FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended: MARCH 31, 1998
--------------
OR
[ ] 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 0-18832
-------
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
-----------------------------------------------
(Exact Name of Registrant as specified in its charter)
KENTUCKY 61-1168311
-------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2323 Ring Road
ELIZABETHTOWN, KENTUCKY 42701
-----------------------------
(Address of principal executive offices)
(Zip Code)
(502)765-2131
-------------
(Registrants's telephone number, including area code)
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
--- --- APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AS OF APRIL 30, 1998
----------- ----------------------------------
Common Stock 4,129,612 shares
This document is comprised of 13 pages.
<PAGE>
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
INDEX
PART I - Financial Information Page Number
Item 1 - Financial Statements
Consolidated Statements of Financial Condition as
of March 31, 1998 (Unaudited) and June 30, 1997. 3
Consolidated Statements of Income for the Three Months
and Nine Months Ended March 31, 1998 and 1997
(Unaudited). 4
Consolidated Statements of Cash Flows for the Nine
Months Ended March 31, 1998 and 1997 (Unaudited). 5
Notes to Consolidated Financial Statements. 6
Item 2 - Management's Discussion and Analysis of the Consolidated
Statements of Financial Condition and Results of Operations. 7
PART II - Other Information 12
SIGNATURES 13
<PAGE>
<TABLE>
<CAPTION>
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, June 30,
ASSETS 1998 1997
------ ---------- -------
(unaudited)
<S> <C> <C>
Cash $ 11,549,166 $ 8,694,283
Interest bearing deposits 4,463,842 481,430
Securities:
Securities held-to-maturity 21,415,695 17,484,427
Securities available-for-sale 2,080,709 5,192,323
(Total securities fair value: $23,540,970 at
March 31, 1998; $22,922,346 at June 30, 1997)
Loans receivable, net 349,773,379 327,791,495
Real estate owned:
Acquired through foreclosure 205,075 183,569
Held for development 642,491 687,261
Investment in Federal Home Loan Bank stock 2,879,500 2,777,200
Premises and equipment 10,601,841 10,221,228
Other assets 890,944 842,656
Excess of cost over net assets of affiliate purchased 2,844,427 3,024,481
----------- ----------
TOTAL ASSETS $407,347,069 $377,380,353
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
LIABILITIES:
Savings deposits $305,894,750 $281,342,174
Advances from Federal Home Loan Bank 43,336,295 41,514,194
Accrued interest payable 600,087 202,982
Accounts payable and other liabilities 1,593,951 655,272
Deferred income taxes 2,112,358 1,949,361
------------ -----------
TOTAL LIABILITIES 353,537,441 325,715,603
----------- -----------
STOCKHOLDERS' EQUITY:
Serial preferred stock 5,000,000 shares authorized
and unissued -- --
Common stock, $1 par value per share; authorized
10,000,000 shares; issued and outstanding
4,132,812 shares on March 31, 1998 and 4,170,003
shares on June 30, 1997 4,132,812 4,170,003
Additional paid-in capital 3,321,647 4,330,548
Retained earnings - substantially restricted 45,158,409 42,193,609
Net unrealized holding gain on securities
available-for-sale, net of tax 1,196,760 970,590
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 53,809,628 51,664,750
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $407,347,069 $377,380,353
============ ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest on loans $7,451,143 $6,787,507 $21,811,011 $19,979,343
Interest and dividends
on investments and deposits 438,094 462,122 1,292,911 1,355,919
--------- --------- ---------- ----------
Total interest income 7,889,237 7,249,629 23,103,921 21,335,262
--------- --------- ---------- ----------
INTEREST EXPENSE:
Savings deposits 3,434,597 2,981,606 10,071,475 8,945,270
FHLB advances 612,639 613,145 1,796,851 1,714,977
--------- --------- ---------- ---------
Total interest expense 4,047,236 3,594,751 11,868,327 10,660,247
--------- --------- ---------- ----------
Net interest income 3,842,001 3,654,878 11,235,595 10,675,015
Provision for loan losses 30,000 0 120,000 200,000
--------- --------- ---------- ----------
Net interest income after
provision for loan losses 3,812,001 3,654,878 11,115,595 10,475,015
--------- --------- ---------- ----------
OTHER INCOME:
Customer service fees
on deposit accounts 306,635 315,657 943,583 926,733
Other income 278,008 250,194 878,930 680,358
Gain on sale of investment 125,622 0 242,567 316,927
------- ------- ------- -------
Total other income 710,265 565,851 2,065,080 1,924,018
------- ------- --------- ---------
OTHER EXPENSE:
Employee compensation
and benefits 944,057 898,713 2,757,621 2,642,839
Office occupancy and
equipment expense 226,179 241,089 696,237 683,374
Federal insurance
premiums (Note 2) 44,777 43,144 133,390 1,970,572
Marketing and advertising 91,850 71,316 276,472 273,020
Outside services and
data processing 188,277 143,065 497,539 454,572
State franchise tax 74,039 74,039 224,016 218,826
Other expense 462,936 401,239 1,424,900 1,270,622
------- ------- --------- ---------
Total other expense 2,032,155 1,872,605 6,010,175 7,513,825
--------- --------- --------- ---------
Income before taxes 2,490,151 2,348,124 7,170,500 4,885,208
Income taxes 840,645 819,261 2,464,827 1,684,379
--------- --------- --------- ---------
NET INCOME $1,649,505 $1,528,863 $4,705,673 $3,200,829
========= ========= ========= =========
Weighted average common
shares outstanding 4,133,516 4,171,424 4,149,667 4,187,806
Net income per share
of common stock (Note 3) $0.40 $0.37 $1.13 $0.77
Dividends per share ===== ===== ===== =====
of common stock $0.14 $0.13 $0.42 $0.37
===== ===== ===== =====
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Nine Months Ended
MARCH 31,
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,705,673 $ 3,200,829
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses and real estate owned 120,000 200,000
Provision for depreciation 446,565 406,238
Net change in deferred loan fees and costs 143,768 126,629
Federal Home Loan Bank stock dividends (153,700) (138,000)
Amortization of discounts on securities
held-to-maturity (81,968) (115,812)
Gain on sale of investments available-for-sale (242,567) (316,927)
Increase in interest payable (48,288) 452,466
Increase (Decrease) in accounts payable
and other liabilities 1,101,676 (498,153)
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,568,318 3,961,925
--------- ---------
INVESTING ACTIVITIES:
Sale of securities available-for-sale 3,615,708 335,111
Purchases of securities available-for-sale (36,082) (151,567)
Purchases of securities held-to-maturity (10,000,000) (6,000,000)
Principal collections on securities
held-to-maturity 6,150,699 377,681
Net increase in loans to customers (22,858,245) (20,267,731)
Purchases of premises and equipment (827,178) (718,707)
Sales of real estate acquired in settlement of loans 593,448 483,063
Increase in real estate held for development -- (182,000)
Sales of real estate held for development 44,770 --
---------- -----------
NET CASH USED IN INVESTING ACTIVITIES (23,316,880) (17,571,858)
---------- -----------
FINANCING ACTIVITIES:
Advances from Federal Home Loan Bank 1,822,101 6,719,389
Net increase in customer savings deposits 24,552,576 12,249,201
Dividends paid (1,742,689) (1,547,234)
Proceeds from stock options exercised -- 60,543
Common stock repurchased (1,046,131) (1,042,645)
Advance to ESOP -- (14,658)
---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 23,585,857 16,424,569
---------- ----------
Increase (Decrease) in cash and cash equivalents 6,837,295 (5,737,656)
Cash and cash equivalents, beginning of year 9,175,713 16,160,272
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $16,013,008 $10,422,616
========== ==========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
First Federal Financial Corporation of Kentucky ("Corporation") is the
parent to its wholly owned subsidiary, First Federal Savings Bank of
Elizabethtown ("Bank"). The Corporation has no material income, other
than that generated by the Bank.
In the opinion of management, these unaudited consolidated financial
statements include all adjustments necessary for a fair presentation of
its financial position as of March 31, 1998 and the results of its
operations and its cash flows for the three month and nine month
periods then ended. All such adjustments were of a normal recurring
nature.
The results of operations for the three month and nine month periods
ended March 31, 1998 and 1997 are not necessarily indicative of the
results for the full years.
It is suggested that these financial statements be read in conjunction
with the financial statements, accounting policies and financial notes
thereto included in the Appendix to the Company's 1997 Proxy Statement
which has been previously filed with the Commission.
2. Federal Deposit Insurance Corporation (FDIC) legislation was signed
into law on September 30, 1996, to recapitalize the Savings Association
Insurance Fund (SAIF). All SAIF-insured savings institutions were
required to pay a one-time special assessment of $.657 for every $100
of customer deposits. This has resulted in a charge to earnings of
$1,658,000 ($1,094,000, net of tax) during the Bank's first quarter
ended September 30, 1996.
3. The Bank has elected to adopt SFAS No. 128 "Earnings Per Share,"
effective for both interim and annual fiscal periods ending after
December 15, 1997. The reconciliation of the numerators and
denominators of the basic and diluted EPS computations is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
MARCH 31, MARCH 31,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net Income available
to common shareholders $1,650 $1,529 $4,706 $3,201
====== ====== ====== ======
Basic EPS:
Weighted average common shares 4,133,516 4,171,424 4,149,667 4,187,806
========= ========= ========= =========
Diluted EPS:
Weighted average common shares 4,133,516 4,171,424 4,149,667 4,187,806
Dilutive effect of stock options 28,433 42,887 29,055 47,502
Weighted average common and --------- -------- --------- ---------
incremental shares 4,161,949 4,214,311 4,178,722 4,235,308
========= ========= ========= =========
Earnings Per Share:
Basic $0.40 $0.37 $1.13 $0.77
===== ===== ===== =====
Diluted $0.40 $0.36 $1.13 $0.76
===== ===== ===== =====
</TABLE>
6
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
First Federal Financial Corporation of Kentucky ("Corporation") is the parent to
its wholly owned subsidiary, First Federal Savings Bank of Elizabethtown
("Bank"). The Bank has operations in the central Kentucky communities of
Elizabethtown, Radcliff, Bardstown, Munfordville, Shepherdsville, and Mt.
Washington.
The following discussion and analysis covers any material changes in the
financial condition since June 30, 1997 and any material changes in the results
of operations for the three month and nine month periods ending, March 31, 1998.
This discussion and analysis should be read in conjunction with "Managements
Discussion and Analysis of Financial Condition and Results of Operations"
included in the 1997 Annual Report to Shareholders.
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information set forth in this report includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. For
this purpose, the words "believes," "anticipates," "plans," "expects," and
similar expressions are intended to identify forward-looking statements.
Although the Corporation believes that the forward-looking statements are based
upon reasonable assumptions, the statements are subject to certain risks and
uncertainties that could cause the Corporation's actual results to differ
materially from those indicated by the forward-looking statements. Among the key
factors that may have a direct bearing on the Corporation's operating results
are fluctuations in the economy; the relative strengths and weakness in the
consumer and commercial credit sectors and in the real estate market; the
actions taken by the Federal Reserve for the purpose of managing the economy;
the Corporation's success in assimilating acquired branches and operations into
the Bank's existing operations; the Bank's success in converting its systems to
integrate new hardware and software without material disruption; the
Corporation's ability to offer competitive banking products and services; the
continued growth of the markets in which the Corporation operates consistent
with recent historical experience; the enactment of federal legislation
affecting the operations of the Corporation; and the Corporation's ability to
expand into new markets and to maintain profit margins in the face of pricing
pressure.
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED MARCH 31, 1998 VS. 1997 - Net income was $1,649,505 or
$0.40 per share for the three month period ended March 31, 1998, as compared to
$1,528,863 or $0.37 per share for the same period in 1997. In addition to the
higher net income, the 8% increase in net income per share was also attributable
to the Corporation's stock repurchase plans which have reduced the weighted
average number of shares outstanding from 4,171,424 for the 1997 period to
4,133,516 for the 1998 period. The following discussion outlines the material
differences in income and expenses for the three month period ended March 31,
1998, as compared to 1997.
Net interest income increased by $187,123 in 1998 as compared to 1997 in spite
of the declining net interest margin which was 4.11% for the 1998 period, as
compared to 4.23% for the 1997 period. The Corporation's cost of funds increased
by 18 basis points in 1998 compared to 1997, due to higher rates paid on
short-term customer deposits and FHLB advances.
Average interest-earning assets increased by $28 million from $348 million for
the 1997 period to $376 million for the 1998 period. Average loans were $27
million higher and averaged $347 million during 1998, while the average yield on
loans increased by 10 basis points to 8.70%.
Average interest-bearing liabilities increased by $26 million to an average
balance of $342 million for the 1998 period. Customer deposits averaged $299
million during 1998, an increase of $26 million compared to the 1997 quarter.
Total other income was $710,265 for the three months ended March 31, 1998, as
compared to $565,851 for the 1997 period, an increase of $144,414. The increase
is attributable to a $125,622 gain recorded on sales of investments during the
March 31, 1998 period. Other sources of income, such as loan fees and other
customer transaction fees increased by $18,792 in 1998 versus 1997 due to growth
in deposit relationships with existing customers.
7
<PAGE>
Total other expense was $2,032,115 for the three month period ended March 31,
1998, as compared to $1,872,605 for the 1997 period, an increase of $159,510.
Expenses directly related to loans and customer checking accounts increased due
to a higher volume of accounts. Expenses directly related to data processing
costs, marketing, and supplies increased due to asset growth, expanded services
and products offered to customers, and general inflation.
NINE MONTH PERIOD ENDED MARCH 31, 1998 VS. 1997 - Net income was $4,705,673 or
$1.13 per share for the nine month period ended March 31, 1998, as compared to
$4,295,209 or $1.03 per share for the same period in 1997. During the quarter
ended September 30, 1996, net income was affected by a one-time special
assessment of $1,658,151 ($1,094,380, net of tax) paid to the FDIC. Due to this
payment, actual net income was $3,200,829 or $0.77 per share during the 1997
period. See further discussion under "Regulatory Matters."
In addition to the higher net income the 10% increase in net income per share
was also attributable to the Corporation's stock repurchase plans which have
reduced the weighted average number of shares outstanding from 4,187,806 for the
1997 period to 4,149,667 for 1998.
Net interest income increased by $560,580 in 1998 as compared to 1997 in spite
of the declining net interest margin which was 4.06% for the 1998 period as
compared to 4.12% for the 1997 period. Average interest-earning assets increased
by $24 million during the nine months ended March 31, 1998 compared to the 1997
period as average loans grew by $25 million. Average interest-bearing
liabilities increased by $23 million to an average balance of $332 million for
the 1998 period, while the average cost of funds increased by 18 basis points
during the comparative periods due to higher rates paid on short-term customer
deposits.
Total other income was $2,065,080 for the nine months ended March 31, 1998, as
compared to $1,924,018 for the 1997 period, an increase of $141,062. Customer
service fees increased by $16,850 during the 1998 period due to a growth in
customer checking accounts. Gains from investment sales were $242,567 for the
nine months ended March 31, 1998, as compared to $316,927 reported in the 1997
period. Other sources of non-interest income, such as brokerage commissions,
loan fees, checking account fees, and other customer transaction fees, increased
by $198,572, or 29% in 1998 versus 1997.
Total other expense was $6,010,175 for the nine months ended March 31, 1998, as
compared to $7,513,825 for the 1997 period, a decrease of $1,503,650. The
decrease is a result of the SAIF special assessment recorded in the first
quarter of 1996. Federal insurance premium expense decreased $153,815 during the
1998 period, reflecting lower assessment rates. Expenses directly related to
customer checking accounts increased by $19,604 during the 1998 period due to a
higher volume of accounts. Expenses directly related to data processing costs,
postage and supplies increased due to asset growth, expanded services and
products offered to customers.
8
<PAGE>
NON-PERFORMING ASSETS
Management periodically evaluates the adequacy of the allowance for loan losses
based on the Bank's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may effect the borrower's ability to repay
and other factors. During the nine month period ended March 31, 1998, management
chose to add $120,000 to the reserve for loan loss. Although current loan
charge-offs and delinquencies are consistent with previous years, the reserve
was increased to compensate for the Bank's continued strong loan growth. The
Bank experienced an insignificant amount of uncollectible loans during the
periods indicated in the table below. Approximately 56% of the Bank's
non-performing assets are secured by one-to-four-family residences at March 31,
1998.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
MARCH 31, MARCH 31,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Allowance for loan losses:
Balance, beginning of period $1,795 $1,772 $1,715 $1,613
Provision for loan losses 30 -- 120 200
Charge-offs (7) (43) (32) (86)
Recoveries 3 1 18 3
------ ------ ------ ------
Balance, end of period $1,821 $1,730 $1,821 $1,730
====== ====== ====== ======
Net loans outstanding at quarter end $349,773 $321,835
Non-performing loans at quarter end:
Collateralized by one-to-four family homes $1,038 $878
Other non-performing loans $606 $294
Ratios:
Non-performing loans to total loans .47% .36%
Allowance for loan losses to non-performing
loans 111% 148%
Allowance for loan losses to net loans .52% .54%
Non-performing assets to total assets .45% .43%
</TABLE>
LIQUIDITY & CAPITAL RESOURCES
Loan demand continued to be strong during the nine months ended March 31, 1998,
as net loans grew by $22 million to $350 million, a 9% annualized growth. In
spite of strong competition from new financial institutions, mutual funds, and
the stock market, customer deposits increased by $24.6 million, or 12%
annualized, during the nine month period, primarily in customer accounts with
maturity terms under two years. The Bank's loan growth was funded by additional
borrowings of $1.8 million from the Federal Home Loan Bank.
Current regulations require the Corporation's subsidiary, First Federal Savings
Bank, to maintain minimum specific levels of liquid assets, (currently 4%) of
cash and eligible investments to the savings deposits and short-term borrowings.
At March 31, 1998, the Bank's liquid assets were 9.98% of its liquidity base.
The Bank intends to continue to fund loan growth (outstanding loan commitments
were $8.1 million at March 31, 1998) and any declines in customer deposits
through additional advances from the FHLB. At March 31, 1998, the Bank has an
unused approved line of credit in the amount of $12.3 million, and the potential
to
9
<PAGE>
significantly increase its indebtedness with the FHLB, if necessary, due to the
Bank's strong financial condition.
The Office of Thrift Supervision's capital regulations require the Bank to meet
three capital standards. As indicated below, the Bank substantially exceeded the
regulatory requirements for each category at March 31, 1998.
(Dollars in thousands)
TANGIBLE CORE RISK-WEIGHTED
Actual capital $48,608 $48,608 $50,423
Regulatory requirement 6,078 16,226 20,902
------- ------- -------
Excess $42,530 $32,382 $29,521
======= ======= =======
REGULATORY MATTERS
The Bank insures its customers' deposits through the Savings Association
Insurance Fund ("SAIF"). On September 30, 1996, Federal Deposit Insurance
Corporation ("FDIC") legislation was signed into law to recapitalize the SAIF.
As was anticipated, all SAIF-insured savings institutions were required to pay a
one-time special assessment of $.657 for every $100 of customer deposits. This
has resulted in a charge to earnings of $1,095,000, net of tax, during the
quarter ended September 30, 1996. On January 1, 1997, the Bank began paying
insurance premiums of $.064 per $100 of deposits as compared to a previous
premium of $.23 per $100 of deposits.
NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Comprehensive
Income," was issued in June 1997 and becomes effective for fiscal periods
beginning after December 15, 1997. SFAS 130 requires reclassification of earlier
financial statements for comparative purposes. SFAS 130 requires that changes in
the amounts of certain items, including foreign currency translation adjustments
and gains and losses on certain securities be shown in the financial statements.
SFAS 130 does not require a specific format for the financial statement in which
comprehensive income is reported, but does require that an amount representing
total comprehensive income be reported in that statement. Management has
determined that the adoption of SFAS 130 will not have a material effect on the
consolidated financial statements.
PENDING ACQUISITION
In March 1998, the Bank entered into an agreement to acquire three offices of
Bank One Corporation located in Meade County, Kentucky, a community located 40
miles from the Bank's main office. The three offices currently have
approximately $72 million in customer deposits resulting in a 24% growth for the
Bank. This acquisition will expand the Bank's market share to 53% of the total
deposits in Meade County. In addition, approximately $7 million of commercial
loans are included in the acquisition.
It is currently anticipated that the acquisition will be completed late in July
1998. During the quarter ended September 30, 1998, it is anticipated the Bank
will charge against operations approximately $150,000 after tax in acquisition
costs. Management estimates that the operations of the acquired branches could
dilute earnings by approximately $200,000 after tax during the fiscal year ended
June 30, 1999. However, management anticipates the three offices to have a
positive contribution to earnings beginning July 1, 1999.
10
<PAGE>
YEAR 2000
Recognizing the need to ensure its operations will not be adversely impacted by
Y2K failures, the Bank has developed a proactive plan for minimizing its risk
and updating a majority of its computer hardware and software systems in the
process. The Bank has entered into agreements with hardware and software vendors
to systematically replace all non-Y2K compliant hardware and software by March
1999. An equally important objective of the complete overhaul of the systems is
to enhance the Bank's technological capabilities. The anticipated benefits of
the new systems include faster customer service, the flexibility to offer a
wider range of new products and services and the capability to offer electronic
banking services in the future. Communication systems will be converted to a
fully integrated wide area network, thereby connecting all banking centers
electronically to one another. Although the Bank anticipates a $400,00 after tax
charge against operations during the quarter ended September 30, 1998, future
technology costs are expected not to differ materially from those incurred in
prior periods.
11
<PAGE>
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
Part II. Other Information
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of
Security Holders
Not Applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits: Not Applicable
Reports on Form 8-K:
Not Applicable
12
<PAGE>
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
Pursuant to the requirements of Section 13 or 15(d) 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.
DATE: May 13, 1998 BY: (S) B. KEITH JOHNSON
--------------------
B. Keith Johnson
President and Chief Executive Officer
DATE: May 13, 1998 BY: (S) RICHARD L. MUSE
------------------
Richard L. Muse
Vice President and Comptroller
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
(This schedule contains summary financial information extracted from the
registrant's unaudited consolidated financial statements for the nine months
ended March 31, 1998 and is qualified in its entirety by reference to such
financial statements.)
</LEGEND>
<CIK> 0000854395
<NAME> First Federal Financial Corp of Kentucky
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997
<PERIOD-START> JUL-01-1997 JUL-01-1996
<PERIOD-END> MAR-31-1998 MAR-31-1997
<EXCHANGE-RATE> 1.000 1.000
<CASH> 11,549,166 7,378,637
<INT-BEARING-DEPOSITS> 4,463,842 3,043,979
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 2,080,709 4,858,628
<INVESTMENTS-CARRYING> 21,415,695 17,731,927
<INVESTMENTS-MARKET> 23,540,970 22,832,982
<LOANS> 349,773,379 321,834,790
<ALLOWANCE> 1,815,000 1,730,000
<TOTAL-ASSETS> 407,347,069 372,299,611
<DEPOSITS> 305,894,750 277,194,945
<SHORT-TERM> 43,336,295 41,698,468
<LIABILITIES-OTHER> 4,306,396 2,766,495
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 4,132,812 4,165,353
<OTHER-SE> 49,676,816 46,474,350
<TOTAL-LIABILITIES-AND-EQUITY> 407,347,069 372,299,611
<INTEREST-LOAN> 21,811,011 19,979,343
<INTEREST-INVEST> 1,292,911 1,355,919
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 23,103,921 21,335,262
<INTEREST-DEPOSIT> 10,071,475 8,945,270
<INTEREST-EXPENSE> 11,868,327 10,660,247
<INTEREST-INCOME-NET> 11,235,595 10,675,015
<LOAN-LOSSES> 120,000 200,000
<SECURITIES-GAINS> 242,567 316,927
<EXPENSE-OTHER> 6,010,175 7,513,825
<INCOME-PRETAX> 7,170,500 4,885,208
<INCOME-PRE-EXTRAORDINARY> 7,170,500 4,885,208
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,705,673 3,200,829
<EPS-PRIMARY> 1.13 0.77
<EPS-DILUTED> 1.13 0.76
<YIELD-ACTUAL> 8.39 8.28
<LOANS-NON> 0 0
<LOANS-PAST> 1,723,000 1,172,000
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 1,931,000 1,752,000
<ALLOWANCE-OPEN> 1,715,000 1,613,000
<CHARGE-OFFS> 32,000 86,000
<RECOVERIES> 18,000 3,000
<ALLOWANCE-CLOSE> 1,821,000 1,730,000
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,821,000 1,730,000
</TABLE>
