<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 December 31, 1998
--------------------------------------
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.
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(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
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(Address of principal executive offices) (Zip Code)
(740) 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 February 12, 1999, there were issued and outstanding 583,361 shares
of the Registrant's Common Stock.
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 December 31,
1998 (unaudited) and September 30, 1998) . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income (for the three
months ended December 31, 1998 (unaudited)
and 1997 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Changes in Stockholders' Equity (for
the three months ended December 31, 1998 (unaudited) and
the year ended September 30, 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows (for the three
months ended December 31, 1998 (unaudited)
and 1997 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . 15
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 1,505,667 $ 746,261
INVESTMENT SECURITIES HELD
TO MATURITY 2,283,491 3,309,806
INVESTMENT SECURITIES AVAILABLE
FOR SALE 604,797 609,978
LOANS RECEIVABLE 47,630,660 44,642,641
MORTGAGE-BACKED SECURITIES
HELD TO MATURITY 5,057,937 5,268,915
MORTGAGE-BACKED SECURITIES
AVAILABLE FOR SALE 5,122,865 5,618,354
ACCRUED INTEREST RECEIVABLE 310,082 341,410
FORECLOSED REAL ESTATE 43,355 10,603
OFFICE PROPERTIES AND EQUIPMENT 1,734,075 1,752,308
OTHER ASSETS 46,395 95,621
------------- -------------
$ 64,339,324 $ 62,395,897
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 47,413,843 $ 45,436,581
ADVANCES FROM FEDERAL HOME LOAN BANK 6,994,978 7,004,136
ACCRUED INCOME TAXES PAYABLE:
Current 14,687 -
Deferred 100,785 139,592
ACCRUED INTEREST PAYABLE 33,502 32,814
OTHER LIABILITIES 146,597 131,878
------------- -------------
Total liabilities 54,704,392 52,745,001
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STOCKHOLDERS' EQUITY:
Common stock 5,834 5,834
Employee benefit plans (620,758) (643,854)
Additional paid-in capital 5,517,312 5,510,264
Retained earnings-substantially restricted 4,702,350 4,707,377
Accumulated other comprehensive income 30,194 71,275
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Total stockholders' equity 9,634,932 9,650,896
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$ 64,339,324 $ 62,395,897
============= ============
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For The Three Months Ended
-----------------------------------
December 31, December 31,
1998 1997
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INTEREST INCOME: (Unaudited) (Unaudited)
<S> <C> <C>
Loans receivable-
First mortgage loans $ 798,695 $ 741,571
Consumer and other loans 53,829 33,130
Mortgage-backed and related securities 155,425 119,595
Investment securities 53,506 138,944
Other interest-earning assets 12,974 10,640
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Total interest income 1,074,429 1,043,880
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INTEREST EXPENSE:
Interest-bearing checking 5,314 4,406
Passbook savings 61,928 69,233
Certificates of deposit 510,968 513,780
Advances from Federal Home
Loan Bank 93,396 52,851
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Total interest expense 671,606 640,270
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Net interest income 402,823 403,610
PROVISION FOR LOAN LOSSES 3,000 3,000
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Net interest income after provision
for loan losses 399,823 400,610
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NON-INTEREST INCOME:
Gains on foreclosed real estate 303 5,320
Gain on sale of assets 5,000 -
Other 21,916 11,595
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Total non-interest income 27,219 16,915
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NON-INTEREST EXPENSE:
Compensation and benefits 158,295 153,441
Occupancy and equipment 32,412 37,826
SAIF deposit insurance premium 6,553 7,223
Directors' fees and expenses 23,280 23,862
Franchise taxes 37,881 36,675
Data processing 25,499 23,950
Advertising 20,117 16,799
Professional services 28,325 24,569
Other 42,278 30,104
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Total non-interest expense 374,640 354,449
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INCOME BEFORE PROVISION FOR INCOME TAXES 52,402 63,076
PROVISION FOR INCOME TAXES 20,355 8,710
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NET INCOME $ 32,047 $ 54,366
============= ============
EARNINGS PER SHARE:
Basic $ .06 $ .09
============= ============
Diluted $ .06 $ .09
============= ============
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Employee Additional
Common Benefit Paid-in
Stock Plans Capital
----- ----- -------
<S> <C> <C> <C>
BALANCES, September 30, 1997 $ 6,464 $ (739,000) $ 6,060,242
COMPREHENSIVE INCOME:
Net income, year ended September 30, 1998 - - -
Other comprehensive income, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $25,655 - - -
Less reclassification adjustment - - -
----------- ----------- ------------
TOTAL COMPREHENSIVE INCOME - - -
ESOP SHARES RELEASED, 5,554 shares;
$16.76 average fair market value - 55,540 37,559
RRP SHARES AMORTIZED, 3,254 shares - 38,236 -
DIVIDENDS PAID ($.28 per share) - 1,370 1,088
PURCHASE OF 63,022 TREASURY SHARES (630) - (588,625)
----------- ----------- ------------
BALANCES, September 30, 1998 5,834 (643,854) 5,510,264
COMPREHENSIVE INCOME:
Net income, three months ended
December 31, 1998 (unaudited) - - -
Other comprehensive income, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $21,163 (unaudited) - - -
----------- ----------- ------------
TOTAL COMPREHENSIVE INCOME (unaudited) - - -
ESOP SHARES RELEASED, 1,349 shares;
$15.23 average fair market
value (unaudited) - 13,490 7,048
RRP SHARES AMORTIZED, 817 shares (unaudited) - 9,606 -
DIVIDENDS PAID ($.07 per share) (unaudited) - - -
----------- ----------- ------------
BALANCES, December 31, 1998 (unaudited) $ 5,834 $ (620,758) $ 5,517,312
=========== =========== ============
<CAPTION>
Retained Accumulated
Earnings- Other Total
Substantially Comprehensive Stockholders'
Restricted Income Equity
---------- ------ ------
<S> <C> <C> <C>
BALANCES, September 30, 1997 $ 5,127,312 $ 24,317 $ 10,479,335
COMPREHENSIVE INCOME:
Net income, year ended September 30, 1998 252,257 - 252,257
Other comprehensive income, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $25,655 - 49,416 49,416
Less reclassification adjustment - (2,458) (2,458)
----------- ----------- --------------
TOTAL COMPREHENSIVE INCOME 252,257 46,958 299,215
ESOP SHARES RELEASED, 5,554 shares;
$16.76 average fair market value - - 93,099
RRP SHARES AMORTIZED, 3,254 shares - - 38,236
DIVIDENDS PAID ($.28 per share) (160,419) - (157,961)
PURCHASE OF 63,022 TREASURY SHARES (511,773) - (1,101,028)
----------- ----------- --------------
BALANCES, September 30, 1998 4,707,377 71,275 9,650,896
COMPREHENSIVE INCOME:
Net income, three months ended
December 31, 1998 (unaudited) 32,047 - 32,047
Other comprehensive income, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $21,163 (unaudited) - (41,081) (41,081)
----------- ----------- --------------
TOTAL COMPREHENSIVE INCOME (unaudited) 32,047 (41,081) (9,034)
ESOP SHARES RELEASED, 1,349 shares;
$15.23 average fair market
value (unaudited) - - 20,538
RRP SHARES AMORTIZED, 817 shares (unaudited) - - 9,606
DIVIDENDS PAID ($.07 per share) (unaudited) (37,074) - (37,074)
----------- ----------- --------------
BALANCES, December 31, 1998 (unaudited) $ 4,702,350 $ 30,194 $ 9,634,932
=========== =========== ==============
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------------
December 31, December 31,
1998 1997
------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 32,047 $ 54,366
Adjustments to reconcile net income to net cash
provided by operating activities -
Gains on foreclosed real estate (303) (5,320)
Gain on sale of assets (5,000) -
Provision for loan losses 3,000 3,000
Depreciation 18,233 24,069
FHLB stock dividends (8,900) (8,500)
Amortization and accretion, net 6,446 3,421
ESOP compensation 20,538 21,575
RRP compensation 9,606 9,419
Change in -
Accrued interest receivable 31,328 (28,597)
Other assets 49,226 8,843
Deferred Federal income taxes (17,641) 12,247
Accrued interest payable 688 1,374
Accrued income taxes payable 14,687 -
Other liabilities 14,719 (71,060)
------------ ------------
Net cash provided by operating activities 168,674 24,837
------------ ------------
INVESTING ACTIVITIES:
Net increase in loans (3,034,374) (970,916)
Proceeds from maturities of investment securities held to maturity 1,035,000 400,000
Purchases of mortgage-backed securities available for sale - (677,580)
Principal collected on mortgage-backed securities held to maturity 206,701 139,280
Principal collected on mortgage-backed securities available for sale 436,469 80,458
Purchases of office properties and equipment - (9,025)
Proceeds from sale of foreclosed real estate 10,906 44,763
Proceeds from sale of assets 5,000 -
------------ ------------
Net cash used for investing activities (1,340,298) (993,020)
------------ ------------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 1,977,262 (145,170)
Dividends paid (37,074) (41,485)
Proceeds from FHLB advances - 2,375,000
Repayments of FHLB advances (9,158) (1,100,000)
------------ ------------
Net cash provided by financing activities 1,931,030 1,088,345
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INCREASE IN CASH AND CASH EQUIVALENTS 759,406 120,162
CASH AND CASH EQUIVALENTS, beginning of period 746,261 807,314
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 1,505,667 $ 927,476
============ ============
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate $ 43,355 $ 29,722
Change in unrealized holding loss on investment
securities available for sale (62,244) (28,472)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Federal income taxes paid 23,311 41,385
Interest paid 670,918 638,896
</TABLE>
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<PAGE> 7
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, 1998.
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 December 31, 1998 and
September 30, 1998, and for the three months ended December 31, 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> 8
(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 recorded during the three month periods ended December 31,
1998 and 1997 was $20,538 and $21,575, respectively.
(4) STOCK OPTION PLAN
On December 16, 1996, the Stock Option Plan (the "Plan") was approved
by the Company'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 December
31, 1998. These options are subject to vesting provisions as well as other
provisions of the Plan. No options have been exercised through December 31,
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 December 31, 1998. 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 periods ended December 31, 1998 and
1997 was $9,606 and $9,419, 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> 9
(6) PURCHASE OF COMMON STOCK
During the year ended September 30, 1998, the Company purchased
63,022 shares of its outstanding common stock at an aggregate cost of
$1,101,028. 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 months
ended December 31, 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
December 31, 1998 December 31, 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 $ 32,047 544,414 $ 0.06 $ 54,366 601,782 $ 0.09
Effect of Dilutive
Securities-Options - 1,990 - - 2,202 -
----------- --------- -------- --------- --------- ----------
Diluted EPS $ 32,047 546,404 $ 0.06 $ 54,366 603,984 $ 0.09
=========== ========= ======== ========= ========= ==========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
ASSETS. Total assets increased $1.9 million, or 3.0%, from $62.4
million at September 30, 1998 to $64.3 million at December 31, 1998. The
increase consisted primarily of increases in cash and cash equivalents of $.8
million and loans receivable of $3.0 million, offset by declines in
mortgage-backed securities (held to maturity and available for sale) of $.7
million and investment securities (held to maturity and available for sale) of
$1.0 million.
CASH AND CASH EQUIVALENTS. The $.8 million increase in cash and cash
equivalents resulted primarily from maturities of investment securities,
principal payments on mortgage-backed securities, along with an increase in
deposits, partially offset by cash outflows used to fund loan demand.
INVESTMENT SECURITIES. Investment securities (held to maturity and
available for sale) decreased $1.0 million, or 25.6%, from $3.9 million at
September 30, 1998 to $2.9 million at December 31, 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
$1.0 million, with no corresponding reinvestments of the proceeds.
LOANS RECEIVABLE. Loans receivable increased $3.0 million, or 6.7%,
from $44.6 million at September 30, 1998 to $47.6 million at December 31, 1998.
The majority of the increase is attributed to 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 $45.5 million, or 95.0%, of total gross loans, while
consumer loans, including installment loans and loans secured by deposit
accounts, totaled $2.4 million, or 5.0%, of total gross loans outstanding at
December 31, 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 remained unchanged constituting .6% of loans
outstanding at September 30, 1998 and December 31, 1998. The dollar amount of
the allowance totaled $288,350 at September 30, 1998 as compared to $285,246 at
December 31, 1998.
Charge-off activity for the three months ended December 31, 1998 and
1997, totaled $6,104 and $3,635, respectively. Recoveries totaled $-0- and
$-0- for the three months ended December 31, 1998 and 1997, respectively.
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<PAGE> 11
The Company had $133,000 and $125,000 of non-accrual loans at
December 31, 1998 and September 30, 1998, 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 three
month periods ended December 31, 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 decreased $.7 million, or 6.4%,
from $10.9 million at September 30, 1998 to $10.2 million at December 31, 1998,
due to scheduled principal payments of $.7 million.
DEPOSITS. Deposits increased by $2.0 million, or 4.4%, from $45.4
million at September 30, 1998 to $47.4 million at December 31, 1998. The
Company continues to offer competitive interest rates on deposits.
ADVANCES FROM FEDERAL HOME LOAN BANK. The Company's advances from
the FHLB totaled $7.0 million at December 31, 1998 and September 30, 1998. The
growth in deposits provided the Company with ample funds to meet its
commitments during the quarter without additional borrowings.
STOCKHOLDERS' EQUITY. Stockholders' equity totaled $9.6 million at
December 31, 1998 and September 30, 1998. The Company's net income for the
quarter was offset by dividends declared and the release of common stock shares
to the employee benefit plans.
RESULTS OF OPERATIONS-THREE MONTHS ENDED DECEMBER 31, 1998 AS
COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1997
Net income decreased $22,319, or 41.1%, from $54,366 for the quarter
ended December 31, 1997 to $32,047 for the quarter ended December 31, 1998.
Earnings per share were $.06 and $.09 for the 1998 and 1997 quarters, both
primary and assuming full dilution. The decrease in net income primarily
resulted from increases in non-interest expense and the provision for income
taxes of $20,191 and $11,645, respectively, offset by an increase in
non-interest income of $10,304.
Total interest income increased $30,549, or 2.9%, from $1,043,880 for
the quarter ended December 31, 1997 to $1,074,429 for the quarter ended
December 31, 1998. The increase was due to increased levels of interest earned
on loans receivable of $77,823, mortgage-backed securities of $35,830, and
other interest-earning assets of $2,334, offset by a reduction in interest
earned on investment securities of $85,438. The increases were primarily
attributable to increases in the average volumes of the respective portfolios
during the 1998 quarter as compared to the 1997 quarter, while the decrease in
interest earned on investments reflects a reduced portfolio volume during the
1998 quarter as compared to the 1997 quarter.
Total interest expense increased $31,336, or 4.9%, from $640,270 for
the 1997 quarter to $671,606 for the 1998 quarter, 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.
- 11 -
<PAGE> 12
The Company provided $3,000 for loan losses for the 1998 and 1997
quarters, such amounts corresponding with the growth in the loan portfolio
during the periods.
The $10,304 increase in non-interest income, from $16,915 for the
1997 quarter to $27,219 for the 1998 quarter, resulted primarily from increased
service charge income on deposit accounts and from a $5,000 gain during the
1998 quarter on the sale of assets.
The $20,191, or 5.7%, increase in non-interest expense, from $354,449
for the 1997 quarter to $374,640 for the 1998 quarter, consisted primarily of
increases in compensation and benefits of $4,854, advertising of $3,318,
professional fees of $3,756, and other expenses of $12,174, partially offset by
a decrease in occupancy expenses of $5,414. Compensation and benefits expenses
increased due to increased salaries and wages from normal percentage salary
increases and higher employee insurance costs. Advertising costs increased due
to increased television advertisements, while professional services expenses
increased due to the timing of services performed. Other non-operating
expenses increased primarily due to increased expenses associated with the
Company's public reporting responsibilities for the fiscal year ended September
30, 1998 as compared to fiscal 1997. The decrease in occupancy expenses
reflects the reduction of costs associated with the Bank's former Chesapeake,
Ohio branch facility which was sold during the fiscal year ended September 30,
1998.
The $11,645 increase in the provision for income taxes, from $8,710
for the 1997 quarter to $20,355 for the 1998 quarter, resulted from 1998 income
levels being taxed at higher statutory tax rates as compared to 1997.
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 5.9% at December 31, 1998, as compared to 5.4% at
September 30, 1998. At December 31, 1998, the Bank's "liquid" assets totaled
approximately $2.2 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.
Outstanding advances totaled $7.0 million at December 31, 1998.
- 12 -
<PAGE> 13
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 December 31, 1998, the total approved loan
commitments outstanding amounted to $1.5 million. Certificates of deposit
scheduled to mature in one year or less at December 31, 1998, totaled $19.5
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 December 31, 1998, the Bank had regulatory capital which was well
in excess of applicable limits. At December 31, 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 December 31, 1998, the Bank's tangible capital was
$8.2 million, or 12.9% of adjusted total assets, core capital was $8.2 million,
or 12.9% of adjusted total assets and risk-based capital was $8.5 million, or
27.0% of adjusted risk-weighted assets, exceeding the requirements by $7.2
million, $6.3 million and $6.0 million, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
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, the Company's only other comprehensive
income is unrealized holding gains and losses on available for sale securities.
The Company adopted the provisions of this Statement effective for
the quarter ending December 31, 1998. The prior years statements have been
reclassified to conform to the provisions of the Statement. Adoption of this
Statement had no effect on current, or previously reported amounts of total
stockholders' equity. See the Consolidated Statements of Changes in
Stockholders' Equity for the reported amounts of net income, and total
comprehensive income.
YEAR 2000
The Bank's most significant data processing is performed by an
outside service bureau, Fiserv, Inc. Fiserv serves a large client base and has
been keeping the Bank informed as to its progress in addressing its Year 2000
preparations, which significantly impact the Bank.
A "Client Task Force" was formed among Fiserv members which has
already conducted on-site testing at the data center. Exceptions noted as a
result of this testing have been addressed. Based upon overall test results,
Fiserv believes the testing was successful and completes a major step towards
their readiness for Year 2000. The Bank is independently evaluating the test
results.
The Bank has identified the need to replace "teller hardware and
software" and "local area network software" used in daily operations. After a
thorough evaluation, the Bank has ordered replacement hardware and software
which is Year 2000 compliant, and will test these products with the Fiserv
systems during the first half of 1999.
- 13 -
<PAGE> 14
Fiserv efforts include a Disaster Recovery Center to ensure proper
backup. All test results have been made available to the Bank and are being
independently evaluated. Other areas being evaluated by the Bank include
systems for security, vaults, ATMs and others. Management believes the Bank is
continuing to make satisfactory progress in addressing Year 2000 implementation
issues.
The costs associated with the Year 2000 issues are estimated to
approximate $60,000 to $100,000. The majority of such costs will be
capitalized and depreciated over an estimated five year period.
"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-Q 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.
- 14 -
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
There are no material legal proceedings to which the Issuer is a
part, or to which any of its property is subject.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits:
No. Description
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.
- ---------------
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.
- 15 -
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 12, 1999 By:/s/ I. Vincent Rice
--------------------------- ---------------------------------
I. Vincent Rice, President
Date: February 12, 1999 By:/s/ Jeffery W. Clark
--------------------------- ---------------------------------
Jeffery W. Clark, Comptroller
- 16 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
FEDERAL FINANCIAL BANCORP INC AND SUBSIDIARY CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 1998 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 247,035
<INT-BEARING-DEPOSITS> 1,258,632
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,727,662
<INVESTMENTS-CARRYING> 7,341,428
<INVESTMENTS-MARKET> 7,468,109
<LOANS> 47,915,906
<ALLOWANCE> 285,246
<TOTAL-ASSETS> 64,339,324
<DEPOSITS> 47,413,843
<SHORT-TERM> 0
<LIABILITIES-OTHER> 295,571
<LONG-TERM> 6,994,978
0
0
<COMMON> 5,834
<OTHER-SE> 9,629,098
<TOTAL-LIABILITIES-AND-EQUITY> 64,339,324
<INTEREST-LOAN> 852,524
<INTEREST-INVEST> 208,931
<INTEREST-OTHER> 12,974
<INTEREST-TOTAL> 1,074,429
<INTEREST-DEPOSIT> 578,210
<INTEREST-EXPENSE> 671,606
<INTEREST-INCOME-NET> 402,823
<LOAN-LOSSES> 3,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 374,640
<INCOME-PRETAX> 52,402
<INCOME-PRE-EXTRAORDINARY> 32,047
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,047
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
<YIELD-ACTUAL> 2.04
<LOANS-NON> 133,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 288,350
<CHARGE-OFFS> 6,104
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 285,246
<ALLOWANCE-DOMESTIC> 285,246
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
