<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
----------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1996
Commission File Number: 0-19609
-----------
FirstFed Bancorp, Inc.
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-1048648
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1630 Fourth Avenue North
Bessemer, Alabama 35020
- -------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 428-8472
--------------
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
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 31, 1996
- ---------------------------- --------------------------------
Common Stock, $.01 par value 612,961 shares
<PAGE>
FIRSTFED BANCORP, INC.
----------------------
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1996 AND MARCH 31, 1996 . . . . . . . . . 2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE
MONTHS ENDED DECEMBER 31, 1996 AND 1995 AND THE NINE
MONTHS ENDED DECEMBER 31, 1996 AND 1995 . . . . . . . . . . . 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED DECEMBER 31, 1996 AND 1995 . . . . . . . . 4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS . . . . . 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . 7
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FURNISHED HAVE NOT BEEN AUDITED
BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN THE OPINION OF
MANAGEMENT, ALL ADJUSTMENTS NECESSARY FOR A FAIR PRESENTATION OF FINANCIAL
CONDITION AND THE RESULTS OF OPERATIONS FOR THE PERIODS PRESENTED.
1
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PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
----------------------------
FIRSTFED BANCORP, INC.
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
--------------------------------------------------------
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
ASSETS December 31, March 31,
1996 1996
-------------- -------------
<S> <C> <C>
Cash and Cash Equivalents:
Cash on hand and in banks $ 1,791 $ 2,221
Interest-bearing deposits in other banks 5,684 5,018
Federal funds sold 3,875 4,875
-------- --------
11,350 12,114
-------- --------
Securities available for sale, at fair value 10,841 10,845
Assets held for sale, at lower of cost or market 1,044 1,582
Securities, at amortized cost, fair value of
$6,905 and $3,821, respectively 6,839 3,808
Mortgage-backed securities, at amortized cost,
fair value of $10,001 and $4,778, respectively 9,988 4,766
Loans receivable, net 129,542 126,199
Land, buildings and equipment, net 2,564 2,606
Goodwill 1,514 1,598
Real estate owned 66 12
Real estate held for investment 997 997
Accrued interest receivable 1,480 1,326
Other assets 271 331
-------- --------
$176,496 $166,184
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $156,913 $145,858
Borrowed funds 1,000 2,002
Accrued interest payable 134 172
Income taxes payable 168 232
Dividends payable 123 97
Other liabilities 599 592
---- ---
158,937 148,953
-------- --------
Stockholders' Equity:
Common stock, $.01 par value 3,000,000 shares
authorized, 735,635 shares issued and 612,961
shares outstanding 7 7
Paid-in capital 6,539 6,457
Retained earnings 13,941 13,831
Treasury stock (2,774) (2,774)
Unearned compensation (114) (204)
Unrealized loss on securities available for
sale, net (40) (86)
-------- --------
17,559 17,231
-------- --------
$176,496 $166,184
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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FIRSTFED BANCORP, INC.
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
December 31 December 31
--------------- -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 2,891 $ 2,285 $ 8,500 $ 6,642
Interest on mortgage-backed
securities 164 84 390 262
Interest and dividends on
securities 281 89 783 294
Other interest income 82 82 300 195
-------- -------- -------- --------
Total interest income 3,418 2,540 9,973 7,393
-------- -------- -------- --------
INTEREST EXPENSE:
Interest on deposits 1,850 1,363 5,390 3,958
Interest on other borrowings 19 40 79 143
----- ----- ----- -----
Total interest expense 1,869 1,403 5,469 4,101
-------- -------- -------- --------
Net interest income 1,549 1,137 4,504 3,292
Provision for loan losses 50 15 135 45
-------- -------- -------- --------
Net interest income after
provision for loan losses 1,499 1,122 4,369 3,247
-------- -------- -------- --------
NONINTEREST INCOME:
Fees for customer service 164 51 453 156
Miscellaneous operating and
non-operating income, net 55 55 164 84
-------- -------- -------- --------
Total noninterest income 219 106 617 240
-------- -------- -------- --------
NONINTEREST EXPENSES:
Salaries and employee benefits 501 515 1,578 1,365
Office building and equipment
expenses 123 93 381 267
Deposit insurance expense 69 73 228 210
Loss on real estate owned 1 - 3 1
Amortization of goodwill 28 - 84 -
Other operating expenses 302 252 909 679
Deposit insurance special
assessment (Note 3) (21) - 704 -
Litigation expense (Note 4) (75) - 250 -
-------- -------- -------- --------
Total noninterest expenses 928 933 4,137 2,522
-------- -------- -------- --------
Income before income taxes 790 295 849 965
PROVISION FOR INCOME TAXES 250 45 274 330
-------- -------- -------- --------
Net income $ 540 $ 250 $ 575 $ 635
======== ======== ======== ========
EARNINGS PER SHARE (Note 2) $ .86 $ .37 $ .92 $ .95
======== ======== ======== ========
AVERAGE NUMBER OF SHARES
OUTSTANDING 624,490 660,470 623,163 670,110
======== ======== ======== ========
DIVIDENDS DECLARED PER SHARE
(Note 2) $ .20 $ .16 $ .76 $ 1.12
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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FIRSTFED BANCORP, INC.
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
---------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
---- ----
<S> <C> <C>
Net income $ 575 $ 635
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 193 206
Amortization of unearned compensation 96 -
Amortization of premiums, net 67 34
Accretion of deferred income (32) (83)
Loan fees (cost) deferred, net (106) (133)
Provision for loan losses 135 45
Net loans (originated for sale) sold 538 (628)
Amortization of goodwill 84 -
Change in assets and liabilities:
Increase in accrued interest (154) (77)
Decrease in other assets 60 94
Increase (decrease) in accrued interest
payable (38) (17)
Increase (decrease) in income taxes payable (95) 24
Increase (decrease) in other liabilities 7 58
-------- -------
Net cash provided by operating
activities 1,330 158
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
available for sale 1,550 2,995
Proceeds from the sale of securities available
for sale 857 -
Purchase of securities available for sale (2,341) -
Proceeds from maturities of securities 1,061 -
Purchase of securities (4,103) -
Principal payments received on mortgage-backed
securities 1,613 566
Purchase of mortgage-backed securities (6,876) -
Proceeds from sale of real estate and
repossessed assets 22 14
Net loan originations (3,416) (4,020)
Capital expenditures (151) (72)
-------- -------
Net cash used in investing activities (11,784) (517)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits, net 11,055 7,235
Proceeds from FHLB advances - 591
Payment of FHLB advances (1,002) (1,620)
Proceeds from exercise of stock options 76 83
Purchase of treasury stock - (1,116)
Dividends paid (439) (741)
Purchase of stock for stock plans - (24)
-------- -------
Net cash provided by financing activities 9,690 4,408
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (764) 4,049
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,114 5,656
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,350 $ 9,705
======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for-
Income taxes $ 369 $ 306
======== =======
Interest $ 5,507 $ 4,118
======== =======
Noncash transactions-
Transfers of loans receivable to real estate
owned $ 76 $ 30
Declaration of cash dividends not paid $ 123 $ 102
Issuance of stock for stock plans $ 6 $ 29
(Decrease) increase in unrealized loss on
securities
available for sale, net of deferred tax $ 46 $ (56)
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
FIRSTFED BANCORP, INC.
----------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Dollar amounts in thousands, except per share amounts)
1. BASIS OF PRESENTATION:
----------------------
FirstFed Bancorp, Inc. (the "Company") is the holding company and sole
shareholder of First Federal Savings Bank ("First Federal") and First State
Corporation ("FSC"). FSC was acquired by the Company on January 2, 1996, and is
the sole shareholder of First State Bank of Bibb County ("First State"). First
Federal and First State are referred to herein collectively as the "Banks".
The accompanying unaudited condensed consolidated financial statements as of
December 31, 1996 (unaudited) and March 31, 1996, and for the three and nine
months ended December 31, 1996 and 1995 (unaudited), include the accounts of the
Company, FSC and the Banks. All significant intercompany transactions and
accounts have been eliminated in consolidation.
In the opinion of management, all adjustments necessary for a fair presentation
of the results of such interim periods have been included. The results of
operations for the three and nine months ended December 31, 1996, are not
necessarily indicative of the results of operations which may be expected for
the entire year.
These unaudited condensed Financial Statements should be read in conjunction
with the Consolidated Financial Statements and the notes thereto included in the
Company's annual report on Form 10-K for the year ended March 31, 1996. The
accounting policies followed by the Company are set forth in the summary of
Significant Accounting Policies in the Company's March 31, 1996 Consolidated
Financial Statements.
2. EARNINGS AND DIVIDENDS PER SHARE:
---------------------------------
Earnings per share of $.86 and $.92 for the three and nine months ended December
31, 1996, considers the incremental dilutive effect of shares represented by
stock options outstanding. Dividends declared for the nine months ended
December 31, 1996, consisted of a $.20 per share quarterly dividend and a $.16
per share special dividend paid in the first quarter.
3. SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") SPECIAL ASSESSMENT
--------------------------------------------------------------
On September 30, 1996, an omnibus appropriations bill was signed into law to
fund a number of government agencies in the 1997 fiscal year, which began
October 1, 1996. Banking provisions to resolve the deposit insurance premium
disparity between the SAIF and the Bank Insurance Fund ("BIF") were included in
the legislation. The deposits of First Federal are insured by SAIF while the
deposits of
5
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First State are insured by BIF. The banking provisions also included extensive
regulatory relief for thrifts and banks.
The major banking provisions contained in the bill included a one-time special
assessment on SAIF deposits to bring the fund's reserve ratio to the statutorily
required minimum level of 1.25 percent of deposits. The assessment rate for
First Federal was 65.7 basis points and applied to First Federal's deposits as
of March 31, 1995. At September 30, 1996, First Federal recorded an accrual of
$725 ($475, net of tax) to reflect this special assessment. The actual amount
paid during the quarter ended December 31, 1996, was $21 less than estimated and
accrued at September 30, 1996. The $21 was reversed during the quarter ended
December 31, 1996.
The bill also provides that pro-rata sharing of the Financing Corporation
("FICO") obligation among BIF and SAIF members will begin by January 1, 2000.
From 1997 through 1999, partial sharing will occur, with SAIF deposits assessed
6.44 basis points and BIF deposits assessed 1.29 basis points. The new
assessment rate for institutions with SAIF deposits represents a reduction from
the existing rate of 23 basis points for First Federal, which will have a
positive impact on future earnings.
In addition, under the bill, the BIF and SAIF will merge to form the Deposit
Insurance Fund on January 1, 1999, if there are no savings associations (not
including state savings banks) in existence on that date. In addition, the
Treasury Department has been directed to report to Congress by March 31, 1997,
with its recommendations on a common charter for banks and savings institutions.
4. LITIGATION EXPENSE
------------------
During the quarter ended September 30, 1996, a jury verdict was rendered in the
Circuit Court of Jefferson County, Alabama, against First Federal for $75 in
compensatory damages and $250 in punitive damages, for a total of $325 ($215,
net of tax). The lawsuit arose from a customer's claim for disability insurance
benefits to be paid by an insurance company to cover monthly mortgage payments.
First Federal filed a motion for judgment notwithstanding the verdict or, in the
alternative, for a new trial. During the course of appeal in the quarter ended
December 31, 1996, the lawsuit was settled for $250. For financial statement
purposes, at September 30, 1996, the entire amount of the original verdict was
recorded. During the quarter ended December 31, 1996, the actual amount of the
settlement was appropriately reflected in the financial statements by reducing
the expense from the intial accrual of $325 to $250.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Comparison of Financial Condition as of December 31, 1996, and March 31, 1996
- ------------------------------------------------------------------------------
All dollar amounts, except per share amounts, included hereafter in Management's
Discussion and Analysis of Financial Condition and Results of Operations are in
thousands.
Primarily due to an increase in mortgage-backed and other government securities
and loans receivable, the Company's total consolidated assets at December 31,
1996, increased to $176,496; an increase of $10,312, or 6.21%, from total assets
of $166,184 at March 31, 1996.
Securities and securities available for sale increased $3,027 or 20.66%, to
$17,680 at December 31, 1996. This increase is primarily the result of the
purchase of $6,444 of government securities and government agency notes, net of
securities totalling $3,468 called, matured or sold.
Mortgage-backed securities increased $5,222, or 109.6%, to $9,988 at December
31, 1996, from $4,766 at March 31, 1996. This increase is primarily the result
of the purchase of $6,876 of mortgage-backed securities, net of $1,613 of
principal repayments and prepayments.
Loans receivable, net, at December 31, 1996 were $129,542, an increase of
$3,343, or 2.6%, from $126,199 at March 31, 1996. The increase in loans
receivable, net, was due to continued loan demand. Lending activity consisted
mainly of one to four family home loans and, to a lesser extent, consumer and
commercial loans.
The Banks maintain allowances for loan losses. The consolidated allowance had
an aggregate net increase of $82 to $703 at December 31, 1996, from $621 at
March 31, 1996. This increase was primarily due to a provision of $135 offset
by the net of charge-offs over recoveries of $52. Non-performing loans at
December 31, 1996, were $894, or 0.7% of loans receivable, up from the March 31,
1996, level of $599, or 0.5% of loans receivable. At December 31, 1996, there
were no material loans not already included in nonperforming loans which
represent material credits about which management had serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
Deposits increased $11,055, or 7.6%, to $156,913 at December 31, 1996, from
$145,858 at March 31, 1996. The increase was primarily
7
<PAGE>
related to a 60th Anniversary certificate of deposit program implemented and
completed during the first quarter of fiscal 1997.
The Company had stockholders' equity of $17,559 as of December 31, 1996, an
increase of $328, or 1.9%, from $17,231 as of March 31, 1996. The net increase
was primarily attributable to net income of $575, offset by dividends declared
of $.76 per share, totalling $466. Included in the dividends was a special
dividend of $.16 per share.
Traditionally, the Bank's principal sources of funds have been deposits,
principal and interest payments on loans, and proceeds from maturities of
investment and mortgage-backed securities. In addition, First Federal has
borrowing ability from the Federal Home Loan Bank of Atlanta if the need for
additional funds arises. At December 31, 1996, the Banks had commitments to
originate and fund loans of $4,551. The Banks anticipate that sufficient funds
will be available to meet current loan commitments.
First Federal is required by regulation to maintain minimum levels of liquid
assets. The liquidity of First Federal at December 31, 1996, was 10.8%, which
exceeded the applicable 5.0% liquidity requirement.
Under applicable regulations, First Federal, First State and the Company are
required to maintain minimum capital ratios. Set forth below are their actual
capital ratios and the minimum regulatory capital requirements as of December
31, 1996.
<TABLE>
<CAPTION>
First Federal First State The Company
----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
RISK-BASED CAPITAL RATIOS
Tier 1 Capital
Stockholders' Equity less goodwill $10,481 7.47% $ 3,014 8.61% $16,045 9.09%
Minimum Required 5,610 4.00% 1,401 4.00% 7,060 4.00%
------- ----- ------- ----- ------- -----
Excess $ 4,871 3.47% $ 1,613 4.61% $ 8,985 5.09%
======= ===== ======= ===== ======= =====
Total Capital
Tier 1 Capital plus allowances
for loan losses $10,879 13.75% $ 3,257 18.00% $16,748 17.00%
Minimum Required 6,328 8.00% 1,551 8.00% 7,879 8.00%
------- ----- ------- ----- ------- -----
Excess $ 4,551 5.75% $ 1,706 10.00% $ 8,869 9.00%
======= ===== ======= ===== ======= =====
Total Risk-weighted assets $79,096 $19,389 $98,485
======= ======= =======
LEVERAGE RATIOS
Tier 1 Capital $10,481 7.47% $ 3,014 8.61% $16,045 9.09%
Minimum Leverage Requirement 4,208 3.00% 1,051 3.00% 5,295 3.00%
------- ----- ------- ----- ------- -----
Excess $ 6,273 4.47% $ 1,963 5.61% $10,750 6.09%
======= ===== ======= ===== ======= =====
TANGIBLE CAPITAL RATIO
Tangible Capital $10,481 7.47%
Tangible Capital Requirement 2,104 1.50%
------- -----
Excess $ 8,377 5.97%
======= =====
</TABLE>
8
<PAGE>
Management is not aware of any trends, events or uncertainties that will have
or are reasonably likely to have a material effect on the Bank's liquidity,
capital resources or operations.
General Results of Operations - Comparison of the Three Months Ended December
- -----------------------------------------------------------------------------
31, 1996 and 1995
- -----------------
Net income for the three months ended December 31, 1996 was $540, an increase of
$290, or 116.0%, from net income of $250 for the three months ended December 31,
1995. The increase was primarily due to three factors; increase in the interest
rate spread, the addition of First State and the partial reversal of accruals
for litigation and the SAIF special assessment to actual amounts paid.
Interest Income
- ---------------
Total interest income increased $878, or 34.6%, to $3,418 for the three months
ended December 31, 1996. This increase was partially the result of a 30.47%
increase in the average balance of interest-earning assets during the three
months ended December 31, 1996, as compared to the three months ended December
31, 1995. This increase in interest-earning assets is primarily the result of
the acquisition of First State. This increase was also partially the result of
an increase in the average yield on interest earning assets to 8.2% during the
three months ended December 31, 1996, from 7.9% for the corresponding quarter of
the previous year.
Interest income and fees on loans increased $606, or 26.5%, to $2,891 during the
three months ended December 31, 1996, from $2,285 for the three months ended
December 31, 1995. The increase in interest income on loans was in part
attributable to a 17.9% increase in the average balance of loans during the
third quarter of fiscal 1997 as compared to the third quarter of fiscal 1996 as
a result of the addition of First State. The increase was also the result of an
increase in the average yield on loans to 8.9% for three months ended December
31, 1996, compared to 8.3% for the corresponding quarter of the previous year.
Interest earned on mortgage-backed securities increased $80, or 95.2%, to $164
for the three months ended December 31, 1996, from $84 for the corresponding
three months ended December 31, 1995. The increase was primarily attributable to
a 112.7% increase in the average balance of mortgage-backed securities during
the quarter ended December 31, 1996, as compared to the quarter ended December
31, 1995. This was primarily the result of the purchase of $6,876 in mortgage-
backed securities during fiscal 1997, net of principal repayments and
prepayments.
Interest and dividends on the securities portfolio increased $192, or 215.7%,
during the third quarter of fiscal 1997 from the third quarter of fiscal 1996.
This increase reflects a 232.1% increase in
9
<PAGE>
the average balance of securities from the corresponding quarter of the previous
year. The increase in the average balance is primarily the result of the
addition of First State and the purchase of $6,444 in securities, net of $3,468
of securities called, matured or sold.
Interest Expense
- ----------------
Interest expense for the quarter ended December 31, 1996, increased $466, or
33.2%, to $1,869, from $1,403 during the quarter ended December 31, 1995. This
increase was primarily attributable to an increase in the average balance of
deposits of 40.1%, partially offset by a slight decrease in the average rate
paid on deposits to 4.8% during the quarter ended December 31, 1996, from 4.9%
for the quarter ended December 31, 1995. The increase in deposits was the
result of the addition of First State and a 60th Anniversary certificate of
deposit program.
Net Interest Income
- -------------------
Net interest income for the quarter ended December 31, 1996, increased $412, or
36.2%, to $1,549 from the third quarter of fiscal 1996 level of $1,137. The
increase was attributable to an increase in the average balance of interest-
earning assets and interest-bearing liabilities primarily as a result of the
addition of First State. The increase was also the result of an increase in
average net interest spread to 3.4% in the third quarter of fiscal 1997 from
3.0% in the third quarter of fiscal 1996. The net interest margin was 3.7% in
the third quarter of fiscal 1997 and 3.6% in the third quarter of fiscal 1996.
Provision for Loan Losses
- -------------------------
Management increased its allowance for loan losses by a provision of $50 during
the quarter ended December 31, 1996.
The allowance for loan losses is based on management's evaluation of possible
losses inherent in the loan portfolio and considers, among other factors, prior
years' loss experience, economic conditions, distribution of portfolio loans by
risk class and the estimated value of the underlying collateral.
Noninterest Income
- ------------------
Noninterest income for the three months ended December 31, 1996, totaled $219 as
compared to $106 for the three months ended December 31, 1995. The increase was
primarily the result of fee income arising from the addition of First State.
Noninterest Expenses
- --------------------
Noninterest expenses during the quarter ended December 31, 1996,
10
<PAGE>
decreased $5 to $928 from the fiscal 1996 third quarter level of $933. During
the third quarter ended December 31, 1996, the Company reduced previously
accrued expenses by $96, which was the aggregate difference in the amounts
accrued and the actual SAIF assessment paid of $704 and the actual settlement of
the lawsuit for $250.
Income Taxes
- ------------
The provision for income taxes increased $205 to $250 for the quarter ended
December 31, 1996 as compared to a provision of $45 for the corresponding
quarter of the prior year. The increase in tax expense was due partially to a
167.8% increase in pretax income.
General Results of Operations - Comparison of the Nine Months Ended December 31,
- --------------------------------------------------------------------------------
1996 and 1995
- -------------
Net income for the nine months ended December 31, 1996, was $575,
a decrease of $60, or 9.4%, from net income of $635 for the nine months ended
December 31, 1995. The decrease was primarily attributable to two nonrecurring
items: the payment of the SAIF special assessment of $704 and the payment of a
lawsuit settlement of $250. Net income for the nine months ended December 31,
1996, was $1,214, not considering the two nonrecurring items recorded by the
Company. See additional discussion in Note 3 and Note 4 of the "Notes to
Condensed Consolidated Financial Statements".
Interest Income
- ---------------
Total interest income increased $2,580, or 34.9% to $9,973 for the nine months
ended December 31, 1996. This increase was primarily the result of a 30.3%
increase in the average balance of interest-earning assets during the nine
months ended December 31, 1996, as compared to the same period in fiscal 1996
resulting from the addition of First State and internal growth. The increase was
also the result of an increase in the average yield on interest-earning assets
to 8.0% during the nine months ended December 31, 1996, from 7.8% for the
corresponding period of the previous year.
Interest and fees on loans increased $1,858, or 28.0%, to $8,500 during the nine
months ended December 31, 1996, from $6,642 for the nine months ended December
31, 1995. The increase in interest income on loans was in part attributable to
a 17.7% increase in the average balance of loans during the nine months ended
December 31, 1997, as compared to the same period of fiscal 1996 resulting from
the addition of First State. The increase was also the result of an increase in
the average yield on loans to 8.7% for nine months ended December 31, 1996, from
8.0% at December 31, 1995.
Interest earned on mortgage-backed securities increased $128, or 48.9%, to $390
for the nine months ended December 31, 1996, from
11
<PAGE>
$262 for the corresponding nine months ended December 31, 1995. The increase
reflected a 60.9% increase in the average balance of mortgage-backed securities
during the nine months ended December 31, 1996, as compared to the nine months
ended December 31, 1995. This was primarily the result of purchases of $6,876 in
mortgage-backed securities during fiscal 1997, net of principal repayments and
prepayments. This increase was offset in part by a decrease in the average yield
on mortgage-backed securities during the nine months ended December 31, 1996, to
6.4% as compared to 6.9% for the nine months ended December 31, 1995.
Interest and dividends on the securities portfolio increased $489, or 166.3%,
for the nine months ended December 31, 1996, compared to the nine months ended
December 31, 1995, reflecting a 182.0% increase in the average balance of
investment securities. The increase in the average balance of securities was
primarily the result of the addition of First State and the purchase of $6,444
of securities, net of $3,468 of securities called, matured or sold. This
increase was partially offset by the decrease in average yield earned of 6.0%
for the nine months ended December 31, 1996 compared to 6.3% for the nine months
ended December 31, 1995.
Interest Expense
- ----------------
Interest expense for the nine months ended December 31, 1996 increased $1,368,
or 33.4%, to $5,469, from $4,101 during the nine months ended December 31, 1995.
This increase was attributable to a 39.3% increase in the average level of
deposits for the nine months ended December 31, 1996, partially offset by a
slight decrease in the average rate paid on deposits to 4.7% during the nine
months ended December 31, 1996, from 4.8% during the nine months ended December
31, 1995. The increase in deposits was the result of the addition of First State
and a 60th Anniversary certificate of deposit program.
Net Interest Income
- -------------------
Net interest income for the nine months ended December 31, 1996, increased
$1,212, or 36.8%, to $4,504 from $3,292 for the nine months ended December 31,
1995. This increase was primarily due to an increase in the volume of interest-
earning assets and interest-bearing liabilities as a result of the addition of
First State. The increase was also the result of an increase in the average net
interest spread to 3.3% for the first nine months of fiscal 1997 from 2.9% for
the first nine months of fiscal 1996. The net interest margin increased to 3.6%
in the first nine months of fiscal 1997 from 3.5% in the first nine months of
fiscal 1996.
Provision for Loan Losses
- -------------------------
The allowance for loan losses is based on management's evaluation of possible
losses inherent in the loan portfolio and considers,
12
<PAGE>
among other factors, prior years' loss experience, economic conditions,
distribution of portfolio loans by risk class and the estimated value of the
underlying collateral. The allowance for loan losses was increased by a
provision of $135 for the nine months ended December 31, 1996.
Noninterest Income
- ------------------
Noninterest income for the nine months ended December 31, 1996, totaled $617 as
compared to $240 for the nine months ended December 31, 1995. The increase was
primarily the result of the addition of First State.
Noninterest Expenses
- --------------------
Noninterest expenses during the nine months ended December 31, 1996, increased
$1,615 to $4,137 from the fiscal 1996 level of $2,522. The increase was
primarily the result of three factors; the payment of the SAIF special
assessment of $704, the payment of a lawsuit settlement of $250 and the addition
of First State. See additional discussion in Note 3 and Note 4 of the "Notes to
Condensed Consolidated Financial Statements".
Income Taxes
- ------------
The provision for income taxes decreased $56, or 17.0%, to $274 for the nine
months ended December 31, 1996, as compared to the corresponding period of the
prior year. The lower tax expense was primarily due to the 12.0% decrease in
pretax income.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 9, 1996, a jury verdict in the Circuit Court of Jefferson County,
Alabama was rendered against First Federal in connection with a civil lawsuit.
The total amount of the damages set forth in the verdict is $325. First Federal
filed a motion to overturn the verdict or, in the alternative, to obtain a new
trial. On December 19, 1996, First Federal settled the lawsuit for $250. For
further information, see Note 4 to the "Notes to Condensed Consolidated
Financial Statements" set forth herein.
ITEM 2. CHANGE 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
Non.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
(i) Exhibit 27 (SEC use only)
(b) Reports on Form 8-K
None.
14
<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 BANCORP, INC.
Date: February 7, 1997 /s/ B. K. Goodwin, III
---------------------- -----------------------------
B. K. Goodwin, III,
Chairman of the Board,
Chief Executive Officer
and President
(Duly Authorized Officer)
Date: February 7, 1997 /s/ Lynn J. Joyce
---------------------- -----------------------------
Lynn J. Joyce
Vice President, Secretary
and Treasurer
(Principal Financial Officer)
15
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<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,791
<INT-BEARING-DEPOSITS> 5,684
<FED-FUNDS-SOLD> 3,875
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,885
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<INVESTMENTS-MARKET> 16,906
<LOANS> 129,542
<ALLOWANCE> 703
<TOTAL-ASSETS> 176,496
<DEPOSITS> 156,913
<SHORT-TERM> 1,000
<LIABILITIES-OTHER> 1,024
<LONG-TERM> 0
0
0
<COMMON> 7
<OTHER-SE> 17,559
<TOTAL-LIABILITIES-AND-EQUITY> 176,496
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<INTEREST-TOTAL> 9,973
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<EXPENSE-OTHER> 4,137
<INCOME-PRETAX> 849
<INCOME-PRE-EXTRAORDINARY> 849
<EXTRAORDINARY> 0
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<NET-INCOME> 575
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
<YIELD-ACTUAL> 8.2
<LOANS-NON> 289
<LOANS-PAST> 603
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 621
<CHARGE-OFFS> 168
<RECOVERIES> 115
<ALLOWANCE-CLOSE> 703
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