<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO ________
COMMISSION FILE NUMBER 1-12305
FIRSTFED AMERICA BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3331237
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE NORTH MAIN STREET, 02720
FALL RIVER, (ZIP CODE)
MASSACHUSETTS
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 679-8181
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [_]
As of June 11, 1997, there were 8,707,152 shares of the Registrant's Common
Stock outstanding.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
FIRSTFED AMERICA BANCORP, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
PART I FINANCIAL INFORMATION ----
<C> <S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1997 (unaudited) and
March 31, 1997................................................. 1
Consolidated Statements of Operations for the three months
ended June 30, 1997 (unaudited) and 1996 (unaudited)........... 2
Consolidated Statements of Changes in Stockholders' Equity for
the three months ended June 30, 1997 (unaudited) and the
fiscal years ended March 31, 1997 and 1996..................... 3
Consolidated Statements of Cash Flows for the three months
ended June 30, 1997 (unaudited) and 1996 (unaudited)........... 5
Notes to Unaudited Consolidated Financial Statements........... 6
Management's Discussion and Analysis of Financial Condition and
Item 2. Results of Operation........................................... 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 13
Item 2. Changes in Securities.......................................... 13
Item 3. Default Upon Senior Securities................................. 13
Item 4. Submission of Matters to a Vote of Security Holders............ 13
Item 5. Other Information.............................................. 13
Item 6. Exhibits and Reports on Form 8-K............................... 13
Signatures.............................................................. 14
</TABLE>
2
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, MARCH
ASSETS 1997 31, 1997
------ ---------- --------
(UNAUDITED)
<S> <C> <C>
Cash on hand and due from banks.......................... 16,899 $ 14,130
Short-term investments................................... 0 39,410
Mortgage loans held for sale............................. 14,788 23,331
Investment securities available for sale................. 1,631 888
Mortgage-backed securities available for sale............ 46,521 31,732
Investment securities held to maturity................... 23,987 20,991
Mortgage-backed securities held to maturity.............. 14,924 15,435
Stock in Federal Home Loan Bank of Boston, at cost....... 9,531 9,531
Loans receivable, net of allowance for loan losses of
$9,746 and $8,788....................................... 861,127 796,355
Accrued interest receivable.............................. 5,232 4,722
Office properties and equipment, net..................... 17,384 14,215
Mortgage servicing rights................................ 1,988 1,630
Real estate owned, net................................... 576 665
Deferred income tax asset, net........................... 4,346 4,511
Income tax receivable.................................... 14 263
Prepaid expenses and other assets........................ 1,928 1,927
---------- --------
Total assets......................................... $1,020,876 $979,736
========== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Deposits............................................... 726,197 723,976
FHLB advances.......................................... 151,234 111,062
Advance payments by borrowers for taxes and insurance.. 5,746 5,580
Accrued interest payable............................... 787 717
Accrued income taxes................................... 1,023 0
Other liabilities...................................... 11,713 16,247
---------- --------
Total liabilities.................................... 896,700 857,582
========== ========
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued............................... -- --
Common stock, $.01 par value, 25,000,000 shares
authorized; 8,707,152 shares issued and outstanding... 87 87
Additional paid-in capital............................. 84,478 84,334
Retained earnings...................................... 45,250 43,603
Unrealized gain on investments available for sale, net
of tax................................................ 557 326
Unallocated ESOP shares................................ (6,196) (6,196)
---------- --------
Total stockholders' equity........................... 124,176 122,154
---------- --------
Total liabilities and stockholders' equity........... $1,020,876 $979,736
========== ========
</TABLE>
1
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
JUNE 30
---------------
1997 1996
------- -------
(UNAUDITED)
<S> <C> <C>
Interest and dividend income:
Loans......................................................... $16,319 $13,295
Investment securities......................................... 529 358
Mortgage-backed securities.................................... 1,001 126
Federal Home Loan Bank stock.................................. 154 106
------- -------
Total interest and dividend income.......................... 18,003 13,885
------- -------
Interest expense:
Deposits...................................................... 8,575 6,789
Borrowed funds................................................ 2,026 1,627
------- -------
Total interest expense...................................... 10,601 8,416
------- -------
Net interest income before provision for loan losses........ 7,402 5,469
------- -------
Provision for loan losses....................................... 1,000 1,000
------- -------
Net interest income after provision for loan losses......... 6,402 4,469
------- -------
Noninterest income:
Loan servicing income......................................... 651 693
Gain on sale of mortgage loans, net........................... 113 44
Other income.................................................. 538 493
------- -------
Total noninterest income.................................... 1,302 1,230
------- -------
Noninterest expense:
Compensation and employee benefits............................ 2,679 2,075
Office occupancy and equipment................................ 603 420
Advertising and business promotion............................ 284 275
Federal deposit insurance premiums............................ 112 302
Data processing............................................... 177 180
Other......................................................... 894 595
------- -------
Total noninterest expense................................... 4,749 3,847
------- -------
Income before income tax expense............................ 2,955 1,852
Income tax expense.............................................. 1,308 781
------- -------
Net income.................................................. $ 1,647 $ 1,071
======= =======
Earnings per share.............................................. $ 0.20 N/A
======= =======
Weighted average shares outstanding............................. 8,110 N/A
======= =======
</TABLE>
2
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED JUNE 30
--------------------
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 1,647 $ 1,071
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization (accretion) of:
Premium on investment and mortgage-backed securities. 4 1
Deferred loan origination fees, net.................. 108 (94)
Mortgage servicing rights............................ 102 3
Provisions for:
Loan losses.......................................... 1,000 1,000
Deferred income taxes................................ 21 (184)
(Gains) losses on sales of:
Real estate owned.................................... (23) (22)
Mortgage loans....................................... (113) (44)
Net proceeds from sales of mortgage loans.............. 46,903 44,691
Origination of loans held for sale..................... (38,706) (33,691)
Real estate owned valuation write-downs................ 70 90
Depreciation of office properties and equipment........ 325 147
Appreciation in fair value of allocated ESOP shares.... 144 0
Increase or decrease in:
Accrued interest receivable.......................... (510) (471)
Income tax receivable................................ 249 (9)
Prepaid expenses and other assets.................... (1) (519)
Accrued interest payable............................. 70 345
Accrued income taxes and other liabilities........... (3,511) (1,133)
-------- --------
Net cash provided by operating activities.......... 7,779 11,181
-------- --------
Cash flows from investing activities:
Payments received on mortgage-backed securities available
for sale ............................................... $ 669 $ 0
Purchase of mortgage-backed securities available-for-
sale.................................................... (15,190) 0
Maturities of investment securities...................... 3,000 5,000
Purchases of investment securities held to maturity...... (5,993) (2,500)
Payments received on mortgage-backed securities held to
maturity................................................ 511 109
Purchases of investment securities available for sale.... (643) 0
Purchase of the Federal Home Loan Bank Stock............. 0 (337)
Net increase in loans.................................... (66,200) (90,882)
Proceeds from sale of real estate owned.................. 362 303
Purchases of office properties and equipment............. (3,495) (984)
-------- --------
Net cash used in investing activities.............. (86,979) (89,291)
-------- --------
</TABLE>
3
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS
ENDED JUNE 30
-------------------
1997 1996
-------- ---------
(UNAUDITED)
<S> <C> <C>
Cash flows from financing activities:
Net increase in deposits............................ $ 2,221 $ 16,834
FHLB overnight advances............................. 117,516 205,910
Repayments on FHLB advances......................... (77,344) (144,403)
Net change in advance payments by borrowers for
taxes and insurance................................ 166 377
-------- ---------
Net cash provided by financing activities......... 42,559 78,718
-------- ---------
Net increase in cash and cash equivalents............. (36,641) 608
Cash and cash equivalents at beginning of year........ 53,540 13,277
-------- ---------
Cash and cash equivalents at end of year.............. $ 16,899 $ 13,885
======== =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.......................................... $ 10,531 $ 7,134
======== =========
Income taxes...................................... $ 0 $ 1,500
======== =========
Supplemental disclosures of noncash investing
activities:
Property acquired in settlement of loans............ $ 320 $ 167
======== =========
</TABLE>
4
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1997 AND THE FISCAL YEARS ENDED
MARCH 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES INVESTMENTS
OF ADDITIONAL AVAILABLE TOTAL
PREFERRED COMMON COMMON PAID-IN RETAINED FOR SALE, UNALLOCATED STOCKHOLDERS'
STOCK STOCK STOCK CAPITAL EARNINGS NET ESOP SHARES EQUITY
--------- ------ ------ ---------- -------- ----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1995................... $41,430 $267 $ 41,697
Changes in net
unrealized gain on
investments available
for sale, net of taxes. 118 118
Net income.............. 4,603 4,603
--- ----- --- ------- ------- ---- ------- --------
Balance at March 31,
1996................... 0 0 0 0 46,033 385 0 46,418
Stock issued pursuant to
initial common stock
offering............... 8,062 81 77,510 77,591
Issuance of 645,380
shares to The FIRSTFED
Charitable Foundation
charged to expense..... 645 6 6,448 6,454
Common stock acquired by
ESOP................... (6,970) (6,970)
Reduction in unallocated
ESOP shares charged to
expense................ 774 774
Appreciation in fair
value of allocated ESOP
shares charged to
expense................ 376 376
Change in net unrealized
gain on investments
available for sale,
net.................... (59) (59)
Net loss................ (2,430) (2,430)
--- ----- --- ------- ------- ---- ------- --------
Balance at March 31,
1997................... 0 8,707 87 84,334 43,603 326 (6,196) 122,154
Appreciation in fair
value of allocated ESOP
shares charged to
expense................ 144 144
Change in net unrealized
gain on investments
available for sale,
net.................... 231 231
Net income.............. 1,647 1,647
--- ----- --- ------- ------- ---- ------- --------
Balance at June 30,
1997................... 0 8,707 $87 $84,478 $45,250 $557 $(6,196) $124,176
=== ===== === ======= ======= ==== ======= ========
</TABLE>
5
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of FIRSTFED AMERICA BANCORP, INC. (the "Company"), and its wholly-
owned subsidiaries, First Federal Savings Bank of America (the "Bank") and FAB
FUNDING CORPORATION ("FAB FUNDING"). First Federal Savings Bank of America
includes its wholly-owned subsidiary, FIRSTFED MORTGAGE CORPORATION.
The interim consolidated financial statements reflect all normal and
recurring adjustments which are, in the opinion of management, considered
necessary for a fair presentation of the financial condition and results of
operations for the periods presented. The results of operations for the three
months ended June 30, 1997 are not necessarily indicative of the results of
operations that may be expected for all of fiscal year 1998.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, pursuant to the rules and
regulations of the Securities and Exchange Commission.
These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report to Stockholders on Form 10-K
for the fiscal year ended March 31, 1997.
NOTE 2. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 128, Earnings per Share. SFAS 128
established standards for computing and presenting earnings per share ("EPS").
SFAS 128 replaces the presentation of primary EPS with a presentation of basic
EPS. SFAS 128 also requires dual presentation of basic and diluted EPS on the
face of the statement of operations for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted EPS
computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to Opinion 15.
SFAS 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted. The Company will make the required disclosures in future financial
statements.
NOTE 3. CONVERSION TO STOCK FORM OF OWNERSHIP
The Company is a business corporation formed at the direction of the Bank
under the laws of Delaware on September 6, 1996. On January 15, 1997, (i) the
Bank converted from a federally charted mutual savings bank to a federally
chartered stock savings bank (ii) the Bank issued all of its outstanding
capital stock to the Company and (iii) the Company consummated its initial
public offering of common stock, par value $.01 per share (the "Common
Stock"), by selling at a price of $10.00 per share 7,364,762 shares of Common
Stock to certain of the Bank's eligible account holders who had subscribed for
such shares (collectively, the "Conversion"), by selling 697,010 shares to the
Bank's Employee Stock Ownership Plan and related trust ("ESOP") and by
contributing 645,380 shares of Common Stock to The FIRSTFED Charitable
Foundation (the "Foundation"). The Conversion resulted in net proceeds of
$77.6 million, after expenses of $3.0 million. Net proceeds of $43.4
6
<PAGE>
million were invested in the Bank to increase the Bank's tangible capital to
10% of the Bank's total adjusted assets. The Company established The FIRSTFED
Charitable Foundation dedicated to the communities served by the Bank. In
connection with the Conversion, the common stock contributed by the Company to
the Foundation at a value of $6.5 million was charged to expense.
Prior to the initial public offering and as a part of the subscription
offering, in order to grant priority to eligible depositors, the Bank
established a liquidation account at the time of the conversion in an amount
equal to the retained earnings of the Bank as of the date of its latest
balance sheet date, September 30, 1996, contained in the final Prospectus used
in connection with the Conversion. In the unlikely event of a complete
liquidation of the Bank (and only in such an event), eligible depositors who
continue to maintain accounts at the Bank shall be entitled to receive a
distribution from the liquidation account. The total amount at the liquidation
account is decreased if the balances of eligible depositors decrease at the
annual determination dates. The liquidation account approximated $31.1 million
(unaudited) at March 31, 1997.
The Company may not declare or pay dividends on its stock if such
declaration and payment would violate statutory or regulatory requirements.
In addition to the 25,000,000 authorized shares of common stock, the Company
authorized 1,000,000 shares of preferred stock with a par value of $0.01 per
share (the "Preferred Stock"). The Board of Directors is authorized, subject
to any limitations by law, to provide for the issuance of the shares of
preferred stock in series, to establish from time to time the number of shares
to be included in each such series, and to fix the designation, powers,
preferences, and rights of the shares of each such series and any
qualifications, limitations or restriction thereof. As of June 30, 1997, there
were no shares of preferred stock issued.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1997 AND MARCH 31, 1997
GENERAL
Total assets at June 30, 1997 were $1.021 billion, an increase of $41.1
million, or 4.2%, compared to $979.7 million at March 31, 1997. Asset growth
was primarily attributable to growth in net loans receivable, which increased
from $796.4 million to $861.1 million, an increase of $64.8 million, or 8.1%,
as well as growth in mortgage-backed securities available for sale, which
increased from $31.7 million to $46.5 million, an increase of $14.8 million or
46.6%. This growth was primarily funded by a $39.4 million reduction in
Federal Home Loan Bank Overnight Investments, a reduction in mortgage loans
held for sale which decreased by $8.5 million from $23.3 million to $14.8
million, or 36.6%, as well as Federal Home Loan Bank advances which increased
$40.2 million, or 36.2%, from $111.1 million at March 31, 1997 to $151.2
million at June 30, 1997. This growth provides for increased leverage of
stockholders' equity resulting in a reduction in stockholders' equity to total
assets at March 31, 1997 from 12.47% to 12.16% at June 30, 1997, or a .31%
decrease.
Total deposits at June 30, 1997 were $726.2 million, an increase of $2.2
million, or .31%, compared to $724.0 million at March 31, 1997. The $2.2
million increase was the result of a $4.8 million increase in checking and
savings accounts and a $2.6 million decrease in certificates. Stockholders'
equity at June 30, 1997 was $124.2 million, compared to $122.2 million at
March 31, 1997, an increase of $2.0 million, or 1.66%.
LIQUIDITY AND CAPITAL
The Company's primary sources of funds are deposits, principal and interest
payments on loans and mortgage-backed securities, FHLB advances, investment
maturities, and proceeds from the sale of loans. While scheduled amortization
of loans and investment maturities are predictable sources of funds, deposit
flows and mortgage prepayments are influenced by general interest rates,
economic conditions and competition. The Company has other sources of
liquidity if a need for additional funds arises, including an overnight FHLB
line of credit and approximately $350 million of additional borrowing capacity
at the Federal Home Loan Bank. The Bank has maintained liquid assets in excess
of the required minimum levels as defined by the OTS regulations. This
requirement, which may be varied at the direction of the OTS depending upon
economic conditions and deposit flows, is based upon a percentage of the
Bank's deposits and short-term borrowings. The Bank's current required
liquidity ratio is 5%. At June 30, 1997 and March 1997 the Bank's liquidity
ratio was 5.30% and 13.40% respectively. Management has redeployed excess
liquidity into higher yielding assets during the quarter.
The Company's most liquid assets are cash, Federal Home Loan Bank overnight
deposits, mortgage loans held for sale, investments available for sale, and
mortgage-backed securities available for sale. These asset levels are
dependent on the Company's operating, financing, lending, and investing
activities during any given period. At June 30, 1997, the Bank's cash, Federal
Home Loan Bank overnight deposits, mortgage loans held for sale, investments
available for sale, and mortgage-backed securities available for sale totaled
$79.8 million or 7.8% of the Bank's total assets. Additional investments were
available which qualified for the Bank's regulatory liquidity requirements.
The Company has other sources of liquidity if a need for additional funds
arises, including FHLB advances. At June 30, 1997, the Bank had $151.2 million
in advances outstanding from the FHLB. The Company generally maintains a
competitive deposit rate strategy in its market and sources of funds such as
FHLB advances and repurchase agreements will also be used to supplement cash
flow needs.
At June 30, 1997, the Company had commitments to originate loans and unused
outstanding lines of credit totaling $54.0 million. The Company anticipates
that it will have sufficient funds available to meet its current loan
origination commitments. Certificate accounts which are scheduled to mature in
less than one year from June 30, 1997, totaled $383.9 million.
8
<PAGE>
At June 30, 1997, the consolidated stockholders' equity to total assets
ratio was 12.16%. At June 30, 1997, the Bank exceeded all of its regulatory
capital requirements. The Bank's tangible capital of $103.9 million, or
10.23%, of total adjusted assets, is above the required level of $15.2 million
or 1.5%; core capital of $103.9 million, or 10.23% of total adjusted assets,
is above the required level of $30.5 million, or 3.0%; and risk-based capital
of $110.9 million, or 19.72% of risk-weighted assets, is above the required
level of $45.0 million or 8.0%. The Bank is considered a "well capitalized"
institution under the Office of Thrift Supervision's prompt corrective action
regulations.
ASSET QUALITY
The following table sets forth information regarding non-accrual loans and
real estate owned ("REO"). It is the policy of the Company to cease accruing
interest on loans 90 days or more past due and to charge off all accrued
interest.
<TABLE>
<CAPTION>
AT JUNE 30, AT MARCH 31
----------- -----------
1997 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accrual loans:
Mortgage loans:
One- to four-family.......................... $2,022 $1,908
Multi-family................................. 268 268
Commercial real estate....................... 975 976
Construction and land........................ 117 232
------ ------
Total mortgage loans....................... 3,382 3,384
------ ------
Commercial loans............................... -- --
Consumer loans:
Home equity lines 129 114
Second mortgages............................. 22 95
Other consumer loans......................... 21 69
------ ------
Total consumer loans....................... 172 278
------ ------
Total nonaccrual loans..................... 3,554 3,662
Real estate owned, net(1)........................ 576 665
------ ------
Total non-performing assets................ 4,130 4,327
====== ======
Allowance for loan losses as a percent of
loans(2)........................................ 1.12% 1.09%
Allowance for loan losses as a percent of non-
performing loans(3)............................. 273.99% 239.98%
Non-performing loans as a percent of loans(2)(3). 0.41% 0.45%
Non-performing assets as a percent of total
assets(4)....................................... 0.40% 0.44%
</TABLE>
- --------
(1) REO balances are shown net of related valuation allowances.
(2) Loans includes loans receivable, net, excluding allowance for loan losses.
(3) Non-performing loans consist of all 90 days or more past due and other
loans which have been identified by the Bank as presenting uncertainty
with respect to the collectability of interest or principal.
(4) Non-performing assets consist of non-performing loans and real estate
owned (REO).
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income on interest-
earning assets and expense on interest-bearing liabilities. Net interest
income is a function of both the relative amounts of interest earning assets
and interest-bearing liabilities, and the interest rates earned or paid on
them.
9
<PAGE>
The following table sets forth certain information relating to the Company
for the three months ended June 30, 1997 and June 30, 1996. The average yields
and costs are derived by dividing income or expense by the average balance of
interest earning assets or interest bearing liabilities, respectively, for the
periods shown. Average balances are derived from average month-end balances.
Management does not believe that the use of average monthly balances instead
of average daily balances has caused any material differences in the
information presented. The yields and the costs include fees, premiums and
discounts which are considered adjustments to yields.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
-----------------------------------------------------------
1997 1996
------------------------------ ----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST YIELD/COST BALANCE INTEREST YIELD/COST
--------- -------- ---------- ------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans receivable, net
and mortgage loans
held for sale........ 853,268 16,319 7.67% 695,716 13,295 7.66%
Investment securities. 45,457 683 6.03% 29,813 464 6.24%
Mortgage-backed
securities........... 58,073 1,001 6.91% 7,199 126 7.02%
--------- ------ ---- ------- ------ ----
Total interest-
earning assets..... 956,798 18,003 7.55% 732,728 13,885 7.60%
------ ---- ------ ----
Noninterest-earning
assets................. 44,367 31,002
--------- -------
Total assets........ 1,001,165 763,730
========= =======
LIABILITIES AND RETAINED
EARNINGS:
Interest-bearing
liabilities:
Deposits.............. 684,632 8,575 5.02% 548,491 6,789 4.96%
FHLB advances......... 130,383 2,026 6.23% 108,671 1,627 6.01%
--------- ------ ---- ------- ------ ----
Total interest-
bearing
liabilities........ 815,015 10,601 5.22% 657,162 8,416 5.14%
------ ---- ------ ----
Noninterest-bearing
liabilities............ 62,967 59,612
--------- -------
Total liabilities... 877,982 716,774
--------- -------
Retained earnings....... 123,183 46,956
--------- -------
Total liabilities
and retained
earnings........... 1,001,165 763,730
========= =======
Net interest rate
spread................. 7,402 2.33% 5,469 2.46%
====== ==== ====== ====
Net interest margin..... 3.10% 2.99%
==== ====
Ratio of interest-
earning assets to
interest-bearing
liabilities............ 117.40% 111.50%
========= =======
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1997
AND THE THREE MONTHS ENDED JUNE 30, 1996
GENERAL
Net income increased to $1.6 million for the three months ended June 30,
1997, compared to net income of $1.1 million for the three months ended June
30, 1996, an increase of 53.8%. The increase in net income is due to growth in
residential, commercial, and consumer loan balances as well as investment
earnings on the $77.6 million of net conversion proceeds raised on January 15,
1997.
10
<PAGE>
INTEREST INCOME
Interest income for the three months ended June 30, 1997 was $18.0 million,
compared to $13.9 million for the three months ended June 30, 1996, an
increase of $4.1 million, or 29.7%. The increase in interest income is
primarily attributable to a $224.1 million increase in average interest-
earning assets which increased to $956.8 million for the three months ended
June 30, 1997 from $732.7 million for the three months ended June 30, 1996.
The increase in average interest-earning balances was partially offset by a
five basis point decrease in the average yield. The average yield on interest-
earning assets decreased to 7.55% for the three months ended June 30, 1997
from 7.60% for the three months ended June 30, 1996.
Interest income on loans receivable and mortgage loans held for sale for the
quarter ended June 30, 1997 increased by $3.0 million, or 22.7%, to $16.3
million compared to $13.3 million for the same quarter in 1996. This increase
was primarily attributable to an increase of $157.6 million in the average
loan balance and a one basis point increase in yield on loans receivable and
mortgage loans held for sale. Interest income from short-term investments,
investment securities and Federal Home Loan Bank stock was $683,000 for the
quarter ended June 30, 1997, compared to $464,000 for the comparable quarter
in 1996. The average yield on investment securities declined by 21 basis
points due to the impact of increased short-term investment balances carried
in portfolio during the quarter ending June 30, 1997 with lower yields than
the longer-term U.S. Treasury Securities which comprised most of the portfolio
in the quarter ending June 30, 1996. The average balance increased by $15.6
million to an average of $45.5 million during the three months ending June 30,
1997. Interest on mortgage-backed securities for the quarter ended June 30,
1997 increased by $875,000 to $1.0 million, compared to $126,000 for the same
quarter in 1996. This increase in income was due to the combined effects of a
$50.9 million increase in the average balance offset by a decrease in average
yield of 11 basis points to 6.91% during the quarter ended June 30, 1997,
compared to the quarter ended June 30, 1996.
INTEREST EXPENSE
Interest expense for the three months ended June 30, 1997 was $10.6 million,
compared to $8.4 million for the three months ended June 30, 1996, an increase
of $2.2 million, or 26.0%. The increase in interest expense was primarily the
result of an increase in the average outstanding balance of total interest-
bearing liabilities which increased to $815.0 million for the three months
ended June 30, 1997, from $657.2 million for the three months ended June 30,
1996.
NET INTEREST INCOME
Net interest income before provision for loan losses was $7.4 million for
the three months ended June 30, 1997 compared to $5.5 million for the three
months ended June 30, 1996. This was a $1.9 million, or 35.3%, increase. Net
interest income improved as the increase in the average balance of interest-
earning assets more than offset a decrease in the net interest rate spread,
from 2.46% for the three months ended June 30, 1996 to 2.33% for the three
months ended June 30, 1997. The decrease in the net interest rate spread was
primarily due to an increase in the average balance of higher cost certificate
accounts and Federal Home Loan Bank advances. The Company's net interest
margin increased to 3.10% for the three months ended June 30, 1997 from 2.99%
for the three months ended June 30, 1996.
PROVISION FOR LOAN LOSSES
For the three months ended June 30, 1997, the Company's provision for loan
losses was $1.0 million, compared to the same amount for the same prior year
period. Loan balances have increased steadily over an extended period of time,
and are expected to continue increasing, thus general reserve balances have
been increased accordingly. Additionally, consumer and commercial lending
balances continue to increase and these types of lending carry greater credit
risk than the residential lending which has in past years been the Bank's core
lending strategy. The allowance for loan losses as a percentage of loans at
June 30, 1997 was 1.12% as compared to 1.09% at March 31, 1997 and .88% at
June 30, 1996.
11
<PAGE>
NONINTEREST INCOME
Noninterest income increased to $1.3 million for the three months ended June
30, 1997 compared to $1.2 million for the three months ended June 30, 1996, an
increase of $72,000, or 5.9%. Loan servicing income decreased to $651,000
compared to $693,000 and gain/(loss) on sale of mortgage loans improved to
$538,000 from $493,000. These changes were primarily due to the effect of SFAS
No. 122, "Accounting for Mortgage Servicing Rights", ("SFAS No. 122") on April
1, 1996, which results in the recognition of mortgage servicing rights on loans
originated and sold during the period, as a component of the gain/(loss) on sale
of mortgage loans. The mortgage servicing rights are amortized as a reduction to
loan servicing income.
NONINTEREST EXPENSE
Total noninterest expense was $4.7 million for the quarter ended June 30, 1997
compared to $3.8 million for the comparable quarter in 1996. Compensation and
benefits increased by $604,000 or 29.1% from $2.1 million for the quarter ended
June 30, 1996 to $2.7 million for the quarter ended June 30, 1997. The primary
reasons for the increase in compensation and employee benefits were $338,000
in expense related to the Bank's Employee Stock Ownership Plan in the quarter
ending June 30, 1997, for which there was no corresponding expense in the
quarter ending June 30, 1996, as well as additional salary expenses related to
the Bank's branch expansion strategy. Office occupancy expense also increased
because of the branch expansion strategy to $603,000 for the quarter ended June
30, 1997 versus $420,000 for the quarter ended June 30, 1996, an increase of
$183,000 or 43.6%. Federal deposit insurance premiums expense decreased by
$190,000, or 62.9%, from $302,000 during the quarter ended June 30, 1996 to
$112,000 for the quarter ended June 30, 1997 due to reduced premiums as a result
of the Savings Association Insurance Fund recapitalization during the quarter
ending September 30, 1996. Other noninterest expense increased to $894,000 for
the quarter ended June 30, 1997 versus $595,000 for the quarter ended June 30,
1996, an increase of $299,000, or 50.3%. The largest changes in this category
came from a $155,000 increase in professional fees, and a $69,000 increase in
new holding company related expenses.
INCOME TAXES
Income tax expense increased by $527,000, or 67.5%, to $1.3 million, for the
quarter ended June 30, 1997 compared to $781,000 for the quarter ended June
30, 1996 due to increased income before taxes. The effective income tax rates
for the June 30, 1997 and June 30, 1996 quarters were 44% and 42%,
respectively. The Company's effective tax rate increased as a result of non-
deductible expenses recorded for the appreciation in the fair value of the
allocated ESOP shares.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not engaged in any legal proceedings of a material nature at
the present time. From time to time, the Company is a party to routine legal
proceedings within the normal course of business. Such routine legal
proceedings in the aggregate are believed by management to be immaterial to
the Company's financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on August 5, 1997. The following
proposals were voted on by the stockholders:
<TABLE>
<CAPTION>
WITHHELD/ BROKER
PROPOSAL FOR AGAINST ABSTAIN NON-VOTES
- -------- --------- ------- --------- ---------
<S> <C> <C> <C> <C>
1)Election of Directors:
Thomas A. Rodgers, Jr................... 7,729,126 100,017
Anthony L. Sylvia....................... 7,737,891 91,252
2)Approval of the FIRSTFED
AMERICA BANCORP, INC
1997 Stock-Based Incentive Plan.......... 5,576,111 251,190 45,886 1,955,956
3)Ratification of KPMG Peat Marwick
LLP as independent auditors of the
Company for the fiscal year ending
March 31, 1998........................... 7,699,425 93,268 36,450
</TABLE>
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
<TABLE>
<S> <C>
3.1 Certificates of Incorporation of FIRSTFED AMERICA BANCORP, INC.*
3.2 Bylaws of FIRSTFED AMERICA BANCORP, INC.*
4.0 Stock Certificate of FIRSTFED AMERICA BANCORP, INC.*
11 Computation of earnings per share
27 Financial Data Schedule ( filed herewith )
</TABLE>
b) Reports on Form 8-K
None
- --------
* Incorporated herein by reference into this document from the Exhibits to
Form S-1, Registration Statement, filed on September 27, 1996, as amended,
Registration No. 333-12855.
13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Firstfed America Bancorp, Inc.
Registrant
Date: August 14, 1997 /s/ Robert F. Stoico
President and Chief Executive
Officer and
Chairman of the Board
(Principal Executive Officer)
Date: August 14, 1997 /s/ Edward A. Hjerpe III
Senior Vice President
(Principal Accounting and Financial
Officer)
14
<PAGE>
EXHIBIT 11.
FIRSTFED AMERICA BANCORP, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, 1997
------------------
<S> <C>
Net Income.................................................. $ 1.647
==========
Weighted average shares outstanding:
Weighted average shares issued............................ 8,707,152
Less: Unallocated shares held by the ESOP................. (607,045)
Plus: ESOP shares released or committed to be released
during the fiscal year................................... 9,760
----------
Weighted average shares outstanding..................... 8,109,867
==========
Earnings per share.......................................... $ .20
==========
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 16,899
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 47,504
<INVESTMENTS-CARRYING> 38,911
<INVESTMENTS-MARKET> 39,222
<LOANS> 861,127
<ALLOWANCE> 9,746
<TOTAL-ASSETS> 1,020,876
<DEPOSITS> 726,197
<SHORT-TERM> 64,695
<LIABILITIES-OTHER> 19,269
<LONG-TERM> 86,539
0
0
<COMMON> 87
<OTHER-SE> 124,089
<TOTAL-LIABILITIES-AND-EQUITY> 1,020,876
<INTEREST-LOAN> 16,319
<INTEREST-INVEST> 1,530
<INTEREST-OTHER> 154
<INTEREST-TOTAL> 18,003
<INTEREST-DEPOSIT> 8,575
<INTEREST-EXPENSE> 10,601
<INTEREST-INCOME-NET> 7,402
<LOAN-LOSSES> 1,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,749
<INCOME-PRETAX> 2,955
<INCOME-PRE-EXTRAORDINARY> 2,955
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,647
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<YIELD-ACTUAL> 3.04
<LOANS-NON> 3,554
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,462
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,788
<CHARGE-OFFS> 53
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 9,746
<ALLOWANCE-DOMESTIC> 9,746
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,095
</TABLE>
