $46,790. The increases were primarily due to
increased levels of these interest-earning assets during the 1997 period as
compared to 1996, the result of the Conversion proceeds. Interest income on
other interest-earning assets and mortgage-backed securities decreased due to
lower volumes during the 1997 period as compared to 1996.
Total interest expense increased modestly by $4,132, or .3%, from $1,185,027
for the six months ended March 31, 1996 to $1,189,159 for the six months ended
March 31, 1997. The increase is attributable to slightly higher volumes of
interest-bearing liabilities during the 1997 six month period as compared to
1996.
The provision for loan losses decreased $12,000 for the 1997 six month
period as compared to the 1996 six month period. Management determined that the
allowance for loan losses was adequate at March 31, 1997 and, therefore, no
additional provision was necessary.
The $10,870 increase in non-interest income consisted of gains on foreclosed
real estate of $7,633 for the six months ended March 31, 1997 as compared to
$1,000 in losses during the 1996 six month period, and a $2,237 increase in
other miscellaneous non-interest income consisting primarily of late payment
fees on loans.
The $147,764 increase in non-interest expense, or 29.2%, from $505,448 for
the six months ended March 31, 1996 to $653,212 for the comparable 1997 period,
consisted primarily of increases in compensation and benefits of $54,582, Ohio
franchise tax of $14,427, professional services expenses of $72,428 and other
miscellaneous expenses of $24,417, partially offset by a decrease in SAIF
deposit insurance premiums of $23,050. Other increases and decreases were
relatively insignificant between periods.
The increase in compensation and benefits was due to $35,815 and $11,275 in
ESOP and RRP compensation expense, respectively, recorded in the 1997 period
with no comparable expenses for 1996, along with normal salary increases given
to management and employees. 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 associated with operating as a
public company. The decrease in SAIF deposit insurance premiums was the result
of lower assessment rates. See "RECAPITALIZATION OF SAIF".
The provision for income taxes increased for the 1997 period as compared to
1996 due to increased pretax income.
13
<PAGE>
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 14.8% at March 31, 1997, as compared to 15.0% at September 30,
1996. At March 31, 1997, the Bank's "liquid" assets totalled approximately $6.8
million, which was $4.5 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 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 March 31, 1997, the total approved loan
commitments outstanding amounted to $1.2 million. Certificates of deposit
scheduled to mature in one year or less at March 31, 1997, totaled $28.2
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 March 31, 1997, the Bank had regulatory capital which was well in excess
of applicable limits. At March 31, 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 March 31, 1997, the Bank's tangible capital was $8.7 million, or
15.6% of adjusted total assets, core capital was $8.7 million, or 15.6% of
adjusted total assets and risk-based capital was $8.8 million, or 34.8% of
adjusted risk-weighted assets, exceeding the requirements by $7.9 million, $7.0
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.
14
<PAGE>
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.
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 range
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.
15
<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
a) An annual meeting of stockholders ("Annual Meeting") was held on
January 15, 1997.
b) Not applicable
c) Two matters were voted upon at the Annual Meeting. The stockholders
approved matters brought before the Annual Meeting. The matters voted upon
together with the applicable voting results were as follows:
1) Proposal to elect two directors for a three-year term or until their
successors are elected and qualified; Edward R. Rambacher received votes for
487,291; against -0-; abstain -0-; not voted 100, and James E. Waldo
received votes for 487,391; against -0-; abstain -0-; not voted -0-.
2) Proposal to ratify the appointment of Kelley, Galloway & Company,
PSC as the Company's independent auditors for the fiscal year ending
September 30, 1997; received votes for 487,391; against -0-; abstain -0-;
not voted -0-.
d) 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.
16
<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: May 12, 1997 By:/s/ I. Vincent Rice
--------------- ---------------------------------
I. Vincent Rice, President
Date: May 12, 1997 By:/s/ Jeffery W. Clark
---------------- ---------------------------------
Jeffery W. Clark, Comptroller
17
<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 March 31, 1997 and the consolidated statement of income form the six months
ended March 31, 1997 and is qualified in its entirety by reference to such
Consolidated Financial Statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 109,141
<INT-BEARING-DEPOSITS> 1,722,402
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,963,083
<INVESTMENTS-CARRYING> 13,033,843
<INVESTMENTS-MARKET> 12,833,237
<LOANS> 37,472,790
<ALLOWANCE> 287,478
<TOTAL-ASSETS> 57,908,733
<DEPOSITS> 47,109,953
<SHORT-TERM> 66,000
<LIABILITIES-OTHER> 178,184
<LONG-TERM> 0
0
0
<COMMON> 6,621
<OTHER-SE> 10,548,075
<TOTAL-LIABILITIES-AND-EQUITY> 57,908,733
<INTEREST-LOAN> 1,446,565
<INTEREST-INVEST> 579,885
<INTEREST-OTHER> 27,732
<INTEREST-TOTAL> 2,054,182
<INTEREST-DEPOSIT> 1,175,632
<INTEREST-EXPENSE> 1,189,159
<INTEREST-INCOME-NET> 865,023
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 653,212
<INCOME-PRETAX> 241,550
<INCOME-PRE-EXTRAORDINARY> 162,216
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,216
<EPS-PRIMARY> .26
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2.25
<LOANS-NON> 109,266
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 283,112
<CHARGE-OFFS> 4,366
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 287,478
<ALLOWANCE-DOMESTIC> 287,478
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
