<PAGE>
================================================================================
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 SEPTEMBER 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 FIRSTFED PARK,
SWANSEA,
MASSACHUSETTS 02777
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 679-8181
ONE NORTH MAIN ST., FALL RIVER, MASSACHUSETTS 02720
(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 September 30, 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
----
<C> <S> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1997 (unaudited)
and March 31, 1997.............................................. 2
Consolidated Statements of Operations for the three months and
six months ended September 30, 1997 (unaudited) and 1996
(unaudited)..................................................... 3
Consolidated Statements of Changes in Stockholders' Equity for
the six months ended September 30, 1997 (unaudited) and the
years ended March 31, 1997, 1996, and 1995...................... 4
Consolidated Statements of Cash Flows for the six months ended
September 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 Operations........................................... 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................... 18
Item 2. Changes in Securities........................................... 18
Item 3. Default Upon Senior Securities.................................. 18
Item 4. Submission of Matters to a Vote of Security Holders............. 18
Item 5. Other Information............................................... 18
Item 6. Exhibits and Reports on Form 8-K................................ 18
Signatures............................................................... 19
</TABLE>
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
A S S E T S 1997 1997
----------- ------------- ---------
(UNAUDITED)
<S> <C> <C>
Cash on hand and due from banks.................................. $ 13,011 $ 14,130
Short-term investments........................................... 3,435 39,410
Mortgage loans held for sale..................................... 17,742 23,331
Investment securities available for sale (amortized cost of
$1,367 and $5).................................................. 2,678 888
Mortgage-backed securities available for sale (amortized cost of
$44,497 and $32,059)............................................ 44,711 31,732
Investment securities held to maturity (fair value $25,082 and
$20,958)........................................................ 24,984 20,991
Mortgage-backed securities held to maturity (fair value of
$14,630 and $15,578)............................................ 14,300 15,435
Stock in Federal Home Loan Bank of Boston........................ 9,531 9,531
Loans receivable, net............................................ 870,931 796,355
Accrued interest receivable...................................... 5,318 4,722
Office properties and equipment, net............................. 20,808 14,215
Mortgage servicing rights........................................ 2,421 1,630
Real estate owned, net........................................... 680 665
Deferred income tax asset, net................................... 3,536 4,511
Income tax receivable............................................ -- 263
Prepaid expenses and other assets................................ 1,976 1,927
---------- --------
Total assets................................................. $1,036,062 $979,736
========== ========
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
- -----------------------------------------------------------------
Liabilities:
Deposits....................................................... $ 707,694 $723,976
Federal Home Loan Bank advances................................ 181,533 111,062
Advance payments by borrowers for taxes and insurance.......... 4,933 5,580
Accrued interest payable....................................... 925 717
Accrued income taxes........................................... 416 --
Other liabilities.............................................. 14,122 16,247
---------- --------
Total liabilities............................................ 909,623 857,582
---------- --------
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..................................... 84,605 84,334
Retained earnings.............................................. 47,032 43,603
Unrealized gain on securities available for sale, net of tax... 911 326
Unallocated ESOP shares........................................ (6,196) (6,196)
---------- --------
Total stockholders' equity................................... 126,439 122,154
---------- --------
Total liabilities and stockholders' equity................... $1,036,062 $979,736
========== ========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
2
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- --------------------
1997 1996 1997 1996
----------- ---------- ---------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans............................. $ 17,003 $ 14,582 $ 33,322 $ 27,877
Investment securities............. 476 448 1,005 806
Mortgage-backed securities........ 1,028 247 2,028 373
Federal Home Loan Bank stock...... 156 145 311 251
----------- --------- ---------- --------
Total interest and dividend
income......................... 18,663 15,422 36,666 29,307
----------- --------- ---------- --------
Interest expense:
Deposit accounts.................. 8,434 7,195 17,009 13,984
Borrowed funds.................... 2,720 2,555 4,746 4,182
----------- --------- ---------- --------
Total interest expense.......... 11,154 9,750 21,755 18,166
----------- --------- ---------- --------
Net interest income before
provision for loan losses...... 7,509 5,672 14,911 11,141
Provision for loan losses........... 750 1,000 1,750 2,000
----------- --------- ---------- --------
Net interest income after
provision for loan losses...... 6,759 4,672 13,161 9,141
Noninterest income:
Loan servicing income, net........ 645 682 1,296 1,372
Gain on sale of mortgage loans,
net.............................. 362 145 475 189
Gain on sale of investments....... 30 0 30 0
Other income...................... 541 441 1,079 935
----------- --------- ---------- --------
Total noninterest income........ 1,578 1,268 2,880 2,496
----------- --------- ---------- --------
Noninterest expense:
Compensation and employee
benefits......................... 3,318 2,294 5,997 4,369
Office occupancy and equipment.... 584 480 1,187 900
Advertising and business
promotion........................ 178 238 462 513
Federal deposit insurance......... 118 3,217 230 3,519
Data processing................... 182 149 358 329
Other expense..................... 798 613 1,693 1,206
----------- --------- ---------- --------
Total noninterest expense....... 5,178 6,991 9,927 10,836
----------- --------- ---------- --------
Income (loss) before income tax
expense........................ 3,159 (1,051) 6,114 801
Income tax expense (benefit)........ 1,377 (444) 2,685 337
----------- --------- ---------- --------
Net income (loss)............... $ 1,782 $ (607) $ 3,429 $ 464
=========== ========= ========== ========
Earnings per share.................. $ 0.22 N/A $ 0.42 N/A
=========== ========= ========== ========
Weighted average shares outstanding
(not in thousands) ................ 8,129,282 N/A 8,119,628 N/A
=========== ========= ========== ========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
3
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND THE YEARS ENDED MARCH 31, 1997
AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES OF ADDITIONAL INVESTMENTS UNALLOCATED TOTAL
PREFERRED COMMON COMMON PAID-IN RETAINED AVAILABLE ESOP STOCKHOLDERS'
STOCK STOCK STOCK CAPITAL EARNINGS FOR SALE, NET 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................ -- -- -- 271 -- -- -- 271
Change in net unrealized
gain on investments
available for sale,
net.................... -- -- -- -- -- 585 -- 585
Net income.............. -- -- -- -- 3,429 -- -- 3,429
--- ----- --- ------- ------- ---- ------- --------
Balance at September 30,
1997................... 0 8,707 $87 $84,605 $47,032 $911 $(6,196) $126,439
=== ===== === ======= ======= ==== ======= ========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
4
<PAGE>
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 3,429 $ 464
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization (accretion) of:
Premium on investment and mortgage-backed
securities...................................... 10 (6)
Deferred loan origination fees, net.............. 226 158
Mortgage servicing rights........................ 230 21
Provisions for:
Loan losses...................................... 1,750 2,000
Deferred income taxes............................ 590 (1,641)
(Gains) losses on sales of:
Investment securities available for sale......... (30) --
Real estate owned................................ (29) 19
Mortgage loans................................... (475) (189)
Net proceeds from sales of mortgage loans......... 108,962 89,621
Origination of loans held for sale................ (103,918) (86,739)
Real estate owned valuation write-downs........... 138 25
Depreciation of office properties and equipment... 644 413
Appreciation in fair value of allocated ESOP
shares........................................... 271 --
Earned SIP shares................................. 490 --
Increase or decrease in:
Accrued interest receivable...................... (596) (830)
Income tax receivable............................ 263 (141)
Prepaid expenses and other assets................ (49) (1,589)
Accrued interest payable......................... 208 490
Accrued income taxes and other liabilities....... (2,199) 4,936
------------ ------------
Net cash provided by operating activities....... 9,915 7,012
------------ ------------
Cash flows from investing activities:
Payments received on mortgage-backed securities
available for sale............................... 2,739 --
Purchase of mortgage-backed securities available-
for-sale......................................... (15,190) (9,996)
Maturities of investment securities............... 6,000 9,000
Purchases of investment securities held to
maturity......................................... (9,987) (7,993)
Payments received on mortgage-backed securities
held to maturity................................. 1,133 374
Purchases of investment securities available for
sale............................................. (1,473) --
Sales of investment securities available for sale. 141 --
Purchase of the Federal Home Loan Bank Stock...... -- (2,901)
Net increase in loans............................. (77,289) (138,997)
Proceeds from sale of real estate owned........... 613 405
Purchases of office properties and equipment...... (7,238) (2,256)
------------ ------------
Net cash used in investing activities........... (100,551) (152,364)
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits............... (16,282) 52,365
FHLB overnight advances........................... 290,065 416,279
Repayments on FHLB advances....................... (219,594) (324,423)
Net change in advance payments by borrowers for
taxes and insurance.............................. (647) 193
------------ ------------
Net cash provided by financing activities....... 53,542 144,414
------------ ------------
Net increase in cash and cash equivalents.......... (37,094) (938)
Cash and cash equivalents at beginning of period... 53,540 13,277
------------ ------------
Cash and cash equivalents at end of period......... $ 16,446 $ 12,339
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.......................................... $ 21,547 $ 17,676
============ ============
Income taxes...................................... $ 1,322 $ 3,000
============ ============
Supplemental disclosures of noncash investing
activities:
Property acquired in settlement of loans.......... $ 737 $ 432
============ ============
</TABLE>
See accompanying condensed notes to consolidated financial statements.
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 and six months ended September 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 has determined that the adoption will not have a
material impact in comparison to reported EPS.
In February, 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure", which will be effective for 1997 financial
statements. The Company's disclosures currently comply with the provisions of
this statement.
In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and displaying
comprehensive income, which is defined as all changes to equity except
investments by and distributions to shareholders. Net income is a component of
comprehensive income, with all other components referred to in the aggregate
as other comprehensive income. This statement is effective for 1998 financial
statements.
6
<PAGE>
The FASB also issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" in June, 1997, which established standards
for reporting information about operating segments. An operating segment is
defined as a component of a business for which separate financial information
is available that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and evalute performance. This statement
requires a company to disclose certain income statement and balance sheet
information by operating segment, as well as provide a reconciliation of
operating segment information to the company's consolidated balances. This
statement is effective for 1998 annual 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
charted 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 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 September 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 SEPTEMBER 30, 1997 AND MARCH 31, 1997
GENERAL
Total assets at September 30, 1997 were $1.036 billion, an increase of $56.3
million, or 5.8%, 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 $870.9 million, an increase of $74.6 million, or 9.4%,
as well as growth in mortgage-backed securities available for sale, which
increased from $31.7 million to $44.7 million, an increase of $13.0 million or
40.9%. Partially offsetting this growth was a $36.0 million reduction in
short-term investments which decreased from $39.4 million at March 31, 1997 to
$3.4 million at September 30, 1997. Balance sheet growth was primarily funded
by Federal Home Loan Bank advances, which increased $70.5 million, or 63.5%,
from $111.1 million at March 31, 1997 to $181.5 million at September 30, 1997.
This growth resulted in a reduction in stockholders' equity to total assets at
March 31, 1997 from 12.47% to 12.20% at September 30, 1997, or a .27%
decrease.
Total deposits at September 30, 1997 were $707.7 million, a decrease of
$16.3 million, or 2.3%, compared to $724.0 million at March 31, 1997.
Stockholders' equity at September 30, 1997 was $126.4 million, compared to
$122.2 million at March 31, 1997, an increase of $4.3 million, or 3.5%.
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 $450 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 September 30, 1997 and March 30, 1997 the Bank's
liquidity ratio was 5.33% and 13.40% respectively. Management has redeployed
excess liquidity into higher yielding assets during the quarter.
The Company's most liquid assets are cash, short-term investments, 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 September 30, 1997, the Bank's cash, short-term investments,
mortgage loans held for sale, investments available for sale, and mortgage-
backed securities available for sale totaled $81.6 million or 7.9% 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 September 30, 1997, the Bank had $181.5
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 may be used to supplement cash flow
needs.
At September 30, 1997, the Company had commitments to originate portfolio
loans and unused outstanding lines of credit totaling $89.9 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 September 30, 1997, totaled $389.8
million.
8
<PAGE>
At September 30, 1997, the consolidated stockholders' equity to total assets
ratio was 12.20%. At September 30, 1997, the Bank exceeded all of its
regulatory capital requirements. The Bank's tangible capital of $105.4
million, or 10.23%, of total adjusted assets, is above the required level of
$15.4 million or 1.5%; core capital of $105.4 million, or 10.23% of total
adjusted assets, is above the required level of $30.9 million, or 3.0%; and
risk-based capital of $112.5 million, or 19.58% of risk-weighted assets, is
above the required level of $46.0 million or 8.0%. The Bank is considered a
"well capitalized" institution under the Office of Thrift Supervision's prompt
corrective action regulations.
OFF-BALANCE SHEET
At September 30, 1997, the Company maintained two off-balance sheet interest
rate swap positions with notional principal balances totaling $50 million.
There were no off-balance sheet interest rate swap positions at March 31,
1997. These positions require the Company to pay a long term fixed rate that
was set at the time the positon was established, and requires the swap's
counterparty to pay the Company a short-term rate that resets semi-annually
based on the 6 month London Inter Bank Offer Rate (LIBOR). This position is a
hedge to the Company's natural source of short-term funds, short-term
deposits, and reduces the Company's "liability sensitive" interest rate risk
profile. The remaining terms of these swaps were approximately 4 and 5 years
at September 30, 1997.
9
<PAGE>
ASSET QUALITY
At September 30, 1997, non-accrual loans totaled $3.3 million and REO
totaled $680,000. 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.
Foregone interest on non-accrual loans for the six months ended September 30,
1997 was $57,000. The following table sets forth information regarding non-
accrual loans and real estate owned ("REO").
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
1997 1997
---------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accrual loans:
Mortgage loans:
One- to four-family....................... $1,539 $1,908
Multi-family.............................. 268 268
Commercial real estate.................... 1,142 976
Construction and land..................... 117 232
------ ------
Total mortgage loans.................... 3,066 3,384
------ ------
Commercial loans............................ 101 --
Consumer loans:
Home equity lines......................... 128 114
Second mortgages.......................... 10 95
Other consumer loans...................... 32 69
------ ------
Total consumer loans.................... 170 278
------ ------
Total nonaccrual loans.................. 3,337 3,662
Real estate owned, net(1)..................... 680 665
------ ------
Total non-performing assets............. $4,017 $4,327
====== ======
Allowance for loan losses as a percent of
loans(2)..................................... 1.18% 1.09%
Allowance for loan losses as a percent of non-
performing loans(3).......................... 312.47% 239.98%
Non-performing loans as a percent of
loans(2)(3).................................. 0.38% 0.45%
Non-performing assets as a percent of total
assets(4).................................... 0.39% 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).
10
<PAGE>
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.
The following table sets forth certain information relating to the Company
for the three months ended September 30, 1997 and September 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 causes 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 SEPTEMBER 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........ $ 882,676 $17,003 7.64% $766,490 $14,582 7.55%
Investments........... 39,147 632 6.41% 32,343 593 7.27%
Mortgage-backed
securities........... 60,485 1,028 6.74% 14,523 247 6.75%
---------- ------- ---- -------- ------- ----
Total interest-
earning assets..... 982,308 18,663 7.54% 813,356 15,422 7.52%
------- ---- ------- ----
Noninterest-earning
assets................. 48,171 33,426
---------- --------
Total assets........ $1,030,479 $846,782
========== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing
liabilities:
Deposits.............. $ 675,078 8,434 4.96% $577,002 7,195 4.95%
FHLB advances......... 170,015 2,720 6.35% 163,963 2,555 6.18%
---------- ------- ---- -------- ------- ----
Total interest-
bearing
liabilities........ 845,093 11,154 5.24% 740,965 9,750 5.22%
------- ---- ------- ----
Noninterest-bearing
liabilities............ 60,019 58,181
---------- --------
Total liabilities... 905,112 799,146
---------- --------
Stockholders' equity.... 125,367 47,636
---------- --------
Total liabilities
and stockholders'
equity............. $1,030,479 $846,782
========== ========
Net interest rate
spread................. $ 7,509 2.30% $ 5,672 2.30%
======= ==== ======= ====
Net interest margin..... 3.03% 2.77%
==== ====
Ratio of interest-
earning assets to
interest-bearing
liabilities............ 116.24% 109.77%
========== ========
</TABLE>
11
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1997 AND THE THREE MONTHS ENDED SEPTEMBER 30, 1996
GENERAL
Net income increased to $1.8 million for the three months ended September
30, 1997, compared to a net loss of $607,000 for the three months ended
September 30, 1996. Results for the three months ended September 30, 1996
included a one-time, pre-tax charge of $2.9 million for the SAIF Special
Assessment to recapitalize the Savings Association Insurance Fund. Excluding
the SAIF assessment, after-tax earnings for the three months ended September
30, 1996 were $1.1 million. The $726,000 increase in net income excluding the
SAIF assessment for the three months ended September 30, 1997 was primarily
due to growth in interest-earning assets.
INTEREST INCOME
Interest and dividend income for the three months ended September 30, 1997
was $18.7 million, compared to $15.4 million for the three months ended
September 30, 1996, an increase of $3.2 million, or 21.0%. The increase in
interest and dividend income is primarily attributable to a $169.0 million
increase in average interest-earning assets which increased to $982.3 million
for the three months ended September 30, 1997 from $813.4 million for the
three months ended September 30, 1996. The increase in average interest-
earning balances was accompanied by a two basis point increase in the average
yield from 7.52% for the three months ended September 30, 1996 to 7.54% for
the three months ended September 30, 1997.
Interest income on loans receivable and mortgage loans held for sale for the
three months ended September 30, 1997 increased by $2.4 million, or 16.6%, to
$17.0 million compared to $14.6 million for the same three months in 1996.
This increase was primarily attributable to an increase of $116.2 million in
the average loan balance and a nine basis point increase in yield on loans
receivable and mortgage loans held for sale.
Interest and dividend income from investments was $632,000 for the three
months ended September 30, 1997, compared to $593,000 for the comparable three
months in 1996. The average yield on investment securities declined by 86
basis points during the three months ended September 30, 1997 versus the three
months ended September 30, 1996, caused primarily by higher balances of lower
yielding short-term investments and a lower portfolio yield on Treasury
securities. Investment securities increased by $6.8 million to an average of
$39.1 million during the three months ending September 30, 1997 from $32.3
million during the three months ended September 30, 1996.
Interest on mortgage-backed securities for the three months ended September
30, 1997 increased by $781,000 to $1.0 million, compared to $247,000 for the
same three months in 1996. This increase in income is attributable to a $46.0
million increase in the average balance of mortgage-backed securities during
the three months ended September 30, 1997 versus the three months ended
September 30, 1996.
INTEREST EXPENSE
Interest expense for the three months ended September 30, 1997 was $11.2
million, compared to $9.8 million for the three months ended September 30,
1996, an increase of $1.4 million, or 14.4%. The increase in interest expense
during this time period was due to an increase in average interest-bearing
liabilities and a two basis increase in their associated cost. Average
interest-bearing liabilities increased $104.1 million, or 14.1%, to $845.1
million for the three months ended September 30, 1997, from $741.0 million for
the three months ended September 30, 1996. Of this amount, the largest growth
was in average deposits which grew 17.0% to $675.1 million during the three
months ended September 30, 1997 versus $ 577.0 million during the same period
in 1996. The cost of Federal Home Loan Bank Advances increased 17 basis points
during this time period, from 6.18% to 6.35%, as the Company actively extended
liability maturities through longer-term, higher rate advances. In addition,
average Federal Home Loan Bank advance balances increased $6.1 million to
$170.0 million during the three months ended September 30, 1997 from $164.0
million during the three months ended September 30, 1996.
12
<PAGE>
NET INTEREST INCOME
Net interest income before provision for loan losses increased $1.8 million,
or 32.4%, to $7.5 million for the three months ended September 30, 1997 from
$5.7 million for the three months ended September 30, 1996. Net interest
income improved during this time period because the $169.0 million increase in
average interest-earning assets was funded by a $104.1 million increase in
average interest-bearing liabilities, with the $64.9 million difference being
funded by a $77.7 million increase in stockholders' equity. Most of the
increase in stockholders' equity came from net stock conversion proceeds
raised during the Company's initial public offering in January of 1997. The
Company's net interest margin increased to 3.03% for the three months ended
September 30, 1997 from 2.77% for the three months ended September 30, 1996, a
by-product of the increase in net interest income before provision for loan
losses.
PROVISION FOR LOAN LOSSES
For the three months ended September 30, 1997, the Company's provision for
loan losses was $750,000 compared to $1.0 million for the same prior year
period. Loan balances have steadily increased over an extended period of time,
and are expected to continue increasing, thus allowance for loan loss balances
have been increased accordingly. Additionally, while residential lending
remains the Bank's core lending strategy, the portfolio balances of consumer
and commercial loans continue to increase relative to the balance of
residential mortgages. The fact that consumer and commercial loans have
greater credit risk than residential loans has also been factored into the
increase in allowance for loan loss balances. The allowance for loan loss as a
percentage of loans at September 30, 1997 was 1.18% as compared to 1.09% at
March 31, 1997.
NONINTEREST INCOME
Noninterest income increased to $1.6 million for the three months ended
September 30, 1997 compared to $1.3 million for the three months ended
September 30, 1996, an increase of $310,000, or 24.5%. During this time
period, net loan servicing income decreased to $645,000 compared to $682,000
and gain/(loss) on sale of mortgage loans increased to $362,000 from $145,000.
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 of
loan servicing income.
NONINTEREST EXPENSE
Total noninterest expense was $5.2 million for the three months ended
September 30, 1997 compared to $7.0 million for the comparable three months in
1996. Compensation and benefits increased by $1.0 million to $3.3 million for
the three months ended September 30, 1997 from $2.3 million for the three
months ended September 30, 1996. The increase in compensation is primarily due
to expenses related to the Bank's ESOP, which was created at the time of the
initial public offering, and expenses related to the Stock-based Incentive
Plan, which was approved by stockholders in August of 1997, both of which
totaled $811,000 for the quarter. There were no corresponding expenses for
these items in the three months ended September 30, 1996.
Federal deposit insurance expense decreased by $3.1 million, or 96.3%, to
$118,000 for the three months ended September 30, 1997 from $3.2 million
during the three months ended September 30, 1996. Federal deposit insurance
expense for the three months ended September 30, 1996 included a one-time,
pre-tax charge of $2.9 million for the SAIF Special Assessment to recapitalize
the Savings Association Insurance Fund.
Other noninterest expense increased to $798,000 for the three months ended
September 30, 1997 versus $613,000 for the three months ended September 30,
1996, an increase of $185,000, or 30.2%. The largest changes in this category
came from a $85,000 increase in professional fees, and a $63,000 increase in
new stockholder related expenses. Office occupancy expense was up $104,000 to
$584,000 in the three months ended
13
<PAGE>
September 30, 1997 from $480,000 in the three months ended September 30, 1996.
Most of this increase was caused by expenses related to the opening of two new
banking branches and the renovation of other existing branches.
INCOME TAXES
Income tax expense was $1.4 million for the three months ended September 30,
1997 compared to an income tax benefit of $444,000 for the three months ended
September 30, 1996, an increase of $1.8 million, caused by the increase in
income before taxes. The effective income tax rates for the September 30, 1997
and September 30, 1996 three months 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.
The following table sets forth certain information relating to the Company
for the six months ended September 30, 1997 and September 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 SIX MONTHS ENDED SEPTEMBER 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........ $ 866,837 $33,322 7.67% $730,921 $27,877 7.61%
Investments........... 43,324 1,316 6.06% 31,342 1,057 6.73%
Mortgage-backed
securities........... 58,970 2,028 6.86% 11,393 373 6.53%
---------- ------- ---- -------- ------- ----
Total interest-
earning assets..... 969,131 36,666 7.55% 773,656 29,307 7.56%
------- ---- ------- ----
Noninterest-earning
assets................. 45,969 31,902
---------- --------
Total assets........ $1,015,100 $805,558
========== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest-bearing
liabilities:
Deposits.............. $ 679,241 17,009 4.99% $563,503 13,984 4.95%
FHLB advances......... 150,052 4,746 6.31% 136,270 4,182 6.12%
---------- ------- ---- -------- ------- ----
Total interest-
bearing
liabilities........ 829,293 21,755 5.23% 699,773 18,166 5.18%
------- ---- ------- ----
Noninterest-bearing
liabilities............ 61,518 58,506
---------- --------
Total liabilities... 890,811 758,279
Stockholders' equity.... 124,289 47,279
---------- --------
Total liabilities
and stockholders'
equity............. $1,015,100 $805,558
========== ========
Net interest rate
spread................. $14,911 2.32% $11,141 2.38%
======= ==== ======= ====
Net interest margin..... 3.07% 2.87%
==== ====
Ratio of interest-
earning assets to
interest-bearing
liabilities............ 116.86% 110.56%
========== ========
</TABLE>
14
<PAGE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30,
1997 AND THE SIX MONTHS ENDED SEPTEMBER 30, 1996
GENERAL
Net income increased to $3.4 million for the six months ended September 30,
1997, compared to $464,000 for the six months ended September 30, 1996.
Results for the six months ended September 30, 1996 included a one-time, pre-
tax charge of $2.9 million for the SAIF Special Assessment to recapitalize the
Savings Association Insurance Fund that was paid in the second quarter of
fiscal year 1997 ended September 30, 1996. Excluding the SAIF Special
Assessment, after-tax earnings for the six months ended September 30, 1996
were $2.1 million. The $1.3 million increase in net income, excluding the SAIF
Special Assessment, for the six months ended September 30, 1997 was primarily
due to growth in interest-earning assets.
INTEREST INCOME
Interest and dividend income for the six months ended September 30, 1997 was
$36.7 million, compared to $29.3 million for the six months ended September
30, 1996, an increase of $7.4 million, or 25.1%. The increase in interest and
dividend income is primarily attributable to a $195.5 million increase in
average interest-earning assets which increased to $969.1 million for the six
months ended September 30, 1997 from $773.6 million for the six months ended
September 30, 1996. The increase in average interest-earning balances was
accompanied by a one basis point decrease in the average yield from 7.56% for
the six months ended September 30, 1996 to 7.55% for the six months ended
September 30, 1997.
Interest income on loans receivable and mortgage loans held for sale for the
six months ended September 30, 1997 increased by $5.4 million, or 19.5%, to
$33.3 million compared to $27.9 million for the same six months in 1996. This
increase was primarily attributable to an increase of $135.9 million in the
average loan balance and a six basis point increase in yield on loans
receivable and mortgage loans held for sale.
Interest and dividend income from short-term investments, investment
securities and Federal Home Loan Bank stock was $1.3 million for the six
months ended September 30, 1997, compared to $1.1 million for the comparable
six months in 1996. The average yield on investment securities declined by 67
basis points, from 6.73% to 6.06%, during the six months ended September 30,
1997 versus the six months ended September 30, 1996, caused primarily by
higher balances of lower yielding short-term investments and a lower portfolio
yield on Treasury securities. The average balance of investment securities
increased by $12.0 million to an average of $43.3 million during the six
months ending September 30, 1997 from $31.3 million during the six months
ended September 30, 1996.
Interest on mortgage-backed securities for the six months ended September
30, 1997 increased by $1.7 million to $2.0 million, compared to $373,000 for
the same six months in 1996. This increase in income is attributable to a
$47.6 million increase in the average balance and a 33 basis point increase in
the average yield on mortgage-backed securities, from 6.53% to 6.86%, during
the six months ended September 30, 1997 versus the six months ended September
30, 1996.
INTEREST EXPENSE
Interest expense for the six months ended September 30, 1997 was $21.8
million, compared to $18.2 million for the six months ended September 30,
1996, an increase of $3.6 million, or 19.8%. The increase in interest expense
during this time period was due to an increase in average interest-bearing
liabilities and a five basis point increase in their associated cost. Average
interest-bearing liabilities increased $129.5 million, or 18.5%, to $829.3
million for the six months ended September 30, 1997, from $699.8 million for
the six months ended September 30, 1996. Of this amount, the largest growth
was in average deposits which grew 20.5% to $679.2 million during the six
months ended September 30, 1997 versus $ 563.5 million during the same period
in 1996. Deposit costs rose four basis points during this time period causing
most of the rate increase in interest-bearing liabilities. However, the
portfolio rate on Federal Home Loan Bank Advances was up 19 basis points as
the
15
<PAGE>
Company actively extended liability maturities through longer-term, higher
rate advances. In addition, average Federal Home Loan Bank advance balances
increased $13.8 million to $150.1 million during the six months ended
September 30, 1997 from $136.3 million during the six months ended September
30, 1996.
NET INTEREST INCOME
Net interest income before provision for loan losses increased $3.8 million,
or 33.8%, to $14.9 million for the six months ended September 30, 1997 from
$11.1 million for the six months ended September 30, 1996. Net interest income
improved during this time period because the $195.5 million increase in
average interest-earning assets was funded by a $129.5 million increase in
average interest-bearing liabilities, with the $66.0 million difference being
funded by a $77.0 million increase in stockholders' equity. Most of the
increase in stockholders' equity came from net stock conversion proceeds
raised during the Company's initial public offering in January of 1997. The
Company's net interest margin increased to 3.07% for the six months ended
September 30, 1997 from 2.87% for the six months ended September 30, 1996, a
by-product of the increase in net interest income before provision for loan
losses.
PROVISION FOR LOAN LOSSES
For the six months ended September 30, 1997, the Company's provision for
loan losses was $1.8 million compared to $2.0 million for the same prior year
period. Loan balances have steadily increased over an extended period of time,
and are expected to continue increasing, thus allowance for loan loss balances
have been increased accordingly. Additionally, while residential lending
remains the Bank's core lending strategy, the portfolio balances of consumer
and commercial loans continue to increase relative to the balance of
residential mortgages. The fact that consumer and commercial loans have
greater credit risk than residential loans has also been factored into the
increase in allowance for loan loss balances. The allowance for loan loss as a
percentage of loans at September 30, 1997 was 1.18% as compared to 1.09% at
March 31, 1997.
NONINTEREST INCOME
Noninterest income increased to $2.9 million for the six months ended
September 30, 1997 compared to $2.5 million for the six months ended September
30, 1996, an increase of $384,000, or 15.4%. During this time period, net loan
servicing income decreased to $1.3 million from $1.4 million and gain on sale
of mortgage loans increased to $475,000 from $189,000. 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 of loan servicing
income.
NONINTEREST EXPENSE
Total noninterest expense was $9.9 million for the six months ended
September 30, 1997 compared to $10.8 million for the comparable six months in
1996. Compensation and employee benefits increased by $1.6 million to $6.0
million for the six months ended September 30, 1997 from $4.4 million for the
six months ended September 30, 1996. The increase in compensation is primarily
due to expenses related to the Bank's ESOP, which was created at the time of
the initial public offering, and expenses related to the Stock-based Incentive
Plan, which was approved by stockholders in August of 1997, both of which
totaled $1.1 million for the six months ended September 30, 1997. There were
no corresponding expenses for these items in the six months ended
September 30, 1996.
Federal deposit insurance expense decreased by $3.3 million, or 93.5%, to
$230,000 for the six months ended September 30, 1997 from $3.5 million during
the six months ended September 30, 1996. Federal deposit insurance expense for
the six months ended September 30, 1996 included a one-time, pre-tax charge of
$2.9 million for the SAIF Special Assessment to recapitalize the Savings
Association Insurance Fund.
16
<PAGE>
Other noninterest expense increased to $1.7 million for the six months ended
September 30, 1997 versus $1.2 million for the six months ended September 30,
1996, an increase of $487,000, or 40.4%. The largest changes in this category
came from a $240,000 increase in professional fees, and a $104,000 increase in
new holding company related expenses. Office occupancy and equipment expense
was up $287,000 to $1.2 million in the six months ended September 30, 1997
from $900,000 in the six months ended September 30, 1996. Most of this
increase was caused by expenses related to the opening of two new banking
branches and the renovation of other existing branches.
INCOME TAXES
Income tax expense was $2.7 million for the six months ended September 30,
1997 compared to $337,000 for the six months ended September 30, 1996, an
increase of $2.3 million, caused by the increase in income before taxes. The
effective income tax rates for the September 30, 1997 and September 30, 1996
six month periods 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.
YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (Year 2000) approaches. The Year
2000 problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to
"00". The issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for the Year 2000 compliance. The
Company is currently in an assessment phase to determine the scope and costs
for Year 2000 related issues, and at the end of this phase, the Company will
have an estimate of those costs and the related potential effect on the
Company's earnings.
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-Q contains statements relating to future
results of the corporation (including certain projections and business trends)
that are considered "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those projected as a result of certain risks and uncertainties, including
but not limited to changes in political and economic conditions, interest rate
fluctuations, competitive product and pricing pressures within the Company's
market, equity and bond market fluctuations, personal and corporate customers'
bankruptcies, inflation, acquisitions and integrations of acquired businesses,
as well as other risks and uncertainties detailed from time to time in the
filings of the Company with the Securities and Exchange Commission.
17
<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
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
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 )
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.
18
<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: November 14, 1997 /s/ Robert F. Stoico
President and Chief Executive
Officer and Chairman of the Board
(Principal Executive Officer)
Date: November 14, 1997 /s/ Edward A. Hjerpe III
Senior Vice President
(Principal Accounting and Financial
Officer)
19
<PAGE>
EXHIBIT 11.
FIRSTFED AMERICA BANCORP, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
Net Income............................... $ 1,782 $ 3,429
========== ==========
Weighted average shares outstanding:
Weighted average shares outstanding.... 8,707,152 8,707,152
Less: Unallocated shares held by the
ESOP.................................. 607,045 607,045
Plus: ESOP shares released or committed
to be released during the fiscal year. 29,175 19,521
---------- ----------
Weighted average shares outstanding.. 8,129,282 8,119,628
========== ==========
Earnings per share....................... $ 0.22 $ 0.42
========== ==========
</TABLE>
20
<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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 13,011
<INT-BEARING-DEPOSITS> 3,435
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 47,389
<INVESTMENTS-CARRYING> 39,284
<INVESTMENTS-MARKET> 39,712
<LOANS> 870,931<F1>
<ALLOWANCE> 10,427
<TOTAL-ASSETS> 1,036,062
<DEPOSITS> 707,694
<SHORT-TERM> 104,200
<LIABILITIES-OTHER> 20,396
<LONG-TERM> 77,333
0
0
<COMMON> 87
<OTHER-SE> 126,352
<TOTAL-LIABILITIES-AND-EQUITY> 1,036,062
<INTEREST-LOAN> 33,322
<INTEREST-INVEST> 3,033
<INTEREST-OTHER> 311
<INTEREST-TOTAL> 36,666
<INTEREST-DEPOSIT> 17,009
<INTEREST-EXPENSE> 21,755
<INTEREST-INCOME-NET> 14,911
<LOAN-LOSSES> 1,750
<SECURITIES-GAINS> 30
<EXPENSE-OTHER> 9,927
<INCOME-PRETAX> 6,114
<INCOME-PRE-EXTRAORDINARY> 6,114
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,429
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
<YIELD-ACTUAL> 3.07
<LOANS-NON> 3,337
<LOANS-PAST> 0
<LOANS-TROUBLED> 1,459
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,788
<CHARGE-OFFS> 121
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 10,427
<ALLOWANCE-DOMESTIC> 10,427
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,610
<FN>
<F1>LOANS HELD TO MATURITY
</FN>
</TABLE>
