<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
-----------------------------
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.
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 31-1456058
--------------------------------- -----------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
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 12, 1998, THERE WERE ISSUED AND OUTSTANDING 588,824 SHARES
OF THE REGISTRANT'S COMMON STOCK.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
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<PAGE> 2
FIRST FEDERAL FINANCIAL BANCORP, INC.
TABLE OF CONTENTS
*****************
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (as of June 30,
1998 (unaudited) and September 30, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income (for the three
months ended June 30, 1998 (unaudited)
and 1997 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Income (for the nine
months ended June 30, 1998 (unaudited) and
1997 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Changes in Stockholders' Equity (for
the nine months ended June 30, 1998 (unaudited) and
the year ended September 30, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows (for the nine
months ended June 30, 1998 (unaudited)
and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
<PAGE> 3
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
------------- ------------------
(Unaudited)
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 908,429 $ 807,314
INVESTMENT SECURITIES HELD
TO MATURITY 3,747,334 7,257,115
INVESTMENT SECURITIES AVAILABLE
FOR SALE 1,001,285 1,694,104
LOANS RECEIVABLE 42,428,946 39,026,547
MORTGAGE-BACKED SECURITIES
HELD TO MATURITY 5,462,673 4,695,838
MORTGAGE-BACKED SECURITIES
AVAILABLE FOR SALE 5,679,833 3,130,178
ACCRUED INTEREST RECEIVABLE 355,502 360,604
FORECLOSED REAL ESTATE 10,603 50,046
OFFICE PROPERTIES AND EQUIPMENT 1,771,563 2,052,833
OTHER ASSETS 105,843 123,216
-------------- ---------------
$ 61,472,011 $ 59,197,795
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 45,150,097 $ 44,992,698
ADVANCES FROM FEDERAL HOME LOAN BANK 6,013,163 3,300,000
FEDERAL INCOME TAXES PAYABLE 88,994 101,736
ACCRUED INTEREST PAYABLE 30,452 18,192
OTHER LIABILITIES 106,354 305,834
-------------- ---------------
Total liabilities 51,389,060 48,718,460
-------------- ---------------
STOCKHOLDERS' EQUITY:
Common stock 6,141 6,464
Employee benefit plans (667,870) (739,000)
Additional paid-in capital 5,785,996 6,060,242
Retained earnings-substantially restricted 4,942,123 5,127,312
Unrealized holding gain on investment
securities available for sale, net of taxes 16,561 24,317
-------------- ---------------
Total stockholders' equity 10,082,951 10,479,335
-------------- ---------------
$ 61,472,011 $ 59,197,795
============== ===============
</TABLE>
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<PAGE> 4
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------------
June 30, June 30,
1998 1997
----------- -----------
<S> <C> <C>
INTEREST INCOME: (Unaudited) (Unaudited)
Loans receivable-
First mortgage loans $ 770,907 $ 709,675
Consumer and other loans 38,556 34,810
Mortgage-backed and related securities 172,218 118,677
Investment securities 83,236 147,101
Other interest-earning assets 11,559 30,064
----------- -----------
Total interest income 1,076,476 1,040,327
----------- -----------
INTEREST EXPENSE:
Interest-bearing checking 6,142 3,530
Passbook savings 68,904 70,006
Certificates of deposit 501,763 533,233
Advances from Federal Home
Loan Bank 86,109 16,624
----------- -----------
Total interest expense 662,918 623,393
----------- -----------
Net interest income 413,558 416,934
PROVISION FOR LOAN LOSSES 3,000 -
----------- -----------
Net interest income after provision
for loan losses 410,558 416,934
----------- -----------
NON-INTEREST INCOME:
Gains on foreclosed real estate 279 -
Securities gains 273 -
Gain on sale of office property 47,068 -
Other 16,554 9,166
----------- -----------
Total non-interest income 64,174 9,166
----------- -----------
NON-INTEREST EXPENSE:
Compensation and benefits 145,815 115,744
Occupancy and equipment 35,373 25,476
SAIF deposit insurance premiums 6,941 7,415
Directors' fees and expenses 17,271 22,802
Franchise taxes 37,882 47,346
Data processing 23,913 17,186
Advertising 17,070 14,481
Professional services 24,493 21,562
Other 33,919 40,341
----------- -----------
Total non-interest expense 342,677 312,353
----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 132,055 113,747
PROVISION FOR INCOME TAXES 37,163 33,707
----------- -----------
NET INCOME $ 94,892 $ 80,040
=========== ===========
EARNINGS PER SHARE - BASIC $ .16 $ .13
=========== ===========
EARNINGS PER SHARE ASSUMING DILUTION $ .16 $ .13
=========== ===========
</TABLE>
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<PAGE> 5
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Nine Months Ended
-----------------------------------------
June 30, June 30,
1998 1997
------------- --------------
INTEREST INCOME: (Unaudited) (Unaudited)
<S> <C> <C>
Loans receivable -
First mortgage loans $ 2,259,462 $2,087,769
Consumer and other loans 107,527 103,281
Mortgage-backed and related
securities 438,946 345,569
Investment securities 346,456 500,094
Other interest-earning assets 34,156 57,796
----------- ----------
Total interest income 3,186,547 3,094,509
----------- ----------
INTEREST EXPENSE:
Interest-bearing checking 15,580 9,960
Passbook savings 206,455 212,965
Certificates of deposit 1,523,288 1,559,476
Advances from Federal Home
Loan Bank 210,357 30,151
----------- ----------
Total interest expense 1,955,680 1,812,552
----------- ----------
Net interest income 1,230,867 1,281,957
PROVISION FOR LOAN LOSSES 9,000 -
----------- ----------
Net interest income after
provision for loan losses 1,221,867 1,281,957
----------- ----------
NON-INTEREST INCOME:
Gains on foreclosed real estate 5,599 7,633
Securities gains 273 -
Gain on sale of office property 47,068 -
Other 46,220 31,273
----------- ----------
Total non-interest income 99,160 38,906
----------- ----------
NON-INTEREST EXPENSE:
Compensation and benefits 447,647 379,603
Occupancy and equipment 109,867 73,786
SAIF deposit insurance premiums 21,199 36,010
Directors' fees and expenses 58,441 55,562
Franchise taxes 115,573 102,812
Data processing 76,272 51,630
Advertising 51,284 43,439
Professional services 83,388 104,081
Other 104,419 118,642
------------ ----------
Total non-interest expense 1,068,090 965,565
------------ ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 252,937 355,298
PROVISION FOR INCOME TAXES 55,036 113,042
------------ ----------
NET INCOME $ 197,901 $ 242,256
============ ==========
EARNINGS PER SHARE - BASIC $ .34 $ .39
============ ==========
EARNINGS PER SHARE ASSUMING DILUTION $ .33 $ .39
============ ==========
</TABLE>
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<PAGE> 6
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, 1996 $ 6,718 $ (513,080) $ 6,280,193 $ 5,111,660 $ (1,973) $10,883,518
NET INCOME, 1997 - - - 286,347 - 286,347
CHANGE IN UNREALIZED HOLDING LOSS,
net of deferred taxes of $13,543 - - - - 26,290 26,290
ESOP SHARES RELEASED, 5,810
shares; $12.68 average fair
market value - 58,100 17,004 - - 75,104
RRP SHARES PURCHASED, 26,871 shares;
$11.75 per share - (315,734) - - - (315,734)
RRP SHARES AMORTIZED, 2,603 shares - 30,604 - - - 30,604
DIVIDENDS PAID ($.28 per share) - 1,110 281 (166,923) - (165,532)
PURCHASE OF 25,400 TREASURY
SHARES (254) - (237,236) (103,772) - (341,262)
--------- ----------- ----------- ---------- -------- -----------
BALANCES, September 30, 1997 6,464 (739,000) 6,060,242 5,127,312 24,317 10,479,335
NET INCOME, nine months ended
June 30, 1998 (unaudited) - - - 197,901 - 197,901
CHANGE IN UNREALIZED HOLDING GAIN,
net of deferred taxes of $3,996 (unaudited) - - - - (7,756) (7,756)
ESOP SHARES RELEASED, 4,192 shares; $16.49
average fair market value (unaudited) - 41,920 27,222 - - 69,142
RRP SHARES AMORTIZED, 2,437 shares;
$11.75 per share (unaudited) - 28,630 - - - 28,630
DIVIDENDS PAID ($.14 per share)
(unaudited) - 580 381 (121,751) - (120,790)
PURCHASE OF 32,319 TREASURY SHARES (323) - (301,849) (261,339) - (563,511)
-------- ----------- ----------- ----------- -------- -----------
BALANCES, JUNE 30, 1998 (unaudited) $ 6,141 $ (667,870) $ 5,785,996 $ 4,942,123 $16,561 $10,082,951
======== =========== =========== =========== ======= ===========
</TABLE>
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<PAGE> 7
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
----------------------------------------
June 30, June 30,
1998 1997
--------------- --------------
OPERATING ACTIVITIES: (Unaudited) (Unaudited)
<S> <C> <C>
Net income $ 197,901 $ 242,256
Adjustments to reconcile net income to net cash
provided by operating activities -
Securities gains (273) -
Gain on sale of office property (47,068) -
Gains on foreclosed real estate (5,599) (7,633)
Provision for loan losses 9,000 -
Depreciation 68,859 39,223
FHLB stock dividends (25,800) (25,400)
Amortization and accretion, net 6,125 8,386
ESOP compensation 69,142 54,492
RRP compensation 28,630 20,938
Change in -
Accrued interest receivable 5,102 (5,447)
Other assets 17,373 3,393
Federal income taxes (12,742) 3,594
Accrued interest payable 12,260 6,977
Accrued SAIF special assessment - (269,363)
Other liabilities (79,480) 29,411
------------ -------------
Net cash provided by operating activities 243,430 100,827
------------ -------------
INVESTING ACTIVITIES:
Net increase in loans (3,441,121) (3,098,569)
Proceeds from sales and maturities of investment securities available for sale 950,000 1,248,779
Proceeds from maturities of investment securities held to maturity 3,798,000 1,393,000
Purchases of investment securities held to maturity (250,000) (99,000)
Purchases of investment securities available for sale (249,688) (350,000)
Purchases of mortgage-backed securities held to maturity (1,303,750) (305,248)
Purchases of mortgage-backed securities available for sale (3,071,635) (819,463)
Principal collected on mortgage-backed securities held to maturity 523,983 519,622
Principal collected on mortgage-backed securities available for sale 501,393 218,263
Purchases of office properties and equipment (20,521) (659,265)
Proceeds from sale of foreclosed real estate 74,763 41,000
Proceeds from sale of office property 160,000 -
------------ -------------
Net cash used for investing activities (2,328,576) (1,910,881)
------------ -------------
FINANCING ACTIVITIES:
Net increase in deposits 157,399 1,055,688
Proceeds from FHLB advances 8,325,000 3,300,000
Payments on FHLB advances (5,611,837) (1,000,000)
Proceeds from other borrowed funds - 66,000
Payments on other borrowed funds - (66,000)
Dividends paid (120,790) (128,012)
Purchase of RRP shares - (315,733)
Purchase of treasury shares (563,511) (341,262)
------------ -------------
Net cash provided by financing activities 2,186,261 2,570,681
------------ -------------
INCREASE IN CASH AND CASH EQUIVALENTS 101,115 760,627
CASH AND CASH EQUIVALENTS, beginning of period 807,314 801,243
------------ -------------
CASH AND CASH EQUIVALENTS, end of period $ 908,429 $ 1,561,870
============ =============
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate $ 29,722 $ 50,046
Change in unrealized holding loss on investment securities available for sale (11,752) 16,186
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Federal income taxes paid 41,385 59,805
Interest paid 1,943,420 1,783,141
</TABLE>
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<PAGE> 8
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, 1997.
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 Proctorville, Ohio (formerly 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, 1998
and September 30, 1997, and for the three and nine months ended June 30, 1998
and 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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<PAGE> 9
(2) CONVERSION TRANSACTION
On June 3, 1996, (i) the Association converted from a
federally-chartered mutual savings and loan association to a
federally-chartered stock savings bank to be named "First Federal Savings Bank
of Ironton", and (ii) the Company acquired all of the common stock of the Bank
in the Conversion. As part of the Conversion, the Company issued 671,783
shares of its Common Stock. Total proceeds of $6,717,830 were reduced by
$537,430 for shares to be purchased by the ESOP and by approximately $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
$537,430 for the initial purchase of the ESOP shares. The loan is due and
payable in forty-eight (48) equal quarterly installments of $11,200 beginning
June 29, 1996, plus interest at the rate of 8.75% per annum. The Company 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 for the three month periods ended June 30, 1998 and
1997 was $24,092 and $19,423, respectively, and for the nine month periods
ended June 30, 1998 and 1997 was $69,815 and $54,409, 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, 1998. These options are subject to vesting provisions as well as
other provisions of the Plan. No options have been exercised through June 30,
1998.
(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, 1998. Awards 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 periods ended June 30, 1998 and 1997
was $9,606 and $9,664, respectively, and for the nine months ended June 30,
1998 and 1997 was $28,631 and $20,939, respectively.
The Company purchased 26,871 shares of common stock
during the year ended September 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> 10
(6) PURCHASE OF COMMON STOCK
During the nine months ended June 30, 1998, the Company
purchased 32,319 shares of its outstanding common stock at an aggregate cost of
$563,511. During the year ended September 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) EARNINGS PER SHARE
Basic and full dilution Earnings Per Share (EPS) for the
three and nine month periods ended June 30, 1998 and 1997, were calculated by
dividing the consolidated net income by the weighted average number of common
shares, and common stock equivalents outstanding, as set forth below. Shares
which have not been committed to be released to the ESOP are not considered to
be outstanding for purposes of calculating earnings per share.
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
June 30, 1998 June 30, 1997
------------------------------------------- -----------------------------------------
Shares Shares
Income (Denomi- Per-Share Income (Denomi- Per-Share
(Numerator) nator) Amount (Numerator) nator) Amount
-------------- ------------ ------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 94,892 598,544 $ 0.16 $ 80,040 618,019 $ 0.13
Effect of Dilutive
Securities-Options - 2,926 - - 1,549 -
------------- ---------- ------- -------- ------------ -------
Diluted EPS $ 94,892 601,470 $ 0.16 $ 80,040 619,568 $ 0.13
============= ========== ======= ======== ============ =======
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended For the Nine Months Ended
June 30, 1998 June 30, 1997
---------------------------------------------- ----------------------------------------
Shares Shares
Income (Denomi- Per-Share Income (Denomi- Per-Share
(Numerator) nator) Amount (Numerator) nator) Amount
------------- ---------- ---------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 197,901 593,168 $ 0.34 $ 242,256 615,888 $ 0.39
Effect of Dilutive
Securities-Options - 8,778 (0.01) - 3,335 -
------------- ---------- -------- --------- ---------- -------
Diluted EPS $ 197,901 601,946 $ 0.33 $ 242,256 619,223 $ 0.39
============= ========== ======== ========= ========== =======
</TABLE>
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
ASSETS. Total assets increased $2.3 million, or 3.9%,
from $59.2 million at September 30, 1997 to $61.5 million at June 30, 1998.
The increase consisted primarily of increases in cash and cash equivalents of
$100,000, loans receivable of $3.4 million and mortgage-backed securities (held
to maturity and available for sale) of $3.3 million, partially offset by a
decline in investment securities (held to maturity and available for sale) of
$4.3 million.
CASH AND CASH EQUIVALENTS. The $100,000 increase in
cash and cash equivalents, or 12.5%, resulted primarily from the retention of
proceeds from maturities of investment securities during the period along with
increases in FHLB advances and deposits, partially offset by cash outflows used
to fund loan demand and to purchase mortgage-backed securities.
INVESTMENT SECURITIES. Investment securities (held to
maturity and available for sale) decreased $4.3 million, or 47.8%, from $9.0
million at September 30, 1997 to $4.7 million at June 30, 1998. 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 from maturities of investment securities
during the period of $4.8 million, offset by reinvestments of $.5 million.
LOANS RECEIVABLE. Loans receivable increased $3.4
million, or 8.7%, from $39.0 million at September 30, 1997 to $42.4 million at
June 30, 1998. The majority of the increase is attributed to variable-rate
mortgage loan originations.
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 $40.9 million, or 95.8%, of total gross loans,
while consumer loans, including installment loans and loans secured by deposit
accounts, totaled $1.8 million, or 4.2%, of total gross loans outstanding at
June 30, 1998.
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 slightly from .73% at September
30, 1997 to .67% at June 30, 1998. The dollar amount of the allowance totaled
$287,000 at September 30, 1997 as compared to $286,000 at June 30, 1998.
Charge-off activity for the nine months ended June 30,
1998 and 1997, totaled $9,610 and $4,469, respectively. Recoveries totaled
$-0- and $4,364 for the nine months ended June 30, 1998 and 1997, respectively.
- 11 -
<PAGE> 12
The Company had $134,000 and $84,000 of non-accrual
loans at June 30, 1998 and September 30, 1997, respectively. At the same
dates, there were no significant loans greater than 90 days delinquent which
were still accruing interest.
The Company had no troubled debt restructurings during
the nine month periods ended June 30, 1998 and 1997.
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 $3.3 million,
or 42.3%, from $7.8 million at September 30, 1997 to $11.1 million at June 30,
1998, due to purchases of $4.4 million, offset by scheduled principal payments
of $1.1 million.
OFFICE PROPERTIES AND EQUIPMENT. The Company constructed
a drive-through facility expansion at its Ironton office and a new branch
banking facility located in Proctorville, Ohio during the year ended September
30, 1997. The total cost of both projects approximated $1.0 million. In
connection with the opening of the new branch, the Chesapeake, Ohio branch
was relocated to Proctorville. The Company sold the Chesapeake facility during
the quarter ended June 30, 1998 for $160,000, with a resulting gain of $47,068.
The branch relocation is expected to provide increased business opportunities
for the Company.
The Company purchased office properties and equipment of
$20,521 and $659,265 during the nine months ended June 30, 1998 and 1997,
respectively.
DEPOSITS. Deposits increased by $.2 million, or .4%,
from $45.0 million at September 30, 1997 to $45.2 million at June 30, 1998.
The Company continues to offer competitive interest rates on deposits.
ADVANCES FROM FEDERAL HOME LOAN BANK. The Company
obtained advances totaling $8.3 million during the nine months ended June 30,
1998 to meet its loan demand and other funding needs. $5.6 million of advances
were repaid during the period. The Company has ample borrowing capacity if
needed to fund future commitments.
STOCKHOLDERS' EQUITY. Stockholders' equity totaled
$10.1 million at June 30, 1998 as compared to $10.5 million at September 30,
1997. The Company's net income for the period was offset by dividends declared
and the release of common stock shares to the employee benefit plans. Also,
the Company purchased 32,319 shares of its outstanding stock at an aggregate
cost of $563,511 during the nine months ended June 30, 1998.
RESULTS OF OPERATIONS-THREE MONTHS ENDED JUNE 30, 1998
AS COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net income increased $14,852, or 18.6%, from $80,040 for
the quarter ended June 30, 1997 to $94,892 for the comparable 1998 quarter.
Net income per share was $.16 and $.13 for the 1998 and 1997 quarters,
respectively, both primary and assuming full dilution. The increase consisted
of an increase in non-interest income of $55,008, offset by a reduction in net
interest income of $3,376 and increases in the provision for loan losses of
$3,000, other non-operating expenses of $30,324, and the provision for income
taxes of $3,456.
Total interest income increased $36,149, or 3.5%,
from $1,040,327 for the three months ended June 30, 1997 to $1,076,476
for the comparable 1998 period. The increase was due
- 12 -
<PAGE> 13
to increased levels of interest earned on loans receivable and mortgage-backed
securities of $64,978 and $53,541, respectively, offset by reductions in
interest earned on investment securities and other interest-earning assets of
$63,865 and $18,505, respectively. Interest on loans receivable and
mortgage-backed securities increased primarily due to higher volumes of these
assets in the 1998 period as compared to 1997. The decreases in interest on
investment securities and other interest-earning assets for the 1998 quarter as
compared to the 1997 quarter is primarily attributable to lower volumes of
these assets.
Total interest expense increased $39,525, or 6.3%, from
$623,393 for the quarter ended June 30, 1997 to $662,918 for the quarter ended
June 30, 1998, such increase being primarily attributable to higher volumes of
interest-bearing liabilities during the 1998 quarter as compared to the 1997
quarter, and to a lesser extent, due to higher interest rates paid on deposits.
The Company provided $3,000 for loan losses during the
1998 quarter to correspond with the growth in the loan portfolio. No provision
was deemed necessary during the comparable 1997 quarter.
The $55,008 increase in non-interest income, from $9,166
for the 1997 quarter to $64,174 for the 1998 quarter, resulted primarily from
the $47,068 gain on the sale of the former Chesapeake, Ohio branch and, to a
lesser extent, from increased service charge income on deposit accounts.
Expansion and improvements to the Company's main office and branch facilities
completed during the 1997 fiscal year has enabled the Company to better compete
with other area institutions for transaction accounts, resulting in increased
service fees.
The $30,324, or 9.7%, increase in non-interest expense,
from $312,353 for the 1997 quarter to $342,677 for the comparable 1998 quarter
resulted primarily from increases in compensation and benefits of $30,071, data
processing expenses of $6,727 and occupancy and equipment expenses of $9,897,
partially offset by decreases in franchise taxes, directors' fees and expenses
and other non-operating expenses of $9,464, $5,531 and $6,422, respectively.
Compensation and benefits increased primarily due to increased salaries and
wages from normal percentage salary increases, costs of additional employees
hired to staff new drive-through and branch facilities, and higher employee
health insurance costs. Occupancy and equipment expenses increased due to
increased costs associated with the expansion and improvements made to the
Company's facilities during fiscal year 1997. Data processing expenses
increased due to the increased number of customer accounts and increased costs
of new services, such as ATM machines. Franchise taxes decreased due to the
timing of the assessment of the Delaware franchise tax, while directors' fees
and expenses decreased due to decreased costs associated with Directors
attending outside seminars and conferences. There was no individually
significant factor associated with the decrease in other non-operating
expenses.
The provision for income taxes increased $3,456 due to
higher pretax income. The Company's effective tax rates were 28.1% and 29.6%
for the quarters ended June 30, 1998 and 1997, respectively.
RESULTS OF OPERATIONS - NINE MONTHS ENDED JUNE 30, 1998
AS COMPARED TO NINE MONTHS ENDED JUNE 30, 1997
Net income decreased $44,355, or 18.3%, from $242,256
for the nine months ended June 30, 1997 to $197,901 for the nine months ended
June 30, 1998. Primary net income per share was $.34 and $.39 for the 1998 and
1997 nine month periods, respectively, while net income per share assuming
dilution was $.33 and $.39 for the nine month periods ending June 30, 1998 and
1997, respectively.
- 13 -
<PAGE> 14
The decrease in net income resulted from a decrease in
net interest income of $51,090, or 4.0%, an increase in the provision for loan
losses of $9,000, or 100.0%, and an increase in other non-operating expenses of
$102,525, or 10.6%, offset by an increase in non-interest income of $60,254, or
154.9%, and a decrease in the provision for income taxes of $58,006, or 51.3%.
Total interest income increased $92,038, or 3.0%, from
$3,094,509 for the nine months ended June 30, 1997 to $3,186,547 for the
comparable 1998 period. The increase was due to increased levels of interest
earned on loans receivable and mortgage-backed securities of $175,939 and
$93,377, respectively, offset by reductions in interest earned on investment
securities and other interest earning assets of $153,638 and $23,640,
respectively. Interest on loans receivable and mortgage-backed securities
increased primarily due to higher volumes of these assets during the 1998
period as compared to the 1997 period. The decreases in interest on investment
securities and other interest-earning assets is primarily attributable to lower
volumes of these assets during the 1998 period as compared to the 1997 period.
Total interest expense increased $143,128, or 7.9%, from
$1,812,552 for the 1997 nine month period to $1,955,680 for the nine months
ended June 30, 1998, such increase reflecting higher volumes of
interest-bearing liabilities during the 1998 period as compared to the 1997
period, and to a lesser extent, higher market rates of interest.
The Company provided $9,000 for loan losses during the
nine months ended June 30, 1998 to correspond to the increase in the loan
portfolio. No provision was deemed necessary during the comparable 1997 nine
month period.
Non-interest income increased $60,254 primarily due to
the sale of the branch office building and increased levels of service fees on
deposit accounts as previously described.
The $102,525 increase in non-interest expense, from
$965,565 for the 1997 period to $1,068,090 for the 1998 period resulted
primarily from increases in compensation and benefits expenses of $68,044,
occupancy and equipment expenses of $36,081, franchise taxes of $12,761, and
data processing costs of $24,642, partially offset by decreases in professional
services expenses, SAIF deposit insurance expense, and other non-operating
expenses of $20,693, $14,811 and $14,223, respectively. Compensation and
benefits increased due to increased salaries and wages and employee insurance
costs as described above, and due to three quarters of Recognition and
Retention Plan ("RRP") expenses in the 1998 period as compared to only two
quarters in the 1997 period. The RRP was effective beginning in December,
1996. Occupancy and equipment expenses increased due to increased costs
associated with the Company's expanded facilities. Franchise taxes increased
due to three full quarters of Delaware franchise tax expense during the 1998
period as compared to only two quarters in the 1997 comparable period. Data
processing expenses increased due to the increased number of customer accounts
and expanded transaction account services. The decline in SAIF deposit
insurance premiums reflects the lower assessment rate during the 1998 nine
month period as compared to the 1997 nine month period, while professional
services expenses decreased due to the recurring nature of services provided to
the Company in connection with its public reporting obligations during the 1998
nine month period as compared to the 1997 nine month period. There was no
individually significant factor contributing to the decline in other
non-operating expenses.
The provision for income taxes decreased $58,006 due to
lower statutory tax rates being applied to reduced pretax income for the nine
months ended June 30, 1998 as compared to the nine months ended June 30, 1997.
- 14 -
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required under applicable federal
regulations to maintain specified levels of "liquid" investments. 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 4% 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 6.84% at June 30, 1998, as compared to 13.0% at
September 30, 1997. At June 30, 1998, the Bank's "liquid" assets totaled
approximately $2.6 million, which was $.7 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, 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, 1998, the total
approved loan commitments outstanding amounted to $2.3 million. Certificates
of deposit scheduled to mature in one year or less at June 30, 1998, totaled
$24.1 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, 1998, the Bank had regulatory capital which
was well in excess of applicable limits. At June 30, 1998, 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, 1998, the Bank's tangible capital
was $8.8 million, or 14.6% of adjusted total assets, core capital was $8.8
million, or 14.6% of adjusted total assets and risk-based capital was $9.1
million, or 32.4% of adjusted risk-weighted assets, exceeding the requirements
by $7.9 million, $7.9 million and $6.6 million, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In February, 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards No. 128 ("the
Statement"), "Earnings Per Share." The Statement requires entities to give
effect to all dilutive potential common shares that were outstanding during the
reporting period for purposes of calculating earnings per share.
- 15 -
<PAGE> 16
The Company adopted the provisions of the Statement
effective for the quarter ending December 31, 1997. Although the Company does
have potential common shares outstanding in the form of stock options,
application of the Statement had no material effect on the reported net income
per share amounts for the quarters or nine months ended June 30, 1998 and 1997.
In June, 1997, FASB issued Statement of Financial
Accounting Standards No. 130 ("the Statement"), "Reporting Comprehensive
Income." The Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed in the same prominence as
other financial statements. As currently applicable to the Company, unrealized
holding gains and losses on available for sale securities, which are currently
displayed as a separate component of stockholders' equity in the Company's
financial statements, will be added or subtracted from net income to report
comprehensive income.
The Company will adopt the provisions of this Statement
effective for the quarter ending December 15, 1998. Based upon historical
volatility in the Company's available for sale portfolio and the resultant
unrealized gains and losses, management does not anticipate that future
reporting of comprehensive income will be materially different than reporting
net income.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
In addition to historical information, forward-looking
statements are contained herein that are subject to risks and uncertainties,
that could cause actual results to differ materially from those reflected in
the forward-looking statements. Factors that could cause future results to
vary from current expectations, include, but are not limited to, the impact of
economic conditions (both generally and more specifically in the markets in
which the Company operates), the impact of competition for the Company's
customers from other providers of financial services, the impact of government
legislation and regulation (which changes from time to time and over which the
Company has no control), and other risks detailed in this Form 10-QSB and in
the Company's other Securities and Exchange Commission (SEC) filings. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements,
to reflect events or circumstances that arise after the date hereof. Readers
should carefully review the risk factors described in other documents the
Company files from time to time with the Securities and Exchange Commission.
THE YEAR 2000
Many existing computer programs, such as several
utilized by the Company, use only two digits to identify a year in the date
field. These programs were designed and developed without considering the
impact of the upcoming change in the century.
The Bank's primary regulator, the OTS, is requiring that
the Bank identify its computer applications which could fail or create
erroneous results because of the year 2000, and have in place and operating
alternate systems by December 31, 1998.
In this connection, Bank management is currently
evaluating and seeking cost proposals to meet the OTS imposed deadlines. They
have tentatively identified the need to replace "teller software" and "local
area network software" used in daily operations. Management believes the Bank
is making satisfactory progress in meeting the OTS deadline.
- 16 -
<PAGE> 17
The Bank's most significant data processing is performed
by an outside service bureau. Management, as well as several other data center
customers, have already been in contact with the data center and received
favorable response regarding their plans and implementation schedules for
addressing the year 2000 issues. The Bank will conduct required tests of data
center provided applications.
The costs associated with the year 2000 issues are
estimated to approximate $60,000 to $100,000. Such costs will be capitalized
and depreciated over an estimated five year period.
- 17 -
<PAGE> 18
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
Deadline for Shareholder Proposals
Pursuant to Rule 14a-5(e) under the Securities Exchange Act of
1934, as amended effective June 29, 1998:
(1) The deadline for submitting shareholder proposals
for inclusion in the Company's proxy statement
and form of proxy for the Company's 1999 Annual
Meeting of Stockholders pursuant to Rule 14a-8 is
August 21, 1998.
(2) The date after which notice of a shareholder
proposal submitted outside the processes of Rule
14a-8 is considered untimely is September 20,
1998.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
<TABLE>
<CAPTION>
No. Description
------ --------------------------------------------------------
<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.
</TABLE>
- -------------------
1/ Incorporated by reference from the Registration Statement on Form S-1
(Registration No. 333-1672) filed by the Registrant with the SEC on February
26, 1996, as amended.
b) No Form 8-K reports were filed during the quarter.
- 18 -
<PAGE> 19
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 12, 1998 By:/s/ I. Vincent Rice
----------------------- ---------------------------------------
I. Vincent Rice, President
Date: August 12, 1998 By:/s/ Jeffery W. Clark
----------------------- ---------------------------------------
Jeffery W. Clark, Comptroller
- 19 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE FIRST FEDERAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 1998 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
JUNE 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 227,250
<INT-BEARING-DEPOSITS> 681,179
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,681,118
<INVESTMENTS-CARRYING> 9,210,007
<INVESTMENTS-MARKET> 9,190,454
<LOANS> 42,714,907
<ALLOWANCE> 285,961
<TOTAL-ASSETS> 61,472,011
<DEPOSITS> 45,150,097
<SHORT-TERM> 500,000
<LIABILITIES-OTHER> 225,800
<LONG-TERM> 5,513,163
0
0
<COMMON> 6141
<OTHER-SE> 10,076,810
<TOTAL-LIABILITIES-AND-EQUITY> 61,472,011
<INTEREST-LOAN> 2,366,989
<INTEREST-INVEST> 785,402
<INTEREST-OTHER> 34,156
<INTEREST-TOTAL> 3,186,547
<INTEREST-DEPOSIT> 1,745,323
<INTEREST-EXPENSE> 1,955,680
<INTEREST-INCOME-NET> 1,230,867
<LOAN-LOSSES> 9,000
<SECURITIES-GAINS> 273
<EXPENSE-OTHER> 1,068,090
<INCOME-PRETAX> 252,937
<INCOME-PRE-EXTRAORDINARY> 197,901
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197,901
<EPS-PRIMARY> .34
<EPS-DILUTED> .33
<YIELD-ACTUAL> 2.12
<LOANS-NON> 134,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 286,571
<CHARGE-OFFS> 9,610
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 285,961
<ALLOWANCE-DOMESTIC> 285,961
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
