<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, 1999
---------------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________________ TO _________________
COMMISSION FILE NUMBER 0-28020
-------------------------
FIRST FEDERAL FINANCIAL BANCORP, INC.
---------------------------------------------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
<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)
(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 AUGUST 9, 1999, THERE WERE ISSUED AND OUTSTANDING 554,193 SHARES
OF THE REGISTRANT'S COMMON STOCK.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
------------- -----------
<PAGE> 2
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 June 30,
1999 (unaudited) and September 30, 1998) . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income (for the three
months ended June 30, 1999 (unaudited)
and 1998 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Income (for the nine
months ended June 30, 1999 (unaudited) and
1998 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Changes in Stockholders' Equity (for
the nine months ended June 30, 1999 (unaudited) and
the year ended September 30, 1998) . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows (for the nine
months ended June 30, 1999 (unaudited)
and 1998 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 11-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . 17
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 3
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
--------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 1,506,867 $ 746,261
INVESTMENT SECURITIES HELD
TO MATURITY 1,912,702 3,309,806
INVESTMENT SECURITIES AVAILABLE
FOR SALE 597,014 609,978
LOANS RECEIVABLE 49,531,907 44,642,641
MORTGAGE-BACKED SECURITIES
HELD TO MATURITY 4,593,567 5,268,915
MORTGAGE-BACKED SECURITIES
AVAILABLE FOR SALE 4,803,006 5,618,354
ACCRUED INTEREST RECEIVABLE 319,824 341,410
FORECLOSED REAL ESTATE 35,773 10,603
OFFICE PROPERTIES AND EQUIPMENT 1,728,559 1,752,308
OTHER ASSETS 103,174 95,621
------------ ------------
$ 65,132,393 $ 62,395,897
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 48,480,607 $ 45,436,581
ADVANCES FROM FEDERAL HOME LOAN BANK 7,154,951 7,004,136
ACCRUED INCOME TAXES PAYABLE:
Current 8,715 21,106
Deferred 54,495 118,486
ACCRUED INTEREST PAYABLE 31,809 32,814
OTHER LIABILITIES 144,173 131,878
------------ ------------
Total liabilities 55,874,750 52,745,001
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock 5,542 5,834
Employee benefit plans (573,027) (643,854)
Additional paid-in capital 5,248,785 5,510,264
Retained earnings-substantially restricted 4,619,751 4,707,377
Accumulated other comprehensive income (43,408) 71,275
------------ ------------
Total stockholders' equity 9,257,643 9,650,896
------------ ------------
$ 65,132,393 $ 62,395,897
============ ============
</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,
1999 1998
-------------- -------------
INTEREST INCOME: (Unaudited) (Unaudited)
<S> <C> <C>
Loans receivable-
First mortgage loans $ 857,020 $ 770,907
Consumer and other loans 59,497 38,556
Mortgage-backed and related securities 136,301 172,218
Investment securities 38,463 83,236
Other interest-earning assets 12,246 11,559
-------------- -------------
Total interest income 1,103,527 1,076,476
-------------- -------------
INTEREST EXPENSE:
Interest-bearing checking 6,279 6,142
Passbook savings 64,870 68,904
Certificates of deposit 505,729 501,763
Advances from Federal Home
Loan Bank 89,704 86,109
-------------- -------------
Total interest expense 666,582 662,918
-------------- -------------
Net interest income 436,945 413,558
PROVISION FOR LOAN LOSSES 4,500 3,000
-------------- -------------
Net interest income after provision
for loan losses 432,445 410,558
-------------- -------------
NON-INTEREST INCOME:
Gain (loss) on foreclosed real estate (1,374) 279
Securities gains - 273
Gain on sale of assets - 47,068
Other 24,128 16,554
-------------- -------------
Total non-interest income 22,754 64,174
-------------- -------------
NON-INTEREST EXPENSE:
Compensation and benefits 141,750 145,815
Occupancy and equipment 36,431 35,373
SAIF deposit insurance premiums 7,141 6,941
Directors' fees and expenses 22,788 17,271
Franchise taxes 34,175 37,882
Data processing 29,007 23,913
Advertising 22,710 17,070
Professional services 28,769 24,493
Other 34,846 33,919
-------------- -------------
Total non-interest expense 357,617 342,677
-------------- -------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 97,582 132,055
PROVISION FOR INCOME TAXES 34,251 37,163
-------------- -------------
NET INCOME $ 63,331 $ 94,892
============== =============
EARNINGS PER SHARE - BASIC $ .12 $ .16
============== =============
EARNINGS PER SHARE ASSUMING DILUTION $ .12 $ .16
============== =============
</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,
1999 1998
-------------- -------------
INTEREST INCOME: (Unaudited) (Unaudited)
<S> <C> <C>
Loans receivable -
First mortgage loans $ 2,496,694 $ 2,259,462
Consumer and other loans 169,859 107,527
Mortgage-backed and related
securities 434,939 438,946
Investment securities 133,973 346,456
Other interest-earning assets 37,144 34,156
-------------- -------------
Total interest income 3,272,609 3,186,547
-------------- -------------
INTEREST EXPENSE:
Interest-bearing checking 18,190 15,580
Passbook savings 188,908 206,455
Certificates of deposit 1,520,418 1,523,288
Advances from Federal Home
Loan Bank 274,305 210,357
-------------- -------------
Total interest expense 2,001,821 1,955,680
-------------- -------------
Net interest income 1,270,788 1,230,867
PROVISION FOR LOAN LOSSES 12,000 9,000
-------------- -------------
Net interest income after
provision for loan losses 1,258,788 1,221,867
-------------- -------------
NON-INTEREST INCOME:
Gains on foreclosed real estate 1,661 5,599
Securities gains - 273
Gain on sale of assets 11,131 47,068
Other 66,193 46,220
-------------- -------------
Total non-interest income 78,985 99,160
-------------- -------------
NON-INTEREST EXPENSE:
Compensation and benefits 446,844 447,647
Occupancy and equipment 102,496 109,867
SAIF deposit insurance premiums 20,594 21,199
Directors' fees and expenses 65,550 58,441
Franchise taxes 108,365 115,573
Data processing 83,343 76,272
Advertising 64,351 51,284
Professional services 95,251 83,388
Other 122,883 104,419
-------------- -------------
Total non-interest expense 1,109,677 1,068,090
-------------- -------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 228,096 252,937
PROVISION FOR INCOME TAXES 69,325 55,036
-------------- -------------
NET INCOME $ 158,771 $ 197,901
============== =============
EARNINGS PER SHARE - BASIC $ .30 $ .34
============== =============
EARNINGS PER SHARE ASSUMING DILUTION $ .30 $ .33
============== =============
</TABLE>
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<PAGE> 6
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, nine months ended
June 30, 1999 (unaudited) - - -
Other comprehensive income, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $59,078 (unaudited) - - -
------- ------------ ------------
TOTAL COMPREHENSIVE INCOME (unaudited) - - -
ESOP SHARES RELEASED, 3,968 shares;
$12.89 average fair market
value (unaudited) - 39,680 11,474
RRP SHARES AMORTIZED, 2,453 shares
(unaudited) - 28,817 -
DIVIDENDS PAID ($.21 per share)
(unaudited) - 2,330 (524)
PURCHASE OF 29,168 TREASURY SHARES
(unaudited) (292) - (272,429)
------- ------------ ------------
BALANCES, JUNE 30, 1999 (unaudited) $ 5,542 $ (573,027) $ 5,248,785
======= ============ ============
<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, nine months ended
June 30, 1999 (unaudited) 158,771 - 158,771
Other comprehensive income, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $59,078 (unaudited) - (114,683) (114,683)
------------ ---------- ------------
TOTAL COMPREHENSIVE INCOME (unaudited) 158,771 (114,683) 44,088
ESOP SHARES RELEASED, 3,968 shares;
$12.89 average fair market
value (unaudited) - - 51,154
RRP SHARES AMORTIZED, 2,453 shares
(unaudited) - - 28,817
DIVIDENDS PAID ($.21 per share)
(unaudited) (108,943) - (107,137)
PURCHASE OF 29,168 TREASURY SHARES
(unaudited) (137,454) - (410,175)
------------ ---------- ------------
BALANCES, JUNE 30, 1999 (unaudited) $ 4,619,751 $ (43,408) $ 9,257,643
============ ========== ============
</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,
1999 1998
-------------- ---------------
OPERATING ACTIVITIES: (Unaudited) (Unaudited)
<S> <C> <C>
Net income $ 158,771 $ 197,901
Adjustments to reconcile net income to net cash
provided by operating activities -
Securities gains - (273)
Gain on sale of assets (11,131) (47,068)
Gains on foreclosed real estate (1,661) (5,599)
Provision for loan losses 12,000 9,000
Depreciation 59,954 68,859
FHLB stock dividends (26,800) (25,800)
Amortization and accretion, net 10,849 6,125
ESOP compensation 51,154 69,142
RRP compensation 28,817 28,630
Change in -
Accrued interest receivable 21,586 5,102
Other assets (7,553) 17,373
Federal income taxes (17,302) (12,742)
Accrued interest payable (1,005) 12,260
Other liabilities 12,295 (79,480)
------------ -----------
Net cash provided by operating activities 289,974 243,430
------------ -----------
INVESTING ACTIVITIES:
Net increase in loans (5,016,831) (3,441,121)
Proceeds from sales and maturities of investment securities available for sale - 950,000
Proceeds from maturities of investment securities held to maturity 1,423,000 3,798,000
Purchases of investment securities held to maturity - (250,000)
Purchases of investment securities available for sale - (249,688)
Purchases of mortgage-backed securities held to maturity - (1,303,750)
Purchases of mortgage-backed securities available for sale - (3,071,635)
Principal collected on mortgage-backed securities held to maturity 659,251 523,983
Principal collected on mortgage-backed securities available for sale 660,701 501,393
Purchases of office properties and equipment (25,074) (20,521)
Proceeds from sale of foreclosed real estate 92,056 74,763
Proceeds from sale of office property - 160,000
------------ -----------
Net cash used for investing activities (2,206,897) (2,328,576)
------------ -----------
FINANCING ACTIVITIES:
Net increase in deposits 3,044,026 157,399
Proceeds from FHLB advances 1,200,000 8,325,000
Payments on FHLB advances (1,049,185) (5,611,837)
Dividends paid (107,137) (120,790)
Purchase of treasury shares (410,175) (563,511)
------------ -----------
Net cash provided by financing activities 2,677,529 2,186,261
------------ -----------
INCREASE IN CASH AND CASH EQUIVALENTS 760,606 101,115
CASH AND CASH EQUIVALENTS, beginning of period 746,261 807,314
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,506,867 $ 908,429
============ ===========
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate $ 115,565 $ 29,722
Change in unrealized holding loss on investment securities available for sale (173,761) (11,752)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Federal income taxes paid 104,701 41,385
Interest paid 2,002,826 1,943,420
</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, 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 June 30, 1999 and
September 30, 1998, and for the three and nine months ended June 30, 1999 and
1998, 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, 1999 and
1998 was $13,895 and $24,092, respectively, and for the nine month periods
ended June 30, 1999 and 1998 was $51,515 and $69,815, 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 June 30, 1999. These options are subject to vesting provisions as well as
other provisions of the Plan. No options have been exercised through June 30,
1999.
(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, 1999. 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 June 30, 1999 and 1998
was $9,606 and $9,606, respectively, and for the nine month periods ended June
30, 1999 and 1998 was $28,817 and $28,631, 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, 1999, the Company
purchased 29,168 shares of its outstanding common stock at an aggregate price
of $410,175. 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
and nine months ended June 30, 1999 and 1998, 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, 1999 June 30, 1998
---------------------------------------- ------------------------------------------
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 $ 63,331 517,772 $ .12 $ 94,892 577,349 $ .16
Effect of Dilutive
Securities-Options - - - - 2,960 -
----------- ------------ -------- ------------ ---------- -------
Diluted EPS $ 63,331 517,772 $ .12 $ 94,892 580,309 $ .16
=========== ============ ======== ============ ========== =======
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended For the Nine Months Ended
June 30, 1999 June 30, 1998
---------------------------------------- -----------------------------------------
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 $ 158,771 535,213 $ .30 $ 197,901 592,524 $ .34
Effect of Dilutive
Securities-Options - 1,832 - - 7,950 (.01)
----------- ------------ -------- ------------ ----------- -------
Diluted EPS $ 158,771 537,045 $ .30 $ 197,901 600,474 $ .33
=========== ============ ======== ============ =========== =======
</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 $2.7 million, or 4.3%, from
$62.4 million at September 30, 1998 to $65.1 million at June 30, 1999. The
increase consisted primarily of increases in cash and cash equivalents of $.8
million and loans receivable of $4.9 million, offset by declines in
mortgage-backed securities (held to maturity and available for sale) of $1.5
million and investment securities (held to maturity and available for sale) of
$1.4 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 $1.4 million, or 35.9%, from $3.9 million at
September 30, 1998 to $2.5 million at June 30, 1999. 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
$1.4 million, with no corresponding reinvestments of the proceeds.
LOANS RECEIVABLE. Loans receivable increased $4.9 million, or
11.0%, from $44.6 million at September 30, 1998 to $49.5 million at June 30,
1999. 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 $47.2 million, or 93.8%, of total gross loans, while
consumer loans, including installment loans and loans secured by deposit
accounts, totaled $3.1 million, or 6.2%, of total gross loans outstanding at
June 30, 1999.
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 relatively unchanged constituting .6% of
loans outstanding at June 30, 1999 and September 30, 1998. The dollar amount
of the allowance totaled $288,209 at June 30, 1999 as compared to $288,350 at
September 30, 1998.
Charge-off activity for the nine months ended June 30, 1999 and
1998, totaled $12,141 and $9,610, respectively. Recoveries totaled $-0- and
$-0- for the nine months ended June 30, 1999 and 1998, respectively.
- 11 -
<PAGE> 12
The Company had $98,000 and $133,000 of non-accrual loans at
June 30, 1999 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 nine
month periods ended June 30, 1999 and 1998.
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 $1.5 million, or 13.8%,
from $10.9 million at September 30, 1998 to $9.4 million at June 30, 1999, due
to principal repayments of $1.5 million.
DEPOSITS. Deposits increased by $3.1 million, or 6.8%, from
$45.4 million at September 30, 1998 to $48.5 million at June 30, 1999. The
Company continues to offer competitive interest rates on deposits.
ADVANCES FROM FEDERAL HOME LOAN BANK. The Company's advances
from the FHLB totaled $7.2 million at June 30, 1999 as compared to $7.0 million
at September 30, 1998. During the nine months ended June 30, 1999, the Company
had additional borrowings of $1.2 million and repayments of $1.0 million.
STOCKHOLDERS' EQUITY. Stockholders' equity totaled $9.3 million
at June 30, 1999 as compared to $9.6 million at September 30, 1998. The
Company's net income for the period was offset by dividends declared, the
release of common stock shares to the employee benefit plans, and the purchase
of treasury shares.
RESULTS OF OPERATIONS-THREE MONTHS ENDED JUNE 30, 1999 AS
COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Net income decreased $31,561, or 33.3%, from $94,892 for the
quarter ended June 30, 1998 to $63,331 for the comparable 1999 quarter. Net
income per share was $.12 and $.16 for the 1999 and 1998 quarters,
respectively, both basic and assuming full dilution. The decrease in net
income resulted from a decrease in non-interest income of $41,420 and increases
in non-interest expense of $14,940, or 4.4%, and the provision for loan losses
of $1,500, or 50.0%, offset by an increase in net interest income of $23,387,
or 5.7%, and a decrease in the provision for income taxes of $2,912, or 7.8%.
Total interest income increased $27,051, or 2.5%, from
$1,076,476 for the three months ended June 30, 1998 to $1,103,527 for the
comparable 1999 period. The increase was due to increased interest earned on
loans receivable of $107,054, partially offset by reductions in interest earned
on investment securities and mortgage-backed securities of $44,773 and $35,917,
respectively. Interest income on other interest-earning assets remained
relatively unchanged totaling $12,246 for the three months ended June 30, 1999
as compared to $11,559 for the three months ended June 30, 1998. Interest on
loans receivable increased primarily due to higher volumes of loans in the 1999
period as compared to the 1998 period. The decreases in interest earned on
investment securities and mortgage-backed securities is primarily attributable
to lower volumes of these assets, such volume having decreased during the 1999
quarter as compared to the 1998 quarter to partially fund the increased loan
demand.
- 12 -
<PAGE> 13
Total interest expense increased $3,664, or .6%, from $662,918
for the quarter ended June 30, 1998 to $666,582 for the quarter ended June 30,
1999, such increase being primarily attributable to higher volumes of
interest-bearing liabilities during the 1999 quarter as compared to the 1998
quarter, and to a lesser extent, due to slightly higher interest rates paid on
deposits.
The Company provided $4,500 for loan losses during the 1999
quarter to correspond with the growth in the loan portfolio. This compared to
a $3,000 provision for the 1998 quarter.
The $41,420 decrease in non-interest income, from $64,174 for
the 1998 quarter to $22,754 for the 1999 quarter, resulted primarily from a
$47,068 gain during the 1998 quarter from the sale of the former Chesapeake,
Ohio branch facility, with no comparable gain during the 1999 quarter,
partially offset by a $7,574 increase in other income reflecting increased
service charges on deposit accounts.
The $14,940 increase in non-interest expense, from $342,677 for
the 1998 quarter to $357,617 for the comparable 1999 quarter, resulted
primarily from increases in advertising expenses, directors' fees and expenses
and data processing expenses of $5,640, $5,517, and $5,094, respectively,
partially offset by decreases in compensation and benefits and franchise taxes
of $4,065 and $3,707, respectively. Advertising costs increased due to more
media advertising during the 1999 quarter as compared to the 1998 quarter.
Directors' fees and expenses increased primarily due to costs associated with
attendance at an outside management seminar, while data processing costs
increased due to increased costs associated with ATM machines usage.
Compensation and benefits decreased primarily due to a lower value of common
stock shares contributed to the Employee Stock Ownership Plan, while the
decrease in franchise taxes is attributable to lower levels of taxable
stockholders' equity during the 1999 quarter as compared to the 1998 quarter.
The $2,912 decrease in the provision for income taxes resulted
from lower pretax income during the 1999 quarter as compared to the 1998
quarter.
RESULTS OF OPERATIONS - NINE MONTHS ENDED JUNE 30, 1999 AS
COMPARED TO NINE MONTHS ENDED JUNE 30, 1998
Net income decreased $39,130, or 19.8%, from $197,901 for the
nine months ended June 30, 1998 to $158,771 for the nine months ended June 30,
1999. Net income per share for the 1999 nine month period totaled $.30 per
share, both basic and assuming full dilution. This compared to $.34 per share
basic and $.33 per share assuming full dilution for the 1998 comparable period.
The decrease in net income resulted from increases in other non-operating
expenses of $41,587, or 3.9%, the provision for income taxes of $14,289, or
26.0%, and the provision for loan losses of $3,000, or 33.3%, a decrease in
non-interest income of $20,175, or 20.3%, offset by an increase in net interest
income of $39,921, or 3.2%.
Total interest income increased $86,062, or 2.7%, from
$3,186,547 for the nine months ended June 30, 1998 to $3,272,609 for the
comparable 1999 nine month period. The increase was due to higher levels of
interest earned on loans receivable of $299,564, partially offset by reductions
in interest earned on investment securities and mortgage-backed securities of
$212,483 and $4,007, respectively. Interest on other interest-earning assets
increased slightly to $37,144 for the 1999 nine month period from $34,156 for
the 1998 nine month period. Interest on loans receivable increased due to a
higher volume of loans, while the decrease in interest on investment securities
and mortgage-backed securities resulted primarily from decreases in the average
volumes of these assets during the 1999 nine month period as compared to the
1998 nine month period.
- 13 -
<PAGE> 14
Total interest expense increased $46,141, or 2.4%, from
$1,955,680 for the 1998 nine month period to $2,001,821 for the 1999 nine month
period, such increase resulting primarily from the higher volume of
interest-bearing liabilities during the 1999 period as compared to the 1998
period, and to a lesser extent, higher market rates of interest.
The Company provided $12,000 for loan losses during the 1999
nine month period as compared to $9,000 for the 1998 nine month period to
correspond to the increase in the loan portfolio.
The $20,175 decrease in non-interest income, from $99,160 for
the nine months ended June 30, 1998 to $78,985 for the nine months ended June
30, 1999, resulted primarily from the $47,068 gain on the sale of the former
Chesapeake, Ohio branch during the 1998 period as compared to $11,131 in gains
on sales of assets during the 1999 period, partially offset by a $19,973
increase in other income reflecting increased service charges on deposit
accounts. Expansion and improvements to the Company's main office and branch
facilities completed in 1997 has enabled the Company to better compete with
other area institutions for transaction accounts, resulting in increased
service fee income.
The $41,587 increase in non-interest expense, from $1,068,090
for the 1998 period to $1,109,677 for the 1999 period resulted primarily from
increases in other expenses of $18,464, professional service expenses of
$11,863, and advertising expenses of $13,067, partially offset by declines in
occupancy and equipment expenses and franchise taxes of $7,371 and $7,208,
respectively. There was no significant increase in any single category of
other non-interest expenses. Professional services expenses increased due to
the timing of the services rendered, while advertising costs increased due to
more media advertising during the 1999 nine month period as compared to the
1998 nine month period. Occupancy and equipment expenses decreased due to
lower depreciation charges on equipment during the 1999 period as compared to
the 1998 period, while franchise taxes decreased due to lower levels of taxable
stockholders' equity.
The $14,289 increase in the provision for income taxes, from
$55,036 for the nine months ended June 30, 1998 to $69,325 for the nine months
ended June 30, 1999 resulted from higher levels of taxable income taxed at
higher statutory tax rates.
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 currently must average 4%
of certain liabilities for each quarter, and may be changed periodically by the
OTS 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, averaged 4.5% for the quarter ended June 30, 1999, as
compared to 5.4% for the quarter ended September 30, 1998. At June 30, 1999,
the Bank's "liquid" assets totaled approximately $1.3 million, which was $.1
million in excess of the current OTS minimum requirement.
- 14 -
<PAGE> 15
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 $7.2 million at June 30, 1999.
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, 1999, the total approved loan
commitments outstanding amounted to $1.5 million. Certificates of deposit
scheduled to mature in one year or less at June 30, 1999, totaled $25.1
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, 1999, the Bank had regulatory capital which was well
in excess of applicable limits. At June 30, 1999, the Bank was required to
maintain tangible capital of 1.5% of adjusted total assets, core capital of
4.0% of adjusted total assets and risk-based capital of 8.0% of adjusted
risk-weighted assets. At June 30, 1999, the Bank's tangible capital was $8.4
million, or 13.0% of adjusted total assets, core capital was $8.4 million, or
13.0% of adjusted total assets and risk-based capital was $8.6 million, or
26.4% of adjusted risk-weighted assets, exceeding the requirements by $7.4
million, $5.8 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.
- 15 -
<PAGE> 16
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 has independently evaluated the test
results.
The Bank identified the need to replace "teller hardware and
software" and "local area network software" used in daily operations. Such
software was replaced and tested during the quarter ended June 30, 1999.
Fiserv efforts include a Disaster Recovery Center to ensure
proper backup. All test results have been made available to the Bank and have
been independently evaluated. Other areas evaluated by the Bank include
systems for security, vaults, ATMs and others. All were found to be Year 2000
compliant. 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.
- 16 -
<PAGE> 17
PART II - OTHER INFORMATION
<TABLE>
<S> <C>
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.
</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.
- 17 -
<PAGE> 18
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.
<TABLE>
<S> <C>
Date: August 9, 1999 By:/s/ I. Vincent Rice
------------------------------------ --------------------------------------------------
I. Vincent Rice, President
Date: August 9, 1999 By:/s/ Jeffery W. Clark
------------------------------------ --------------------------------------------------
Jeffery W. Clark, Comptroller
</TABLE>
- 18 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 1999 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 272,430
<INT-BEARING-DEPOSITS> 1,234,437
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,400,020
<INVESTMENTS-CARRYING> 6,506,269
<INVESTMENTS-MARKET> 6,430,987
<LOANS> 49,820,116
<ALLOWANCE> 288,209
<TOTAL-ASSETS> 65,132,393
<DEPOSITS> 48,480,607
<SHORT-TERM> 300,000
<LIABILITIES-OTHER> 239,192
<LONG-TERM> 6,854,951
0
0
<COMMON> 5,542
<OTHER-SE> 9,252,101
<TOTAL-LIABILITIES-AND-EQUITY> 65,132,393
<INTEREST-LOAN> 2,666,553
<INTEREST-INVEST> 568,912
<INTEREST-OTHER> 37,144
<INTEREST-TOTAL> 3,272,609
<INTEREST-DEPOSIT> 1,727,516
<INTEREST-EXPENSE> 2,001,821
<INTEREST-INCOME-NET> 1,270,788
<LOAN-LOSSES> 12,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,109,677
<INCOME-PRETAX> 228,096
<INCOME-PRE-EXTRAORDINARY> 158,771
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158,771
<EPS-BASIC> .30
<EPS-DILUTED> .30
<YIELD-ACTUAL> 2.14
<LOANS-NON> 98,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 288,350
<CHARGE-OFFS> 12,141
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 288,209
<ALLOWANCE-DOMESTIC> 288,209
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
