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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 21, 1998
FIRSTFEDERAL FINANCIAL SERVICES CORP
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(Exact name of registrant as specified in its charter)
Ohio 0-17894 34-1622711
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) No.)
135 East Liberty Street, Wooster, Ohio 44691
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 264-8001
N/A
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
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On April 21, 1998, FirstFederal Financial Services Corp
("FirstFederal") issued the press release included as Exhibit 99 to this report
and incorporated by reference herein, announcing the company's first quarter
earnings.
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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 hereunto duly authorized.
FIRSTFEDERAL FINANCIAL SERVICES CORP
By: /s/ Gary G. Clark
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Gary G. Clark
Chairman and CEO
Date: May 1, 1998
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INDEX TO EXHIBITS
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Sequentially
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Where Attached
Exhibit is Located
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99 Press Release of FirstFederal, dated April 21, 1998 5
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EXHIBIT 99
NEWS RELEASE
James J. Little, President and Chief Operating Officer FOR IMMEDIATE RELEASE
FirstFederal Financial Services Corp ---------------------
135 East Liberty Street
Wooster, OH 44691 April 21, 1998
Phone: (330) 264-8001
FIRSTFEDERAL FINANCIAL SERVICES CORP
POSTS FIRST QUARTER EARNINGS OF $4.1 MILLION
FirstFederal Financial Services Corp (NASDAQ - FFSW; FFSWO) today
announced record net earnings of $4.1 million, or $.53 per share on a diluted
basis for the three month period ended March 31, 1998. This compares favorably
to $3.6 million, or $.51 per share on a diluted basis for the three month period
ended March 31, 1997.
Increased earnings in the first quarter of 1998 compared to 1997 reflect
increases in net interest income of $3.1 million, mortgage banking income of
$1.3 million and customer service fee income of $.9 million, partially offset by
an increase in non-interest expense of $4.9 million related to a higher volume
of asset originations.
Return on average assets (ROA) for the quarter ended March 31, 1998 was
1.09 % as compared to 1.32 % for the comparable period of 1997. Return on
average shareholders' equity (ROE) for the quarter ended March 31, 1998 was
15.26% as compared to 16.47% for the comparable period in 1997. The Company's
ratio of shareholders' equity to total assets decreased from 7.19% at December
31, 1997 to 7.10% at March 31, 1998, reflecting asset growth and improved
leverage in 1998.
Net interest income increased $3.1 million to $9.5 million in the first
quarter of 1998 from $6.4 million in the first quarter of 1997. This increase
reflects growth in average loan and lease balances of $281.2 million and a
$111.5 million increase in average securities balances for the three
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month period ended March 31, 1998 compared to 1997. Loan and lease balances as
of March 31, 1998 include $77.0 million and $29.8 million reflecting the
acquisition of Summit Bank N.A. (Summit) and Alliance Corporate Resources, Inc.
(ACR), respectively in the third quarter of 1997. The net interest margin of
2.76% for the quarter ended March 31, 1998 compares favorably to 2.62% for 1997
and 2.59% for the first quarter of 1997. Yields on interest earning assets
averaged 7.89% for the quarter ended March 31, 1998 compared to 7.58% for 1997
reflecting a favorable change in the mix of loans and leases to higher yielding
assets. The average cost of interest-bearing liabilities increased 13 basis
points to 5.21 % for the quarter ended March 31, 1998 compared to 5.08 % for the
same period in 1997. Comparing first quarter 1998 to 1997, 6 basis points of the
13 basis point increase in cost of interest bearing liabilities reflects
increased rates paid on borrowings and the other 7 basis points of the increase
reflects the incremental cost of the issuance of $50 million of Junior
Subordinated Deferrable Interest Debentures, Series A in February 1998 with a
current effective yield of approximately 8% and the $40.5 million of
subordinated notes issued in March 1997 with a current effective yield of 7.1%.
Issuance of both the Junior Subordinated Series A Debentures and the
subordinated notes provides additional capacity for the Company to leverage
future asset growth, purchase deposits and/or acquire other financial services
businesses. Portions of both debt issues qualify as Tier 1 and Tier 2 regulatory
capital.
The provision for credit losses was $462,000 in the first quarter of
1998 and $107,000 in the first quarter of 1997. The increased provision was
taken primarily in connection with the acquisition of Summit and a continuing
increase in commercial and consumer loan originations which inherently have a
higher credit risk level than residential mortgage loans. Net chargeoffs as a
percentage of average loans and leases for the first quarter of 1998 were 7
basis points and less than 1 basis point for the comparable quarter of 1997.
Nonperforming assets as a percentage of total assets was .36% at March 31, 1998
and .32% at December 31, 1997.
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Non-interest income increased $2.7 million for the first quarter of
1998 versus first quarter 1997 reflecting an increase of $1.3 million in
mortgage banking fee income and $.9 million in customer service fee income.
Non-interest expense increased $4.9 million to $11.6 million for the
quarter ended March 31, 1998 as compared to $6.7 million for the first quarter
of 1997. The increase is comprised primarily of higher compensation expense
($1.9 million), increased occupancy costs ($.6 million) and additional operating
costs ($2.4 million). FirstFederal's efficiency ratio of 60.13% for the first
quarter of 1998 compares to 56.98% for the fourth quarter of 1997 and 50.83% for
the first quarter of 1997. The increases in 1998 in both non-interest expense
and the efficiency ratio reflect the increase in staff and facilities associated
with the Company's investments in Summit, ACR, branch acquisitions and
additional commercial and manufactured housing loan origination capacity. First
quarter loan originations are seasonally slower than the remainder of the year,
which when added to expenses incurred to increased loan origination capacity,
results in a higher first quarter efficiency ratio.
FINANCIAL CONDITION HIGHLIGHTS
Certain aspects of the Company's financial condition during 1998 areas follows
($000's):
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MARCH 31 December 31 Increase
1998 1997 (Decrease)
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Securities available for sale $295,147 $253,809 $41,338
Net loans and leases 905,605 914,356 (8,751)
Deposits 998,646 981,675 16,971
Borrowings 388,978 347,243 41,735
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The $41.3 million increase in securities available for sale and the
$41.7 million increase in borrowings as of March 31, 1998 both reflect the
February 1998 issuance of and investment of the
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proceeds of $50 million in 8.67% Junior Subordinated Deferrable Interest
Debentures, Series A.
Net loans and leases decreased $8.8 million comparing March 31, 1998 to
December 31, 1997 reflecting a $28.5 million decrease in residential mortgage
loans, partially offset by net increases in commercial loans and leases of $16.5
million and a $3.3 million increase in consumer loans. Loan originations for the
first quarter of 1998 of residential mortgage loans and manufactured housing
finance contracts of $92.2 million and $66.5 million, respectively, compare to
$50.2 million and $40.2 million for the first quarter of 1997, respectively. The
$28.5 million decrease in residential mortgage loans reflects the sale of
approximately $75 million in mortgage loans in the first quarter of 1998 and the
impact of mortgage refinancings and expected loan amortization offset by the
first quarter originations of $92.2 million. Whereas, mortgage loan outstandings
decreased as of March 31, 1998, the mortgage servicing portfolio increased $14.2
million in the first quarter of 1998 which will provide future non-interest
income. Higher mortgage loan originations somewhat distorts comparability of the
efficiency ratio between periods. The Corporation securitized and sold $50
million of manufactured housing finance contracts in the first quarter of 1998.
Deposits increased $17.0 million comparing March 31, 1998 to December
31, 1997 reflecting a $.5 million decrease in brokered deposits and a net
increase of $17.5 million in customer deposits.
As previously announced February 9, 1998, First Shenango Bancorp, Inc.
(NASDAQ: SHEN) and FirstFederal signed a definitive agreement for the
acquisition of the stock of First Shenango by FirstFederal Financial Services
Corp. The merger, which will be accounted for as a pooling of interests, is
expected to be consummated late in the second quarter or in the third quarter of
1998, pending shareholder approval of both corporations, regulatory approval and
other customary conditions of closing. At December 31, 1997, First Shenango had
total assets, deposits and
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shareholders' equity of $375.0 million, $275.2 million and $47.9 million,
respectively, and operated 4 full service banking facilities in New Castle,
Pennsylvania.
FirstFederal Financial Services Corp operates in two business segments:
community banking and specialty finance. The community banking segment consists
of Signal Bank, N.A. with 25 full service banking offices and 3 limited service
facilities in North central Ohio, and Summit Bank, N.A. with 2 offices in Summit
County, Ohio. The specialty finance segment consists primarily of Mobile
Consultants, Inc., a broker and servicer of manufactured housing finance
contracts operating in 44 states.
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FIRSTFEDERAL FINANCIAL SERVICES CORP AND SUBSIDIARIES
Selected Financial Data
(UNAUDITED)
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QUARTERS ENDED MARCH 31 YEARS ENDED DECEMBER 31
($ in thousands, except per share data) 1998 1997 1997 1996 1995
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BALANCE SHEET DATA:
Total assets $1,522,534 $1,088,132 $1,457,415 $1,080,383 $ 947,270
Net loans and leases 905,605 695,278 914,356 669,697 581,060
Deposits 998,646 662,680 981,675 671,918 574,041
Borrowings, including advances 387,431 337,546 347,243 312,413 286,726
Shareholders' equity 108,062 87,906 104,735 85,287 76,533
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INCOME STATEMENT DATA:
Interest income $ 27,224 $ 18,698 $ 90,093 $ 73,559 $ 64,922
Interest expense 17,708 12,304 59,550 48,048 41,046
Provision for credit losses 462 107 842 360 0
Net interest income after provision 9,054 6,287 29,701 25,151 23,876
Non-interest income
Manufactured housing income 3,674 4,317 16,001 11,640 0
Mortgage banking fee income 1,979 658 5,168 3,515 2,610
Other non-interest income 3,074 1,056 8,116 2,774 1,557
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Subtotal 8,727 6,031 29,285 17,929 4,167
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Non-interest expense 11,616 6,668 34,434 24,005 13,651
Non-recurring expenses 0 0 1,209 3,341 0
Provision for income taxes 2,106 2,085 8,895 5,884 4,946
Net income 4,059 3,565 14,448 9,850 9,446
Net income applicable to common stock $ 3,885 $ 3,158 $ 12,864 $ 8,154 $ 7,660
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PER SHARE DATA (1)
Net income per share including non-recurring expenses
- basic $ 0.58 $ 0.68 $ 2.59 $ 1.82 $ 1.85
- diluted 0.53 0.51 1.96 1.43 1.42
Net income per share before non-recurring expenses (2)
- basic 0.58 0.68 2.79 2.31 1.85
- diluted 0.53 0.51 2.09 1.74 1.42
Cash earnings per share - diluted (3) 0.59 0.56 2.29 1.86 1.46
Dividends paid per common share 0.11 0.10 0.43 0.38 0.34
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PERFORMANCE RATIOS:(2)
Return on average assets 1.09% 1.32% 1.22% 1.16% 1.07%
Return on average shareholders' equity 15.26 16.47 16.19 14.72 12.90
Net interest margin 2.76 2.59 2.62 2.60 2.78
Efficiency ratio 60.13 50.83 55.07 53.54 50.61
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ASSET QUALITY RATIOS:
Allowance for credit losses
to nonperforming assets 98.43% 72.88% 119.07% 69.91% 158.41%
Total nonperforming assets to total assets 0.36 0.38 0.32 0.39 0.20
Net charge-offs to average loans and leases 0.07 0.00 0.10 0.07 0.04
Net charge-offs $ 653 $ 22 $ 731 $ 438 $ 210
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CAPITAL RATIOS:
Shareholders' equity to total assets 7.10% 8.08% 7.19% 7.89% 8.08%
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(1) Adjusted for stock splits and stock dividends.
(2) Nonrecurring expenses of $1.2 million ($1 million after tax) reflecting
Summit's acquisition costs included in the third quarter of 1997 and $3.3
million ($2.2 million after tax) included in the third quarter of 1996 for
the one-time assessment for the re-capitalization of the Savings
Association Insurance Fund (SAIF) have been excluded for comparative
purposes from the per share data and performance ratios shown above.
(3) Cash earnings per share excludes the after-tax non-cash impact of
amortization of intangible assets.
