<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, 2000
---------------------
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 AUGUST 8, 2000, THERE WERE ISSUED AND OUTSTANDING 531,673 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
*****************
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (as of June 30,
2000 (unaudited) and September 30, 1999).................. 3
Consolidated Statements of Income (for the three
months ended June 30, 2000 (unaudited)
and 1999 (unaudited))..................................... 4
Consolidated Statements of Income (for the nine
months ended June 30, 2000 (unaudited) and
1999 (unaudited))......................................... 5
Consolidated Statements of Changes in
Stockholders' Equity (for the nine months ended
June 30, 2000 (unaudited) and
the year ended September 30, 1999)........................ 6
Consolidated Statements of Cash Flows (for the
nine months ended June 30, 2000 (unaudited)
and 1999 (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
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<PAGE> 3
FIRST FEDERAL FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 1,193,979 $ 940,751
INVESTMENT SECURITIES HELD
TO MATURITY 2,259,197 2,317,111
INVESTMENT SECURITIES AVAILABLE
FOR SALE 344,257 791,159
LOANS RECEIVABLE 53,741,148 49,703,008
MORTGAGE-BACKED SECURITIES
HELD TO MATURITY 4,038,969 4,443,450
MORTGAGE-BACKED SECURITIES
AVAILABLE FOR SALE 4,468,075 4,702,702
ACCRUED INTEREST RECEIVABLE 361,609 337,610
FORECLOSED REAL ESTATE - 45,499
OFFICE PROPERTIES AND EQUIPMENT 1,728,840 1,760,051
OTHER ASSETS 93,709 94,407
------------------ ------------------
$ 68,229,783 $ 65,135,748
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 47,342,136 $ 47,743,450
ADVANCES FROM FEDERAL HOME LOAN BANK 11,349,436 7,845,869
ACCRUED INCOME TAXES PAYABLE:
Current 23,206 12,391
Deferred 20,136 54,461
ACCRUED INTEREST PAYABLE 58,049 37,015
OTHER LIABILITIES 196,861 159,477
------------------ ------------------
Total liabilities 58,989,824 55,852,663
------------------ ------------------
STOCKHOLDERS' EQUITY:
Common stock 5,317 5,516
Employee benefit plans (483,784) (549,531)
Additional paid-in capital 5,038,219 5,227,406
Retained earnings-substantially restricted 4,799,884 4,658,872
Accumulated other comprehensive income (loss) (119,677) (59,178)
------------------ ------------------
Total stockholders' equity 9,239,959 9,283,085
------------------ ------------------
$ 68,229,783 $ 65,135,748
================== ==================
</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,
2000 1999
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME:
Loans receivable-
First mortgage loans $ 936,161 $ 857,020
Consumer and other loans 87,791 59,497
Mortgage-backed and related securities 136,619 136,301
Investment securities 40,686 38,463
Other interest-earning assets 14,167 12,246
---------- ----------
Total interest income 1,215,424 1,103,527
---------- ----------
INTEREST EXPENSE:
Interest-bearing checking 5,676 6,279
Passbook savings 60,375 64,870
Certificates of deposit 505,790 505,729
Advances from Federal Home
Loan Bank 160,183 89,704
---------- ----------
Total interest expense 732,024 666,582
---------- ----------
Net interest income 483,400 436,945
PROVISION FOR LOAN LOSSES 6,000 4,500
---------- ----------
Net interest income after provision
for loan losses 477,400 432,445
---------- ----------
NON-INTEREST INCOME:
Gain (loss) on foreclosed real estate 11,112 (1,374)
Securities gains - -
Gain on sale of assets - -
Other 24,947 24,128
---------- ----------
Total non-interest income 36,059 22,754
---------- ----------
NON-INTEREST EXPENSE:
Compensation and benefits 142,532 141,750
Occupancy and equipment 34,923 36,431
SAIF deposit insurance premiums 2,449 7,141
Directors' fees and expenses 21,800 22,788
Franchise taxes 32,760 34,175
Data processing 34,023 29,007
Advertising 19,090 22,710
Professional services 29,542 28,769
Other 42,186 34,846
---------- ----------
Total non-interest expense 359,305 357,617
---------- ----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 154,154 97,582
PROVISION FOR INCOME TAXES 48,412 34,251
---------- ----------
NET INCOME $ 105,742 $ 63,331
========== ==========
EARNINGS PER SHARE - BASIC $ .21 $ .12
========== ==========
EARNINGS PER SHARE ASSUMING DILUTION $ .21 $ .12
========== ==========
</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,
2000 1999
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME:
Loans receivable -
First mortgage loans $ 2,688,138 $ 2,496,694
Consumer and other loans 234,776 169,859
Mortgage-backed and related
securities 406,373 434,939
Investment securities 133,594 133,973
Other interest-earning assets 35,070 37,144
------------- -------------
Total interest income 3,497,951 3,272,609
------------- -------------
INTEREST EXPENSE:
Interest-bearing checking 17,214 18,190
Passbook savings 183,386 188,908
Certificates of deposit 1,487,436 1,520,418
Advances from Federal Home
Loan Bank 399,781 274,305
------------- -------------
Total interest expense 2,087,817 2,001,821
------------- -------------
Net interest income 1,410,134 1,270,788
PROVISION FOR LOAN LOSSES 16,500 12,000
------------- -------------
Net interest income after
provision for loan losses 1,393,634 1,258,788
------------- -------------
NON-INTEREST INCOME:
Gains on foreclosed real estate 11,112 1,661
Securities gains - -
Gain on sale of assets 725 11,131
Other 79,980 66,193
------------- -------------
Total non-interest income 91,817 78,985
------------- -------------
NON-INTEREST EXPENSE:
Compensation and benefits 435,477 446,844
Occupancy and equipment 101,381 102,496
SAIF deposit insurance premiums 12,124 20,594
Directors' fees and expenses 63,152 65,550
Franchise taxes 98,703 108,365
Data processing 97,821 83,343
Advertising 59,720 64,351
Professional services 90,311 95,251
Other 134,872 122,883
------------- -------------
Total non-interest expense 1,093,561 1,109,677
------------- -------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 391,890 228,096
PROVISION FOR INCOME TAXES 124,023 69,325
------------- -------------
NET INCOME $ 267,867 $ 158,771
============= =============
EARNINGS PER SHARE - BASIC $ .52 $ .30
============= =============
EARNINGS PER SHARE ASSUMING DILUTION $ .52 $ .30
============= =============
</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, 1998 $ 5,834 $ (643,854) $ 5,510,264
COMPREHENSIVE INCOME:
Net income, year ended September 30, 1999 - - -
Other comprehensive income, net of tax:
Change in unrealized gain on invest-
ments available for sale, net of
tax of $67,203 - - -
--------- -------------- --------------
TOTAL COMPREHENSIVE INCOME - - -
ESOP SHARES RELEASED, 5,261 shares;
$12.44 average fair market value - 52,610 12,863
RRP SHARES AMORTIZED, 3,270 shares - 38,422 -
DIVIDENDS PAID ($.28 per share) - 3,291 955
PURCHASE OF 31,764 TREASURY SHARES (318) - (296,676)
--------- -------------- --------------
BALANCES, September 30, 1999 5,516 (549,531) 5,227,406
COMPREHENSIVE INCOME:
Net income, nine months ended
June 30, 2000 (unaudited) - - -
Other comprehensive income, net of tax:
Change in unrealized loss on invest-
ments available for sale, net of
tax of $31,166 (unaudited) - - -
--------- -------------- --------------
TOTAL COMPREHENSIVE INCOME (unaudited) - - -
ESOP SHARES RELEASED, 3,693 shares;
$9.16 average fair market value (unaudited) - 36,930 (3,097)
RRP SHARES AMORTIZED, 2,453 shares (unaudited) - 28,817 -
DIVIDENDS PAID ($.21 per share) (unaudited) - - -
PURCHASE OF 19,924 TREASURY SHARES
(unaudited) (199) - (186,090)
--------- -------------- --------------
BALANCES, JUNE 30, 2000 (unaudited) $ 5,317 $ (483,784) $ 5,038,219
========= ============== ==============
<CAPTION>
Retained Accumulated
Earnings- Other Total
Substantially Comprehensive Stockholders'
Restricted Income (Loss) Equity
-------------- ------------- ---------------
<S> <C> <C> <C>
BALANCES, September 30, 1998 $ 4,707,377 $ 71,275 $ 9,650,896
COMPREHENSIVE INCOME:
Net income, year ended September 30, 1999 239,626 - 239,626
Other comprehensive income, 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;
$12.44 average fair market value - - 65,473
RRP SHARES AMORTIZED, 3,270 shares - - 38,422
DIVIDENDS PAID ($.28 per share) (146,095) - (141,849)
PURCHASE OF 31,764 TREASURY SHARES (142,036) - (439,030)
-------------- ------------ ---------------
BALANCES, September 30, 1999 4,658,872 (59,178) 9,283,085
COMPREHENSIVE INCOME:
Net income, nine months ended
June 30, 2000 (unaudited) 267,867 - 267,867
Other comprehensive income, net of tax:
Change in unrealized loss on invest-
ments available for sale, net of
tax of $31,166 (unaudited) - (60,499) (60,499)
-------------- ------------ ---------------
TOTAL COMPREHENSIVE INCOME (unaudited) 267,867 (60,499) 207,368
ESOP SHARES RELEASED, 3,693 shares;
$9.16 average fair market value (unaudited) - - 33,833
RRP SHARES AMORTIZED, 2,453 shares (unaudited) - - 28,817
DIVIDENDS PAID ($.21 per share) (unaudited) (102,167) - (102,167)
PURCHASE OF 19,924 TREASURY SHARES
(unaudited) (24,688) - (210,977)
-------------- ------------ ---------------
BALANCES, JUNE 30, 2000 (unaudited) $ 4,799,884 $ (119,677) $ 9,239,959
============== ============ ===============
</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,
2000 1999
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 267,867 $ 158,771
Adjustments to reconcile net income to net cash
provided by operating activities -
Gain on sale of assets - (11,131)
Gains on foreclosed real estate (11,112) (1,661)
Provision for loan losses 16,500 12,000
Depreciation 58,241 59,954
FHLB stock dividends (29,300) (26,800)
Amortization and accretion, net 14,011 10,849
ESOP compensation 33,833 51,154
RRP compensation 28,817 28,817
Change in -
Accrued interest receivable (23,999) 21,586
Other assets 697 (7,553)
Current income taxes payable 10,815 (17,302)
Deferred Federal income taxes (3,156) -
Accrued interest payable 21,034 (1,005)
Other liabilities 37,384 12,295
-------------- --------------
Net cash provided by operating activities 421,632 289,974
-------------- --------------
INVESTING ACTIVITIES:
Net increase in loans (4,068,250) (5,016,831)
Proceeds from sales and maturities of investment securities available for sale 450,000 -
Proceeds from maturities of investment securities held to maturity 349,000 1,423,000
Purchases of investment securities held to maturity (262,660) -
Principal collected on mortgage-backed securities held to maturity 389,399 659,251
Principal collected on mortgage-backed securities available for sale 141,807 660,701
Purchases of office properties and equipment (27,030) (25,074)
Proceeds from sale of foreclosed real estate 70,221 92,056
-------------- --------------
Net cash used for investing activities (2,957,513) (2,206,897)
-------------- --------------
FINANCING ACTIVITIES:
Net decrease in deposits (401,314) 3,044,026
Proceeds from FHLB advances 12,400,000 1,200,000
Payments on FHLB advances (8,896,433) (1,049,185)
Dividends paid (102,167) (107,137)
Purchase of treasury shares (210,977) (410,175)
-------------- --------------
Net cash provided by financing activities 2,789,109 2,677,529
-------------- --------------
INCREASE IN CASH AND CASH EQUIVALENTS 253,228 760,606
CASH AND CASH EQUIVALENTS, beginning of period 940,751 746,261
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 1,193,979 $ 1,506,867
============== ==============
NONCASH INVESTING ACTIVITIES:
Loans taken into foreclosed real estate $ 13,610 $ 115,565
Change in unrealized holding loss on investment securities available for sale (91,667) (173,761)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Federal income taxes paid 116,366 104,701
Interest paid 2,066,783 2,002,826
</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, 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 June 30, 2000 and
September 30, 1999, and for the three and nine months ended June 30, 2000 and
1999, 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, 2000 and 1999 was $8,566 and $13,895, respectively, and
for the nine month periods ended June 30, 2000 and 1999 was $33,833 and $51,515,
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, 2000. These options are subject to vesting provisions as well as other
provisions of the Plan. No options have been exercised through June 30, 2000.
(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 June 30, 2000. 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, 2000 and 1999 was
$9,606 and $9,606, respectively, and for the nine month periods ended June 30,
2000 and 1999 was $28,817 and $28,817, respectively.
- 9 -
<PAGE> 10
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.
(6) PURCHASE OF COMMON STOCK
During the nine months ended June 30, 2000, the Company
purchased 19,924 shares of its outstanding common stock at an aggregate price of
$210,977. During the year ended September 30, 1999, the Company purchased 31,764
shares of its outstanding common stock at an aggregate cost of $439,030. 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, 2000 and 1999, 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, 2000 June 30, 1999
-------------------------------------------- -----------------------------------------
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 $ 105,742 501,003 $ .21 $ 63,331 517,772 $ .12
Effect of Dilutive
Securities-Options - - - - - -
---------- ---------- -------- ---------- ---------- --------
Diluted EPS $ 105,742 501,003 $ .21 $ 63,331 517,772 $ .12
========== ========== ======== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended For the Nine Months Ended
June 30, 2000 June 30, 1999
-------------------------------------------- ----------------------------------------
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 $ 267,867 510,288 $ .52 $ 158,771 535,213 $ .30
Effect of Dilutive
Securities-Options - - - - 1,832 -
---------- ---------- -------- ---------- ---------- ---------
Diluted EPS $ 267,867 510,288 $ .52 $ 158,771 537,045 $ .30
========== ========== ======== ========== ========== =========
</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 $3.1 million, or 4.8%, from $65.1
million at September 30, 1999 to $68.2 million at June 30, 2000. The increase
consisted primarily of increases in cash and cash equivalents of $.3 million and
loans receivable of $4.0 million, partially offset by declines in
mortgage-backed securities (held to maturity and available for sale) of $.6
million and investment securities (held to maturity and available for sale) of
$.5 million.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents increased
$253,228, or 26.9%, from $940,751 at September 30, 1999 to $1,193,979 at June
30, 2000. The increase resulted from net cash flows provided by operating
activities of $421,632 and from financing activities of $2,789,109, offset by
net cash flows used for investing activities of $2,957,513.
INVESTMENT SECURITIES. Investment securities (held to maturity
and available for sale) decreased $.5 million, or 16.1%, from $3.1 million at
September 30, 1999 to $2.6 million at June 30, 2000. 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
$.8 million, with $.3 million of corresponding reinvestments of the proceeds.
LOANS RECEIVABLE. Loans receivable increased $4.0 million, or
8.0%, from $49.7 million at September 30, 1999 to $53.7 million at June 30,
2000. 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 $50.9 million, or 93.2%, of total gross loans, while
consumer loans, including installment loans and loans secured by deposit
accounts, totaled $3.7 million, or 6.8%, of total gross loans outstanding at
June 30, 2000.
The Company's lending is concentrated to borrowers who reside in
and/or which are collateralized by real estate and property located in Lawrence
and Scioto County, Ohio, and Boyd and Greenup County, Kentucky. Employment in
these areas is highly concentrated in the petroleum, iron and steel industries.
Therefore, many debtors' ability to honor their contracts is dependent upon
these economic sectors.
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses as a
percentage of total loans decreased slightly from .6% of loans outstanding at
September 30, 1999 to .5% of loans outstanding at June 30, 2000. The dollar
amount of the allowance totaled $290,822 at June 30, 2000 as compared to
$292,500 at September 30, 1999.
Charge-off activity for the nine months ended June 30, 2000 and
1999, totaled $18,178 and $12,141, respectively. Recoveries totaled $-0- and
$-0- for the nine months ended June 30, 2000 and 1999, respectively.
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<PAGE> 12
The Company had $180,000 and $153,000 of non-accrual loans at
June 30, 2000 and September 30, 1999, 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, 2000 and 1999.
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 $.6 million, or 6.6%, from
$9.1 million at September 30, 1999 to $8.5 million at June 30, 2000, due to
principal repayments of $.6 million.
DEPOSITS. Deposits decreased by $.4 million, or .8%, from $47.7
million at September 30, 1999 to $47.3 million at June 30, 2000. The Company
continues to offer competitive interest rates on deposits, but has elected to
utilize available advances from the FHLB 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 $11.3 million at June 30, 2000 as compared to $7.8 million
at September 30, 1999. During the nine months ended June 30, 2000, the Company
had borrowings of $12.4 million and repayments of $8.9 million.
STOCKHOLDERS' EQUITY. Stockholders' equity totaled $9.2 million
at June 30, 2000 as compared to $9.3 million at September 30, 1999. 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, 2000 AS
COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Net income increased $42,411, or 67.0%, from $63,331 for the
quarter ended June 30, 1999 to $105,742 for the comparable 2000 quarter. Net
income per share was $.21 and $.12 for the 2000 and 1999 quarters, respectively,
both basic and assuming full dilution. The increase in net income resulted from
increases in net interest income of $46,455, or 10.6%, and non-interest income
of $13,305, or 58.5%, offset by increases in non-interest expense of $1,688, or
.5%, the provision for loan losses of $1,500, or 33.3%, and the provision for
income taxes of $14,161, or 41.3%.
Total interest income increased $111,897, or 10.1%, from
$1,103,527 for the three months ended June 30, 1999 to $1,215,424 for the
comparable 2000 period. The increase was primarily attributable to increased
interest earned on loans receivable of $107,435 due to higher volumes of loans
in the 2000 period as compared to the 1999 period, and from increased yields
earned on the variable rate loan portfolio, such loans having been subject to
increased repricing in recent months due to higher market rates of interest.
Interest income on investment securities, mortgage-backed securities, and other
interest-earning assets remained relatively unchanged totaling $40,686, $136,619
and $14,167, respectively, for the 2000 quarter as compared to $38,463, $136,301
and $12,246, respectively, for the 1999 quarter.
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<PAGE> 13
Total interest expense increased $65,442, or 9.8%, from $666,582
for the quarter ended June 30, 1999 to $732,024 for the quarter ended June 30,
2000, such increase being primarily attributable to a higher volume of advances
from the FHLB during the 2000 quarter as compared to the 1999 quarter, and to a
lesser extent, due to increased yields paid on interest-bearing deposits due to
higher market rates of interest.
The Company provided $6,000 for loan losses during the 2000
quarter to correspond with the growth in the loan portfolio. This compared to a
$4,500 provision for the 1999 quarter.
The $13,305 increase in non-interest income, from $22,754 for
the 1999 quarter to $36,059 for the 2000 quarter, resulted primarily from
$11,112 in gains on foreclosed real estate during the 2000 quarter as compared
to a $1,374 loss during the 1999 quarter. The remainder of other non-interest
income consists primarily of service charges on deposit accounts, and such
income remained relatively unchanged for the 2000 quarter as compared to the
1999 quarter.
The $1,688 increase in non-interest expense, from $357,617 for
the 1999 quarter to $359,305 for the comparable 2000 quarter, resulted primarily
from increases in data processing expenses of $5,016 and other non-interest
expenses of $7,340, partially offset by decreases in occupancy and equipment
expenses of $1,508, SAIF deposit insurance premiums of $4,692, franchise taxes
of $1,415, and advertising expenses of $3,620. Data processing expenses
increased primarily due to increased ATM usage and from increased deposit and
check processing costs associated with higher transaction volume, while the
increase in other non-interest expenses was not due to any one significant
factor. SAIF deposit insurance premiums decreased primarily due to a lower
premium assessed on insured deposits during the 2000 quarter as compared to the
1999 quarter, while the decrease in occupancy and equipment expenses was not
attributable to any one significant factor. Franchise taxes declined due to
lower levels of taxable stockholders' equity on which such taxes are based,
while advertising expenses decreased primarily due to less media advertising
during the 2000 quarter as compared to the 1999 quarter.
The $14,161 increase in the provision for income taxes, from
$34,251 for the 1999 quarter to $48,412 for the comparable 2000 quarter,
resulted from higher pretax income.
RESULTS OF OPERATIONS - NINE MONTHS ENDED JUNE 30, 2000 AS
COMPARED TO NINE MONTHS ENDED JUNE 30, 1999
Net income increased $109,096, or 68.7%, from $158,771 for the
nine months ended June 30, 1999 to $267,867 for the nine months ended June 30,
2000. Net income per share for the 2000 nine month period totaled $.52 per
share, both basic and assuming full dilution. This compared to $.30 per share,
both basic and assuming full dilution for the 1999 comparable period. The
increase in net income resulted from increases in net interest income of
$139,346, or 11.0%, and non-interest income of $12,832, or 16.2%, and a decrease
in non-interest expense of $16,116 or 1.5%, offset by increases in the provision
for loan losses of $4,500, or 37.5%, and the provision for income taxes of
$54,698, or 78.9%.
Total interest income increased $225,342, or 6.9%, from
$3,272,609 for the nine months ended June 30, 1999 to $3,497,951 for the
comparable 2000 nine month period. The increase was primarily due to increased
interest earned on loans receivable of $256,361, partially offset by decreased
interest earned on mortgage-backed securities of $28,566. Interest on other
interest-earning assets and investment securities decreased slightly during the
2000 nine month
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<PAGE> 14
period as compared to the 1999 nine month period. Interest on loans receivable
increased due to a higher volume of loans and from increased yields earned on
the variable rate loan portfolio, such loans having repriced at higher rates
during the 2000 period due to higher market rates of interest. The decrease in
interest on mortgage-backed securities resulted primarily from a decrease in the
average volume of these assets during the 2000 nine month period as compared to
the 1999 nine month period.
Total interest expense increased $85,996, or 4.3%, from
$2,001,821 for the 1999 nine month period to $2,087,817 for the 2000 nine month
period, such increase reflecting the higher volume of advances from the FHLB
during the 2000 period as compared to the 1999 period, and from increased yields
paid on interest-bearing deposits due to higher market rates of interest.
The Company provided $16,500 for loan losses during the 2000
nine month period as compared to $12,000 for the 1999 nine month period to
correspond with the increase in the loan portfolio.
The $12,832 increase in non-interest income, from $78,985 for
the nine months ended June 30, 1999 to $91,817 for the nine months ended June
30, 2000, resulted primarily from $9,451 of additional gains on sales of
foreclosed real estate, and from an increase in other non-interest income of
$13,787, offset by a decrease of $10,406 in gains on sales of other assets.
Other non-interest income increased primarily due to increased service charges
on deposit accounts.
The $16,116 decrease in non-interest expense, from $1,109,677
for the 1999 nine month period to $1,093,561 for the comparable 2000 period
resulted primarily from decreases in compensation and benefits of $11,367, SAIF
deposit insurance premiums of $8,470, franchise taxes of $9,662, advertising
expenses of $4,631, and professional services expenses of $4,940, offset by
increases in data processing expenses and other non-interest expenses of $14,478
and $11,989, respectively. Compensation and benefits decreased due to lower
costs associated with employee benefit plans. The decrease in SAIF deposit
insurance premiums was due to both a lower rate paid on insured deposits and a
decline in the volume of insured deposits during the 2000 period as compared to
the 1999 period. Franchise taxes decreased due to lower levels of taxable
stockholders' equity, while advertising expenses decreased primarily due to less
media advertising during the 2000 period as compared to the 1999 period.
Professional services expenses declined due to the timing of services rendered.
The increase in data processing expenses was due to increased deposit and check
processing costs and increased ATM usage, while the increase in other
non-interest expenses was not attributable to any one significant factor.
The $54,698 increase in the provision for income taxes, from
$69,325 for the nine months ended June 30, 1999 to $124,023 for the nine months
ended June 30, 2000 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 currently must average 4% of
certain liabilities for each quarter, and may be changed periodically by the OTS
to reflect economic conditions.
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<PAGE> 15
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 26.1% for the quarter ended June 30, 2000, as
compared to 31.1% for the quarter ended September 30, 1999. At June 30, 2000,
the Bank's "liquid" assets totaled approximately $10.5 million, which was $8.9
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, FHLB advances, 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 $11.3 million at June 30, 2000.
Liquidity management is both a daily and long-term function of
business management. The Bank maintains a strategy of investing in loans,
mortgage-backed securities, and investment 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, 2000, the
total approved loan commitments outstanding amounted to $.8 million.
Certificates of deposit scheduled to mature in one year or less at June 30,
2000, totaled $27.9 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, 2000, the Bank had regulatory capital which was well
in excess of applicable limits. At June 30, 2000, 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, 2000, the Bank's tangible capital was $8.3
million, or 12.2% of adjusted total assets, core capital was $8.3 million, or
12.2% of adjusted total assets and risk-based capital was $8.6 million, or 21.6%
of adjusted risk-weighted assets, exceeding the requirements by $7.3 million,
$5.6 million and $5.4 million, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
There are no recent accounting pronouncements to be implemented
which management believes will have a material adverse effect on the Company's
financial position or results of operations.
"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
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<PAGE> 16
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.
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<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
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.
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<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.
Date: August 9, 2000 By:/s/ I. Vincent Rice
----------------------- --------------------------------------
I. Vincent Rice, President
Date: August 9, 2000 By:/s/ Jeffery W. Clark
----------------------- --------------------------------------
Jeffery W. Clark, Comptroller
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