<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 March 31, 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 May 10, 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>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (as of March 31,
1999 (unaudited) and September 30, 1998) . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income (for the three
months ended March 31, 1999 (unaudited)
and 1998 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Income (for the six
months ended March 31, 1999 (unaudited) and
1998 (unaudited)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Changes in Stockholders' Equity (for
the six months ended March 31, 1999 (unaudited) and
the year ended September 30, 1998) . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows (for the six
months ended March 31, 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 . . . . . . . . . . . . . . . . . . . . 18
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
<PAGE> 3
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
--------------- ---------------
(Unaudited)
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 1,101,551 $ 746,261
INVESTMENT SECURITIES HELD
TO MATURITY 2,002,847 3,309,806
INVESTMENT SECURITIES AVAILABLE
FOR SALE 601,335 609,978
LOANS RECEIVABLE 48,972,448 44,642,641
MORTGAGE-BACKED SECURITIES
HELD TO MATURITY 4,876,797 5,268,915
MORTGAGE-BACKED SECURITIES
AVAILABLE FOR SALE 4,970,943 5,618,354
ACCRUED INTEREST RECEIVABLE 331,613 341,410
FORECLOSED REAL ESTATE - 10,603
OFFICE PROPERTIES AND EQUIPMENT 1,747,824 1,752,308
OTHER ASSETS 113,242 95,621
--------------- ---------------
$ 64,718,600 $ 62,395,897
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 47,912,105 $ 45,436,581
ADVANCES FROM FEDERAL HOME LOAN BANK 7,263,864 7,004,136
ACCRUED INCOME TAXES PAYABLE:
Current 25,085 21,106
Deferred 92,432 118,486
ACCRUED INTEREST PAYABLE 35,010 32,814
OTHER LIABILITIES 114,796 131,878
--------------- ---------------
Total liabilities 55,443,292 52,745,001
--------------- ---------------
STOCKHOLDERS' EQUITY:
Common stock 5,542 5,834
Employee benefit plans (597,953) (643,854)
Additional paid-in capital 5,248,403 5,510,264
Retained earnings-substantially restricted 4,593,258 4,707,377
Accumulated other comprehensive income 26,058 71,275
--------------- ---------------
Total stockholders' equity 9,275,308 9,650,896
--------------- ---------------
$ 64,718,600 $ 62,395,897
=============== ===============
</TABLE>
-3-
<PAGE> 4
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------------
March 31, March 31,
1999 1998
--------------- ---------------
INTEREST INCOME: (Unaudited) (Unaudited)
<S> <C> <C>
Loans receivable-
First mortgage loans $ 840,979 $ 746,984
Consumer and other loans 56,534 35,841
Mortgage-backed and related securities 143,214 147,133
Investment securities 42,004 124,276
Other interest-earning assets 11,924 11,958
--------------- ---------------
Total interest income 1,094,655 1,066,192
--------------- ---------------
INTEREST EXPENSE:
Interest-bearing checking 6,597 5,032
Passbook savings 62,110 68,318
Certificates of deposit 503,721 507,745
Advances from Federal Home
Loan Bank 91,205 71,398
--------------- ---------------
Total interest expense 663,633 652,493
--------------- ---------------
Net interest income 431,022 413,699
PROVISION FOR LOAN LOSSES 4,500 3,000
--------------- ---------------
Net interest income after provision
for loan losses 426,522 410,699
--------------- ---------------
NON-INTEREST INCOME:
Gains on foreclosed real estate 2,732 -
Gains on sales of assets 6,131 -
Other 20,149 18,071
--------------- ---------------
Total non-interest income 29,012 18,071
--------------- ---------------
NON-INTEREST EXPENSE:
Compensation and benefits 146,798 148,391
Occupancy and equipment 33,653 36,669
SAIF deposit insurance premiums 6,900 7,034
Directors' fees and expenses 19,481 17,308
Franchise taxes 36,309 41,017
Data processing 28,837 28,410
Advertising 21,524 17,414
Professional services 38,157 34,325
Other 45,763 40,395
--------------- ---------------
Total non-interest expense 377,422 370,963
--------------- ---------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 78,112 57,807
PROVISION FOR INCOME TAXES 14,719 9,164
--------------- ---------------
NET INCOME $ 63,393 $ 48,643
=============== ===============
EARNINGS PER SHARE
Basic $ .12 $ .08
=============== ===============
Diluted $ .12 $ .08
=============== ===============
</TABLE>
-4-
<PAGE> 5
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------------------------
March 31, March 31,
1999 1998
--------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME:
Loans receivable -
First mortgage loans $ 1,639,674 $ 1,488,555
Consumer and other loans 110,362 68,971
Mortgage-backed and related
securities 298,638 266,728
Investment securities 95,510 263,220
Other interest-earning assets 24,898 22,598
--------------- ---------------
Total interest income 2,169,082 2,110,072
--------------- ---------------
INTEREST EXPENSE:
Interest-bearing checking 11,911 9,438
Passbook savings 124,038 137,551
Certificates of deposit 1,014,689 1,021,525
Advances from Federal Home
Loan Bank 184,601 124,249
--------------- ---------------
Total interest expense 1,335,239 1,292,763
--------------- ---------------
Net interest income 833,843 817,309
PROVISION FOR LOAN LOSSES 7,500 6,000
--------------- ---------------
Net interest income after
provision for loan losses 826,343 811,309
--------------- ---------------
NON-INTEREST INCOME:
Gains on foreclosed real estate 3,035 5,320
Gains on sales of assets 11,131 -
Other 42,065 29,666
--------------- ---------------
Total non-interest income 56,231 34,986
--------------- ---------------
NON-INTEREST EXPENSE:
Compensation and benefits 305,094 301,832
Occupancy and equipment 66,065 74,495
SAIF deposit insurance premiums 13,453 14,258
Directors' fees and expenses 42,762 41,170
Franchise taxes 74,190 77,692
Data processing 54,336 52,359
Advertising 41,641 34,214
Professional services 66,482 58,894
Other 88,037 70,498
--------------- ---------------
Total non-interest expense 752,060 725,412
--------------- ---------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 130,514 120,883
PROVISION FOR INCOME TAXES 35,074 17,874
--------------- ---------------
NET INCOME $ 95,440 $ 103,009
=============== ===============
EARNINGS PER SHARE:
Basic $ .18 $ .17
=============== ===============
Diluted $ .18 $ .17
=============== ===============
</TABLE>
-5-
<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, six months ended
March 31, 1999 (unaudited) - - -
Other comprehensive income, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $23,293 (unaudited) - - -
------- ---------- -----------
TOTAL COMPREHENSIVE INCOME (unaudited) - - -
ESOP SHARES RELEASED, 2,662 shares;
$14.00 average fair market
value (unaudited) - 26,620 10,639
RRP SHARES AMORTIZED, 1,635 shares (unaudited) - 19,211 -
DIVIDENDS PAID ($.07 per share) (unaudited) - 70 (71)
PURCHASE OF 29,168 TREASURY SHARES
(unaudited) (292) - (272,429)
------- ---------- -----------
BALANCES, MARCH 31, 1999 (unaudited) $ 5,542 $ (597,953) $ 5,248,403
======= ========== ===========
<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, six months ended
March 31, 1999 (unaudited) 95,440 - 95,440
Other comprehensive income, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $23,293 (unaudited) - (45,217) (45,217)
----------- -------- ------------
TOTAL COMPREHENSIVE INCOME (unaudited) 95,440 (45,217) 50,223
ESOP SHARES RELEASED, 2,662 shares;
$14.00 average fair market
value (unaudited) - - 37,259
RRP SHARES AMORTIZED, 1,635 shares (unaudited) - - 19,211
DIVIDENDS PAID ($.07 per share) (unaudited) (72,105) - (72,106)
PURCHASE OF 29,168 TREASURY SHARES
(unaudited) (137,454) - (410,175)
----------- -------- ------------
BALANCES, MARCH 31, 1999 (unaudited) $ 4,593,258 $ 26,058 $ 9,275,308
=========== ======== ============
</TABLE>
-6-
<PAGE> 7
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------------------------
March 31, March 31,
1999 1998
--------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 95,440 $ 103,009
Adjustments to reconcile net income to net cash
provided by operating activities -
Gains on sales of assets (11,131) -
Gains on foreclosed real estate (3,035) (5,320)
Provision for loan losses 7,500 6,000
Depreciation 38,102 46,577
FHLB stock dividends (17,700) (17,000)
Amortization and accretion, net 5,486 (1,352)
ESOP compensation 37,259 45,050
RRP compensation 19,211 19,025
Change in -
Accrued interest receivable 9,797 10,150
Other assets (17,621) (41,708)
Deferred Federal income taxes (2,760) 6,870
Accrued interest payable 2,196 7,599
Current income taxes payable 3,979 -
Other liabilities (17,082) (98,077)
--------------- ---------------
Net cash provided by operating activities 149,641 80,823
--------------- ---------------
INVESTING ACTIVITIES:
Net increase in loans (4,380,662) (2,099,710)
Proceeds from sales and maturities of investment securities available for sale - 700,000
Proceeds from maturities of investment securities held to maturity 1,324,000 2,999,000
Purchases of investment securities held to maturity - (250,000)
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 383,744 317,611
Principal collected on mortgage-backed securities available for sale 591,090 387,775
Purchases of office properties and equipment (22,487) (9,024)
Proceeds from sale of foreclosed real estate 56,993 44,763
--------------- ---------------
Net cash used for investing activities (2,047,322) (2,284,970)
--------------- ---------------
FINANCING ACTIVITIES:
Dividends paid (72,106) (80,996)
Purchase of treasury shares (410,175) (415,630)
Proceeds from FHLB advances 700,000 6,725,000
Principal paid on FHLB advances (440,272) (4,002,938)
Net increase in deposits 2,475,524 397,198
--------------- ---------------
Net cash provided by financing activities 2,252,971 2,622,634
--------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS 355,290 418,487
CASH AND CASH EQUIVALENTS, beginning of period 746,261 807,314
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 1,101,551 $ 1,225,801
=============== ===============
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate $ 43,355 $ 29,722
Change in unrealized holding loss on investment securities
available for sale (68,511) (40,380)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Federal income taxes paid $ 51,929 $ 41,385
Interest paid 1,333,043 1,285,164
</TABLE>
-7-
<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 March 31, 1999 and
September 30, 1998, and for the three and six months ended March 31, 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.
-8-
<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 March 31, 1999 and
1998 was $16,721 and $23,475, respectively, and for the six month periods ended
March 31, 1999 and 1998 was $37,259 and $45,050, 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 March 31, 1999. These options are subject to vesting provisions as well as
other provisions of the Plan. No options have been exercised through March 31,
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 March 31, 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 March 31, 1999 and 1998
was $9,605 and $9,606, respectively, and for the six month periods ended March
31, 1999 and 1998 was $19,211 and $19,025, 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.
-9-
<PAGE> 10
(6) PURCHASE OF COMMON STOCK
During the three months ended March 31, 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 six months ended March 31, 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
March 31, 1999 March 31, 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 $ 63,393 542,668 $ .12 $ 48,643 599,451 $ .08
Effect of Dilutive
Securities-Options - 496 - - 2,744 -
----------- ------------- ------ ----------- ------------- --------
Diluted EPS $ 63,393 543,164 $ .12 $ 48,643 602,195 $ .08
=========== ============= ====== =========== ============= ========
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended For the Six Months Ended
March 31, 1999 March 31, 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 $ 95,440 542,014 $ .18 $ 103,009 598,781 $ .17
Effect of Dilutive
Securities-Options - 2,623 - - 4,967 -
----------- ------------- ------ ----------- ------------- -------
Diluted EPS $ 95,440 544,637 $ .18 $ 103,009 603,748 $ .17
=========== ============= ====== =========== ============= =======
</TABLE>
-10-
<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 3.7%, from
$62.4 million at September 30, 1998 to $64.7 million at March 31, 1999. The
increase consisted primarily of increases in cash and cash equivalents of $.4
million and loans receivable of $4.4 million, offset by declines in
mortgage-backed securities (held to maturity and available for sale) of $1.0
million and investment securities (held to maturity and available for sale) of
$1.3 million.
CASH AND CASH EQUIVALENTS. The $.4 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 $1.3 million, or 33.3%, from $3.9 million at
September 30, 1998 to $2.6 million at March 31, 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
$1.3 million, with no corresponding reinvestments of the proceeds.
LOANS RECEIVABLE. Loans receivable increased $4.4 million, or
9.9%, from $44.6 million at September 30, 1998 to $49.0 million at March 31,
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 $46.9 million, or 94.2%, of total gross loans, while
consumer loans, including installment loans and loans secured by deposit
accounts, totaled $2.9 million, or 5.8%, of total gross loans outstanding at
March 31, 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 unchanged constituting .6% of loans
outstanding at March 31, 1999 and September 30, 1998. The dollar amount of the
allowance totaled $288,536 at March 31, 1999 as compared to $288,350 at
September 30, 1998.
Charge-off activity for the six months ended March 31, 1999 and
1998, totaled $7,314 and $3,635, respectively. Recoveries totaled $-0- and
$-0- for the six months ended March 31, 1999 and 1998, respectively.
-11-
<PAGE> 12
The Company had $134,000 and $133,000 of non-accrual loans at
March 31, 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 six
month periods ended March 31, 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 $1.0 million, or 9.3%,
from $10.8 million at September 30, 1998 to $9.8 million at March 31, 1999, due
to scheduled principal payments of $1.0 million.
DEPOSITS. Deposits increased by $2.5 million, or 5.5%, from
$45.4 million at September 30, 1998 to $47.9 million at March 31, 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 $7.3 million at March 31, 1999 as compared to $7.0
million at September 30, 1998. During the six months ended March 31, 1999, the
Company had additional borrowings of $.7 million and repayments of $.4 million.
STOCKHOLDERS' EQUITY. Stockholders' equity totaled $9.3 million
at March 31, 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 MARCH 31, 1999 AS
COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Net income increased $14,750, or 30.3%, from $48,643 for the
quarter ended March 31, 1998 to $63,393 for the comparable 1999 quarter. Net
income per share was $.12 and $.08 for the 1999 and 1998 quarters,
respectively, both primary and assuming full dilution. The increase in net
income resulted from an increase in net interest income of $17,323, or 4.2%,
and an increase in non-interest income of $10,941, or 60.5%, partially offset
by increases in the provision for loan losses of $1,500, or 50.0%, non-interest
expense of $6,459, or 1.7%, and the provision for income taxes of $5,555, or
60.6%.
Total interest income increased $28,463, or 2.7%, from
$1,066,192 for the three months ended March 31, 1998 to $1,094,655 for the
comparable 1999 period. The increase was due to increased interest earned on
loans receivable of $114,688, partially offset by reductions in interest earned
on investment securities and mortgage-backed securities of $82,272 and $3,919,
respectively. Interest income on other interest-earning assets remained
relatively unchanged totaling $11,924 for the three months ended March 31, 1999
as compared to $11,958 for the three months ended March 31, 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 fund the increased loan demand.
-12-
<PAGE> 13
Total interest expense increased $11,140, or 1.7%, from $652,493
for the quarter ended March 31, 1998 to $663,633 for the quarter ended March
31, 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 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 $10,941 increase in non-interest income, from $18,071 for
the 1998 quarter to $29,012 for the 1999 quarter, resulted primarily from
$8,863 in gains on sales of assets and foreclosed real estate during the 1999
quarter, with no comparable gains during the 1998 quarter.
The $6,459 increase in non-interest expense, from $370,963 for
the 1998 quarter to $377,422 for the comparable 1999 quarter, resulted
primarily from increases in advertising expenses and other expenses of $4,110
and $5,368, respectively, partially offset by declines in franchise taxes and
occupancy and equipment expenses of $4,708 and $3,016, respectively.
Advertising costs increased due to more media advertising during the 1999
quarter as compared to the 1998 quarter, while no single, significant factor
contributed to the increase in other non-operating expenses. Occupancy and
equipment expenses decreased due to lower depreciation charged on equipment
during the 1999 quarter as compared to the 1998 quarter, due to several assets
having become fully depreciated. Franchise taxes, which are based on total
stockholders' equity, declined due to the decrease in the amount of total
stockholders' equity.
The $5,555 increase in the provision for income taxes resulted
from higher pretax income during the 1999 quarter as compared to the 1998
quarter.
RESULTS OF OPERATIONS - SIX MONTHS ENDED MARCH 31, 1999 AS
COMPARED TO SIX MONTHS ENDED MARCH 31, 1998
Net income decreased $7,569, or 7.3%, from $103,009 for the six
months ended March 31, 1998 to $95,440 for the six months ended March 31, 1999.
Net income per share for the 1999 six month period totaled $.18 per share, both
primary and assuming full dilution. This compared to $.17 per share for the
1998 comparable period. Although net income decreased $7,569, earnings per
share increased due to the reduction of weighted average shares outstanding to
542,014 for the 1999 six month period from 598,781 for the 1998 six month
period, such reduction reflecting the impact of the Company's purchase of
treasury stock shares. The decrease in net income resulted from increases in
other non-operating expenses of $26,648, or 3.7%, the provision for income
taxes of $17,200, or 96.2%, and the provision for loan losses of $1,500, or
25.0%, partially offset by increases in net interest income of $16,534, or
2.0%, and non-interest income of $21,245, or 60.7%.
Total interest income increased $59,010, or 2.8%, from
$2,110,072 for the six months ended March 31, 1998 to $2,169,082 for the
comparable 1999 six month period. The increase was due to higher levels of
interest earned on loans receivable and mortgage-backed securities of $192,510
and $31,910, respectively, partially offset by a reduction in interest earned
on investment securities of $167,710. Interest on other interest-earning
assets increased slightly, to $24,898 for the 1999 six month period from
$22,598 for the 1998 six month period. Interest on loans receivable increased
due to a higher volume of loans, while the increase in interest on mortgage-
backed securities resulted from both an increase in the average volume and
average rates during the
-13-
<PAGE> 14
1999 six month period as compared to the 1998 six month period. The decrease
in interest on investment securities is primarily attributable to a lower
volume of investments during the 1999 six month period as compared to the 1998
six month period.
Total interest expense increased $42,476, or 3.3%, from
$1,292,763 for the 1998 six month period to $1,335,239 for the 1999 six month
period, such increase reflecting 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 $7,500 for loan losses during the 1999 six
month period as compared to $6,000 for the 1998 six month period to correspond
to the increase in the loan portfolio.
The $21,245 increase in non-interest income, from $34,986 for
the six months ended March 31, 1998 to $56,231 for the six months ended March
31, 1999, resulted primarily from $11,131 in gains on sales of assets during
the 1999 period with no comparable gains during the 1998 period, and from
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 $26,648 increase in non-interest expense, from $725,412 for
the 1998 period to $752,060 for the 1999 period resulted primarily from
increases in other expenses of $17,539, professional service expenses of
$7,588, and advertising expenses of $7,427, partially offset by declines in
occupancy and equipment expenses and franchise taxes of $8,430 and $3,502,
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 six month period as compared to the 1998
six month period. Occupancy and equipment expenses decreased due to lower
depreciation charges on equipment during the 1999 period as compared to the
1998 period due to several assets becoming fully depreciated, while franchise
taxes decreased due to lower levels of taxable stockholders' equity.
The $17,200 increase in the provision for income taxes, from
$17,874 for the six months needed March 31, 1998 to $35,074 for the six months
ended March 31, 1999 resulted from the increase in pretax income.
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 4.4% at March 31, 1999, as compared to 5.4% at
-14-
<PAGE> 15
September 30, 1998. At March 31, 1999, the Bank's "liquid" assets totaled
approximately $1.7 million, which was $.2 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 $7.3 million at March 31, 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 March 31, 1999, the total approved loan
commitments outstanding amounted to $2.2 million. Certificates of deposit
scheduled to mature in one year or less at March 31, 1999, totaled $29.2
million. The Bank believes that it has adequate resources to fund all of its
commitments and that it could either adjust the rate of certificates of deposit
in order to retain deposits in changing interest rate environments or replace
such deposits with borrowings if it proved to be cost-effective to do so.
At March 31, 1999, the Bank had regulatory capital which was
well in excess of applicable limits. At March 31, 1999, the Bank was required
to maintain tangible capital of 1.5% of adjusted total assets, core capital of
3.0% of adjusted total assets and risk-based capital of 8.0% of adjusted
risk-weighted assets. At March 31, 1999, the Bank's tangible capital was $8.3
million, or 12.9% of adjusted total assets, core capital was $8.3 million, or
12.9% of adjusted total assets and risk-based capital was $8.6 million, or
25.8% of adjusted risk-weighted assets, exceeding the requirements by $7.3
million, $6.4 million and $5.9 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 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.
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.
-16-
<PAGE> 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Issuer is a
part, or to which any of its property is subject.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
a) An annual meeting of stockholders ("Annual Meeting") was
held on January 20, 1999.
b) Not applicable
c) Two matters were voted upon at the Annual Meeting. The
stockholders approved matters brought before the Annual
Meeting. The matters voted upon together with the
applicable voting results were as follows:
1) Proposal to elect two directors for a three-year
term or until their successors are elected and
qualified; Edith M. Daniels received votes for
471,567, against -0-, abstain -0-, not voted
115,594, and Thomas D. Phillips received votes
for 471,567, against -0-, abstain -0-, not voted
115,594.
2) Proposal to ratify the appointment of Kelley,
Galloway & Company, PSC as the Company's
independent auditors for the fiscal year ending
September 30, 1999; received votes for 484,092,
against 2,500, abstain 600, not voted 99,969.
d) Not applicable
Item 5. Other Information
Not applicable.
-17-
<PAGE> 18
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.
<TABLE>
<S> <C>
Date: May 10, 1999 By:/s/ I. Vincent Rice
------------------------------------------ --------------------------------------------------
I. Vincent Rice, President
Date: May 10, 1999 By:/s/ Jeffery W. Clark
------------------------------------------ --------------------------------------------------
Jeffery W. Clark, Comptroller
</TABLE>
-19-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The First Federal Financial Bancorp, Inc. and subsidiary consolidated balance
sheet as of March 31, 1999 and the consolidated statement of income for the six
months ended March 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 181,353
<INT-BEARING-DEPOSITS> 920,198
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,572,278
<INVESTMENTS-CARRYING> 6,879,644
<INVESTMENTS-MARKET> 6,890,411
<LOANS> 49,260,984
<ALLOWANCE> 288,536
<TOTAL-ASSETS> 64,718,600
<DEPOSITS> 47,912,105
<SHORT-TERM> 300,000
<LIABILITIES-OTHER> 267,323
<LONG-TERM> 6,963,864
0
0
<COMMON> 5,542
<OTHER-SE> 9,269,766
<TOTAL-LIABILITIES-AND-EQUITY> 64,718,600
<INTEREST-LOAN> 1,750,036
<INTEREST-INVEST> 394,148
<INTEREST-OTHER> 24,898
<INTEREST-TOTAL> 2,169,082
<INTEREST-DEPOSIT> 1,150,638
<INTEREST-EXPENSE> 1,335,239
<INTEREST-INCOME-NET> 833,843
<LOAN-LOSSES> 7,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 752,060
<INCOME-PRETAX> 130,514
<INCOME-PRE-EXTRAORDINARY> 95,440
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95,440
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
<YIELD-ACTUAL> 2.04
<LOANS-NON> 134,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 288,350
<CHARGE-OFFS> 7,314
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 288,536
<ALLOWANCE-DOMESTIC> 288,536
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
