<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 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)
DELAWARE 31-1456058
- ----------------------------------- -------------------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
415 CENTER STREET, IRONTON, OHIO 45638
--------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(740) 532-6845
---------------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PAST 12
MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH
REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90
DAYS.
YES X NO
---------
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON EQUITY, AS OF THE LATEST PRACTICABLE DATE:
AS OF FEBRUARY 14, 2000, THERE WERE ISSUED AND OUTSTANDING 535,793
SHARES OF THE REGISTRANT'S COMMON STOCK.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
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<PAGE> 2
FIRST FEDERAL FINANCIAL BANCORP, INC.
TABLE OF CONTENTS
*****************
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (as of December 31,
1999 (unaudited) and September 30, 1999).................................................. 3
Consolidated Statements of Income (for the three
months ended December 31, 1999 (unaudited)
and 1998 (unaudited))..................................................................... 4
Consolidated Statements of Changes in Stockholders' Equity (for
the three months ended December 31, 1999 (unaudited) and
the year ended September 30, 1999......................................................... 5
Consolidated Statements of Cash Flows (for the three months
ended December 31, 1999 (unaudited)
and 1998 (unaudited))..................................................................... 6
Notes to Consolidated Financial Statements................................................ 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................................... 10-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................... 15
Item 2. Changes in Securities..................................................................... 15
Item 3. Defaults Upon Senior Securities........................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders....................................... 15
Item 5. Other Information......................................................................... 15
Item 6. Exhibits and Reports on Form 8-K.......................................................... 15
Signatures .......................................................................................... 16
</TABLE>
<PAGE> 3
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
---------------- ----------------
(Unaudited)
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 1,093,705 $ 940,751
INVESTMENT SECURITIES HELD
TO MATURITY 2,321,862 2,317,111
INVESTMENT SECURITIES AVAILABLE
FOR SALE 589,476 791,159
LOANS RECEIVABLE 50,795,448 49,703,008
MORTGAGE-BACKED SECURITIES
HELD TO MATURITY 4,251,907 4,443,450
MORTGAGE-BACKED SECURITIES
AVAILABLE FOR SALE 4,567,879 4,702,702
ACCRUED INTEREST RECEIVABLE 326,962 337,610
FORECLOSED REAL ESTATE 45,499 45,499
OFFICE PROPERTIES AND EQUIPMENT 1,759,941 1,760,051
OTHER ASSETS 49,253 94,407
---------------- ----------------
$ 65,801,932 $ 65,135,748
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 47,325,944 $ 47,743,450
ADVANCES FROM FEDERAL HOME LOAN BANK 8,936,655 7,845,869
ACCRUED INCOME TAXES PAYABLE:
Current 22,844 12,391
Deferred 28,299 54,461
ACCRUED INTEREST PAYABLE 43,120 37,015
OTHER LIABILITIES 168,780 159,477
---------------- ----------------
Total liabilities 56,525,642 55,852,663
---------------- ----------------
STOCKHOLDERS' EQUITY:
Common stock 5,495 5,516
Employee benefit plans (528,026) (549,531)
Additional paid-in capital 5,209,107 5,227,406
Retained earnings-substantially restricted 4,696,552 4,658,872
Accumulated other comprehensive loss (106,838) (59,178)
---------------- ----------------
Total stockholders' equity 9,276,290 9,283,085
---------------- ----------------
$ 65,801,932 $ 65,135,748
================ ================
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For The Three Months Ended
------------------------------------------
December 31, December 31,
1999 1998
-------------- --------------
INTEREST INCOME: (Unaudited) (Unaudited)
<S> <C> <C>
Loans receivable-
First mortgage loans $ 863,837 $ 798,695
Consumer and other loans 71,206 53,829
Mortgage-backed and related securities 131,705 155,425
Investment securities 48,459 53,506
Other interest-earning assets 11,186 12,974
-------------- --------------
Total interest income 1,126,393 1,074,429
-------------- --------------
INTEREST EXPENSE:
Interest-bearing checking 5,868 5,314
Passbook savings 62,136 61,928
Certificates of deposit 489,299 510,968
Advances from Federal Home
Loan Bank 111,585 93,396
-------------- --------------
Total interest expense 668,888 671,606
-------------- --------------
Net interest income 457,505 402,823
PROVISION FOR LOAN LOSSES 4,500 3,000
-------------- --------------
Net interest income after provision
for loan losses 453,005 399,823
-------------- --------------
NON-INTEREST INCOME:
Gains on foreclosed real estate - 303
Gain on sale of assets - 5,000
Other 27,523 21,916
-------------- --------------
Total non-interest income 27,523 27,219
-------------- --------------
NON-INTEREST EXPENSE:
Compensation and benefits 149,716 158,295
Occupancy and equipment 32,186 32,412
SAIF deposit insurance premium 7,152 6,553
Directors' fees and expenses 21,663 23,280
Franchise taxes 33,133 37,881
Data processing 30,915 25,499
Advertising 23,156 20,117
Professional services 28,073 28,325
Other 45,067 42,278
-------------- --------------
Total non-interest expense 371,061 374,640
-------------- --------------
INCOME BEFORE PROVISION FOR INCOME TAXES 109,467 52,402
PROVISION FOR INCOME TAXES 35,230 20,355
-------------- --------------
NET INCOME $ 74,237 $ 32,047
============== ==============
EARNINGS PER SHARE:
Basic $ .14 $ .06
============== ==============
Diluted $ .14 $ .06
============== ==============
</TABLE>
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FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Retained Accumulated
Employee Additional Earnings- Other Total
Common Benefit Paid-in Substantially Comprehensive Stockholders'
Stock Plans Capital Restricted Income (Loss) Equity
----- ----- ------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, September 30, 1998 $ 5,834 $(643,854) $ 5,510,264 $ 4,707,377 $ 71,275 $ 9,650,896
COMPREHENSIVE INCOME:
Net income, year ended September 30, 1999 - - - 239,626 - 239,626
Other comprehensive loss, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $67,203 - - - - (130,453) (130,453)
------- --------- ----------- ----------- --------- -----------
TOTAL COMPREHENSIVE INCOME - - - 239,626 (130,453) 109,173
ESOP SHARES RELEASED, 5,261 shares;
$12.44 average fair market value - 52,610 12,863 - - 65,473
RRP SHARES AMORTIZED, 3,270 shares - 38,422 - - - 38,422
DIVIDENDS PAID ($.28 per share) - 3,291 955 (146,095) - (141,849)
PURCHASE OF 31,764 TREASURY SHARES (318) - (296,676) (142,036) - (439,030)
------- --------- ----------- ----------- --------- -----------
BALANCES, September 30, 1999 5,516 (549,531) 5,227,406 4,658,872 (59,178) 9,283,085
COMPREHENSIVE INCOME:
Net income, three months ended
December 31, 1999 (unaudited) - - - 74,237 - 74,237
Other comprehensive loss, net of tax:
Change in unrealized loss on invest-
ments available for sale, net of
tax of $24,552 (unaudited) - - - - (47,660) (47,660)
------- --------- ----------- ----------- --------- -----------
TOTAL COMPREHENSIVE INCOME (unaudited) - - - 74,237 (47,660) 26,577
ESOP SHARES RELEASED, 1,190 shares;
$11.10 average fair market
value (unaudited) - 11,900 1,315 - - 13,215
RRP SHARES AMORTIZED, 817 shares (unaudited) - 9,605 - - - 9,605
DIVIDENDS PAID ($.07 per share) (unaudited) - - - (34,892) - (34,892)
PURCHASE OF 2,100 TREASURY
SHARES (unaudited) (21) - (19,614) (1,665) - (21,300)
------- --------- ----------- ----------- --------- -----------
BALANCES, December 31, 1999 (unaudited) $ 5,495 $(528,026) $ 5,209,107 $ 4,696,552 $(106,838) $ 9,276,290
======= ========= =========== =========== ========= ===========
</TABLE>
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<PAGE> 6
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------
December 31, December 31,
1999 1998
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 74,237 $ 32,047
Adjustments to reconcile net income to net cash
provided by operating activities -
Gains on foreclosed real estate - (303)
Gain on sale of assets - (5,000)
Provision for loan losses 4,500 3,000
Depreciation 18,115 18,233
FHLB stock dividends (9,500) (8,900)
Amortization and accretion, net 5,824 6,446
ESOP compensation 13,215 20,538
RRP compensation 9,605 9,606
Change in -
Accrued interest receivable 10,648 31,328
Other assets 45,154 49,226
Deferred Federal income taxes (1,609) (17,641)
Accrued interest payable 6,105 688
Accrued income taxes payable 10,453 14,687
Other liabilities 9,303 14,719
----------- -----------
Net cash provided by operating activities 196,050 168,674
----------- -----------
INVESTING ACTIVITIES:
Net increase in loans (1,096,940) (3,034,374)
Proceeds from maturities of investment securities available for sale 200,000 -
Proceeds from maturities of investment securities held to maturity 250,000 1,035,000
Purchases of investment securities held to maturity (245,560) -
Principal collected on mortgage-backed securities held to maturity 185,318 206,701
Principal collected on mortgage-backed securities available for sale 65,003 436,469
Purchases of office properties and equipment (18,005) -
Proceeds from sale of foreclosed real estate - 10,906
Proceeds from sale of assets - 5,000
----------- -----------
Net cash used for investing activities (660,184) (1,340,298)
----------- -----------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits (417,506) 1,977,262
Dividends paid (34,892) (37,074)
Proceeds from FHLB advances 6,475,000 -
Repayments of FHLB advances (5,384,214) (9,158)
Purchase of treasury stock (21,300) -
----------- -----------
Net cash provided by financing activities 617,088 1,931,030
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 152,954 759,406
CASH AND CASH EQUIVALENTS, beginning of period 940,751 746,261
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,093,705 $ 1,505,667
=========== ===========
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate $ - $ 43,355
Change in unrealized holding loss on investment
securities available for sale (72,212) (62,244)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Federal income taxes paid 26,386 23,311
Interest paid 662,783 670,918
</TABLE>
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<PAGE> 7
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
First Federal Financial Bancorp, Inc. (the "Company") was
incorporated under Delaware law in February 1996 by First Federal Savings and
Loan Association of Ironton (the "Association") in connection with the
conversion of the Association from a federally-chartered mutual savings and loan
association to a federally-chartered stock savings bank to be known as "First
Federal Savings Bank of Ironton" (the "Bank") and the issuance of the Bank's
common stock to the Company and the offer and sale of the Company's common stock
by the Company to the members of the public, the Association's Board of
Directors, its management, and the First Federal Financial Bancorp, Inc.
Employee Stock Ownership Plan (the "ESOP") (the "Conversion").
The accompanying financial statements were prepared in
accordance with instructions to Form 10-QSB, and therefore, do not include
information or footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. However, all normal, recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the financial statements, have been included. These financial statements should
be read in conjunction with the audited consolidated financial statements and
the notes thereto for the year ended September 30, 1999.
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. The Bank's deposits are
insured by the Savings Association Insurance Fund ("SAIF") to the maximum extent
permitted by law. The Bank is subject to examination and comprehensive
regulation by the Office of Thrift Supervision ("OTS"), which is the Bank's
chartering authority and primary regulator. The Bank is also subject to
regulation by the Federal Deposit Insurance Corporation ("FDIC"), as the
administrator of the SAIF, and to certain reserve requirements established by
the Federal Reserve Board ("FRB"). The Bank is a member of the Federal Home Loan
Bank of Cincinnati ("FHLB").
Principles of Consolidation
The consolidated financial statements at December 31, 1999 and
September 30, 1999, and for the three months ended December 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.
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<PAGE> 8
(2) CONVERSION TRANSACTION
On June 3, 1996, (i) the Association converted from a
federally-chartered mutual savings and loan association to a federally-chartered
stock savings bank to be named "First Federal Savings Bank of Ironton", and (ii)
the Company acquired all of the common stock of the Bank in the Conversion. As
part of the Conversion, the Company issued 671,783 shares of its Common Stock.
Total proceeds of $6,717,830 were reduced by $537,430 for shares to be purchased
by the ESOP and by approximately $432,000 for conversion expenses. As a result
of the Conversion, the Company contributed approximately $3,145,000 of
additional capital to the Bank and retained the balance of the proceeds.
(3) COMMON STOCK ACQUIRED BY THE EMPLOYEE STOCK OWNERSHIP PLAN
The Company has established an ESOP for employees of the Company
and the Bank which became effective upon the Conversion. Full-time employees of
the Company and the Bank who have been credited with at least 1,000 hours of
service during a twelve month period and who have attained age 21 are eligible
to participate in the ESOP. The Company loaned the ESOP $537,430 for the initial
purchase of the ESOP shares. The loan is due and payable in forty-eight (48)
equal quarterly installments of $11,200 beginning June 29, 1996, plus interest
at the rate of 8.75% per annum. The Company makes scheduled discretionary cash
contributions to the ESOP sufficient to amortize the principal and interest on
the loan over a period of 12 years. The Company accounts for its ESOP in
accordance with Statement of Position 93-6, "Employer's Accounting For Employee
Stock Ownership Plans." As shares are committed to be released to participants,
the Company reports compensation expense equal to the average market price of
the shares during the period. ESOP compensation expense recorded during the
three month periods ended December 31, 1999 and 1998 was $13,215 and $20,538,
respectively.
(4) STOCK OPTION PLAN
On December 16, 1996, the Stock Option Plan (the "Plan") was
approved by the Company's stockholders. A total of 67,178 shares of common stock
may be issued pursuant to the Plan and 37,529 shares have been awarded as of
December 31, 1999. These options are subject to vesting provisions as well as
other provisions of the Plan. No options have been exercised through December
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 16,438
shares have been awarded as of December 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 December 31, 1999 and 1998
was $9,605 and $9,606, respectively.
The Company purchased 26,871 shares of common stock during the
year ended September 30, 1997, to fully fund the RRP. The cost of unearned RRP
shares is recorded as a reduction of stockholders' equity.
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<PAGE> 9
(6) PURCHASE OF COMMON STOCK
During the three months ended December 31, 1999 and the year
ended September 30, 1999, the Company purchased 2,100 and 31,764 shares,
respectively, of its outstanding common stock at an aggregate cost of $21,300
and $439,030, respectively. The purchase of these shares has been recorded as a
purchase of common stock shares, which are authorized but unissued.
(7) EARNINGS PER SHARE
Basic and full dilution Earnings Per Share (EPS) for the three
months ended December 31, 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
December 31, 1999 December 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 $74,237 517,929 $ 0.14 $32,047 544,414 $ 0.06
Effect of Dilutive
Securities-Options - - - - 1,990 -
------- ------- ------ ------- ------- ---------
Diluted EPS $74,237 517,929 $ 0.14 $32,047 546,404 $ 0.06
======= ======= ====== ======= ======= =========
</TABLE>
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
ASSETS. Total assets increased $.7 million, or 1.1%, from $65.1
million at September 30, 1999 to $65.8 million at December 31, 1999. The
increase consisted primarily of an increase in loans receivable of $1.1 million,
offset by declines in mortgage-backed securities (held to maturity and available
for sale) of $.3 million and investment securities (held to maturity and
available for sale) of $.2 million.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents increased
$152,954, or 16.3%, from $940,751 at September 30, 1999 to $1,093,705 at
December 31, 1999. The increase resulted from net cash flows provided by
operating activities of $196,050 and from financing activities of $617,088,
offset by net cash flows used for investing activities of $660,184.
INVESTMENT SECURITIES. Investment securities (held to maturity
and available for sale) decreased $.2 million, or 6.5%, from $3.1 million at
September 30, 1999 to $2.9 million at December 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
$.4 million, with $.2 million of corresponding reinvestments.
LOANS RECEIVABLE. Loans receivable increased $1.1 million, or
2.2%, from $49.7 million at September 30, 1999 to $50.8 million at December 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 $48.1 million, or 93.4%, of total gross loans, while
consumer loans, including installment loans, loans secured by deposit accounts,
and unsecured loans totaled $3.4 million, or 6.6%, of total gross loans
outstanding at December 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 borrowers' 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 total gross
loans outstanding at December 31, 1999 and September 30, 1999. The dollar amount
of the allowance totaled $295,199 at December 31, 1999 as compared to $292,500
at September 30, 1999.
Charge-off activity for the three months ended December 31, 1999
and 1998, totaled $1,801 and $6,104, respectively. Recoveries totaled $-0- and
$-0- for the three months ended December 31, 1999 and 1998, respectively.
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<PAGE> 11
The Company had $103,000 and $153,000 of non-accrual loans at
December 31, 1999 and September 30, 1999, respectively. At the same dates, there
were no significant loans greater than 90 days past due which were still
accruing interest. The Company had no troubled debt restructurings during the
three month periods ended December 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 $.3 million, or 3.3%, from
$9.1 million at September 30, 1999 to $8.8 million at December 31, 1999, due to
scheduled principal repayments of $.3 million.
DEPOSITS. Deposits decreased by $.4 million, or .8%, from $47.7
million at September 30, 1999 to $47.3 million at December 31, 1999. The Company
continues to offer competitive interest rates on deposits, but has elected to
utilize available advances from the FHLB in recent months to meet its funding
requirements, rather than to pay above market rates of interest to retain, or
increase deposits.
ADVANCES FROM FEDERAL HOME LOAN BANK. The Company's advances
from the FHLB totaled $8.9 million at December 31, 1999 as compared to $7.8
million at September 30, 1999, an increase of $1.1 million, or 14.1%. During the
three months ended December 31, 1999, the Company obtained $6.5 million of new
advances and repaid $5.4 million.
STOCKHOLDERS' EQUITY. Stockholders' equity totaled $9.3 million
at December 31, 1999 and September 30, 1999. The Company's net income for the
quarter was offset by dividends paid and the release of common stock shares to
the employee benefit plans.
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 1999 AS
COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1998
Net income increased $42,190, or 131.7%, from $32,047 for the
quarter ended December 31, 1998 to $74,237 for the quarter ended December 31,
1999. Earnings per share were $.14 and $.06 for the 1999 and 1998 quarters,
respectively, both basic and assuming full dilution. The increase in net income
consisted of increases in net interest income of $54,682, or 13.6% and
non-interest income of $304, or 1.1%, and a decrease in non-interest expense of
$3,579, or 1.0%, offset by increases in the provision for income taxes and the
provision for loan losses of $14,875, or 73.1%, and $1,500, or 50.0%,
respectively.
Total interest income increased $51,964, or 4.8%, from
$1,074,429 for the 1998 quarter to $1,126,393 for the 1999 quarter. The increase
was due to increased levels of interest earned on loans receivable of $82,519,
offset by declines in interest earned on mortgage-backed securities of $23,720,
investment securities of $5,047, and other interest-earning assets of $1,788.
The increase in interest earned on loans receivable resulted primarily from an
increase in the average volume of the loan portfolio during the 1999 quarter as
compared to the 1998 quarter, and from increased yields earned on the variable
rate loan portfolio, such loans having been subject to increased repricing in
recent months. Interest earned on mortgage-backed securities, investment
securities, and other interest-earning assets declined due to lower volumes of
these assets during the 1999 quarter as compared to the 1998 quarter.
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<PAGE> 12
Total interest expense decreased $2,718, or .4%, from $671,606
for the 1998 quarter to $668,888 for the 1999 quarter. The small decline in
interest expense reflects the effects of decreased interest paid on a reduced
volume of interest-bearing deposits during the 1999 quarter as compared to the
1998 quarter. Such deposits were replaced with lower rate, interest-bearing
advances from the FHLB.
The Company provided $4,500 for loan losses during the 1999
quarter as compared to $3,000 for the 1998 quarter to correspond with the
continued growth in the loan portfolio. However, past due loans continue to be
at historically low levels.
Non-interest income, which primarily consists of service charges
on deposit accounts, remained relatively unchanged, totaling $27,523 for the
1999 quarter as compared to $27,219 for the 1998 quarter. A non-recurring gain
on sale of assets of $5,000 during the 1998 quarter was more than offset in the
current quarter by increased service charges on deposit accounts.
The $3,579 decrease in non-interest expense, from $374,640 for
the 1998 quarter to $371,061 for the 1999 quarter resulted primarily from
decreases in compensation and benefits of $8,579 and franchise taxes of $4,748,
partially offset by increases in data processing expenses of $5,416 and
advertising expenses of $3,039. Compensation and benefits decreased due to lower
costs associated with employee benefit plans while franchise taxes decreased due
to lower levels of taxable stockholders' equity, on which such taxes are based.
The increase in data processing costs reflects increased costs associated with
ATM usage, while advertising costs increased due to more media advertising
during the 1999 quarter as compared to the 1998 quarter.
The $14,875 increase in the provision for income taxes, from
$20,355 for the 1998 quarter to $35,230 for the 1999 quarter reflects the tax
effects of the increase in pretax income.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of U.S.
Government and government agency obligations and other similar investments
having maturities of five years or less. Such investments are intended to
provide a source of relatively liquid funds upon which the Bank may rely if
necessary to fund deposit withdrawals and for other short-term funding needs.
The required level of such liquid investments is currently 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, averaged 28.5% for the quarter ended December 31, 1999,
as compared to 31.1% for the quarter ended September 30, 1999. At December 31,
1999, the Bank's "liquid" assets totaled approximately $10.5 million, which was
$ 9.0 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,
-12-
<PAGE> 13
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 $8.9 million at December 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 December 31, 1999, the total approved loan
commitments outstanding amounted to $997,000. Certificates of deposit scheduled
to mature in one year or less at December 31, 1999, totaled $27.2 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 December 31, 1999, the Bank had regulatory capital which was
well in excess of applicable limits. At December 31, 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 December 31, 1999, the Bank's tangible capital was $8.5
million, or 13.1% of adjusted total assets, core capital was $8.5 million, or
13.1% of adjusted total assets and risk-based capital was $8.8 million, or 24.1%
of adjusted risk-weighted assets, exceeding the requirements by $7.5 million,
$5.9 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. 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
kept the Bank informed as to its progress in addressing its Year 2000
preparations, which significantly impact the Bank.
A "Client Task Force" was formed among Fiserv members which
conducted on-site testing at the data center during 1999. Exceptions noted as a
result of this testing were addressed in 1999. Based upon overall test results,
Fiserv determined the testing was successful and completed their readiness for
Year 2000. The Bank 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 and hardware was replaced and tested during 1999.
-13-
<PAGE> 14
Fiserv efforts included a Disaster Recovery Center to ensure
proper backup. All test results were made available to the Bank and were
independently evaluated. Other areas evaluated by the Bank during 1999 included
systems for security, vaults, ATMs and others. Management believes the Bank made
satisfactory progress in addressing Year 2000 implementation issues and has not
yet experienced any Year 2000 related issues to date.
The costs associated with the Year 2000 issues were
approximately $60,000 and are included in the accompanying December 31, 1999
financial statements.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
In addition to historical information, forward-looking
statements are contained herein that are subject to risks and uncertainties,
that could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that could cause future results to vary from
current expectations, include, but are not limited to, the impact of economic
conditions (both generally and more specifically in the markets in which the
Company operates), the impact of competition for the Company's customers from
other providers of financial services, the impact of government legislation and
regulation (which changes from time to time and over which the Company has no
control), and other risks detailed in this Form 10-Q and in the Company's other
Securities and Exchange Commission (SEC) filings. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements, to reflect
events or circumstances that arise after the date hereof. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission.
-14-
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Issuer is a part,
or to which any of its property is subject.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
<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.
-15-
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 14, 2000 By:/s/ I. Vincent Rice
-------------------------------- ----------------------------------
I. Vincent Rice, President
Date: February 14, 2000 By:/s/ Jeffery W. Clark
-------------------------------- ----------------------------------
Jeffery W. Clark, Comptroller
-16-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 1999 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS
ENDED DECEMBER 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 313,494
<INT-BEARING-DEPOSITS> 780,211
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,157,355
<INVESTMENTS-CARRYING> 6,573,769
<INVESTMENTS-MARKET> 6,467,000
<LOANS> 51,090,647
<ALLOWANCE> 295,199
<TOTAL-ASSETS> 65,801,932
<DEPOSITS> 47,325,944
<SHORT-TERM> 2,000,000
<LIABILITIES-OTHER> 263,043
<LONG-TERM> 6,936,655
0
0
<COMMON> 5,495
<OTHER-SE> 9,270,795
<TOTAL-LIABILITIES-AND-EQUITY> 65,801,932
<INTEREST-LOAN> 935,043
<INTEREST-INVEST> 180,164
<INTEREST-OTHER> 11,186
<INTEREST-TOTAL> 1,126,393
<INTEREST-DEPOSIT> 557,303
<INTEREST-EXPENSE> 668,888
<INTEREST-INCOME-NET> 457,505
<LOAN-LOSSES> 4,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 371,061
<INCOME-PRETAX> 109,467
<INCOME-PRE-EXTRAORDINARY> 74,237
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,237
<EPS-BASIC> .14
<EPS-DILUTED> .14
<YIELD-ACTUAL> 2.75
<LOANS-NON> 103,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 292,500
<CHARGE-OFFS> 1,801
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 295,199
<ALLOWANCE-DOMESTIC> 295,199
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
