<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 September 30, 1997
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 October 23, 1997
---------------------------- -------------------------------
Common Stock, $.01 par value 1,150,998 shares
<PAGE>
FIRSTFED BANCORP, INC.
----------------------
PART I
FINANCIAL INFORMATION
---------------------
Page
----
ITEM 1. FINANCIAL STATEMENTS:
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1997 AND MARCH 31, 1997......................... 2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE
MONTHS ENDED SEPTEMBER 30, l997 AND 1996 AND THE SIX
MONTHS ENDED SEPTEMBER 30, 1997 AND 1996............................ 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996........................ 4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS................ 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.......................... 7
PART II
OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS........................................... 12
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS................... 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................. 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 13
ITEM 5. OTHER INFORMATION........................................... 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 13
SIGNATURES........................................................... 14
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
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
FIRSTFED BANCORP, INC.
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
--------------------------------------------------------
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
September 30, 1997 March 31, 1997
------------------ --------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents: (Unaudited)
Cash on hand and in banks $ 6,986 $ 5,411
Interest-bearing deposits in other banks 1,488 4,354
Federal funds sold 10,175 4,200
----------- -----------
18,649 13,965
----------- -----------
Securities available for sale, at fair value 10,996 10,330
Assets held for sale, at lower of cost or market 1,378 331
Securities, at amortized cost, fair value of
$4,410 and $6,395, respectively 4,371 6,373
Mortgage-backed securities, at amortized cost,
fair value of $11,910 and $13,382, respectively 11,843 13,329
Loans receivable, net 121,412 126,849
Land, buildings and equipment, net 2,949 2,642
Goodwill 1,443 1,487
Real estate owned 833 131
Real estate held for investment 931 931
Accrued interest receivable 1,363 1,450
Other assets 296 306
----------- -----------
$ 176,464 $ 178,124
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 157,432 $ 157,970
Borrowed funds 1,000 1,000
Accrued interest payable 168 156
Income taxes payable 274 318
Dividends payable 144 123
Other liabilities 450 634
159,468 160,201
----------- -----------
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized, none issued and
outstanding
Common stock, $.01 par value, 3,000,000 shares
authorized, 1,484,880 shares issued and
1,150,998 shares outstanding and 1,477,530
issued and 1,231,582 shares outstanding,
respectively 15 14
Paid-in capital 6,658 6,601
Retained earnings 14,699 14,256
Treasury stock, at cost (333,882 and 245,948),
respectively (4,320) (2,781)
Unearned compensation (56) (95)
Unrealized loss on securities available
for sale, net - (72)
----------- -----------
16,996 17,923
----------- -----------
$ 176,464 $ 178,124
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
FIRSTFED BANCORP, INC.
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
-------------------------- -------------------------
1997 1996 1997 1996
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME: (Unaudited)
Interest and fees on loans $ 2,796 $ 2,835 $ 5,648 $ 5,609
Interest on mortgage-backed securities 196 142 403 226
Interest and dividends on securities 225 282 486 502
Other interest income 154 113 248 218
---------- ---------- ---------- ----------
Total interest income 3,371 3,372 6,785 6,555
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits 1,792 1,847 3,598 3,540
Interest on other borrowings 19 29 37 60
---------- ---------- ---------- ----------
Total interest expense 1,811 1,876 3,635 3,600
---------- ---------- ---------- ----------
Net interest income 1,560 1,496 3,150 2,955
Provision for loan losses 51 55 102 85
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,509 1,441 3,048 2,870
---------- ---------- ---------- ----------
NONINTEREST INCOME:
Fees for customer service 170 147 349 289
Miscellaneous operating and
non-operating income, net 40 57 90 109
---------- ---------- ---------- ----------
Total noninterest income 210 204 439 398
---------- ---------- ---------- ----------
NONINTEREST EXPENSES:
Salaries and employee benefits 573 544 1,171 1,077
Office building and equipment
expenses 139 128 273 258
Deposit insurance expense 23 79 46 159
Loss on real estate owned 2 2 2 2
Amortization of goodwill 27 28 54 56
Other operating expenses 317 310 642 607
Deposit insurance special
assessment - 725 - 725
Litigation expense - 325 - 325
---------- ---------- ---------- ----------
Total noninterest expenses 1,081 2,141 2,188 3,209
---------- ---------- ---------- ----------
Income (loss) before income taxes 638 (496) 1,299 59
PROVISION (CREDIT) FOR INCOME TAXES
218 (171) 445 24
---------- ---------- ---------- ----------
Net income (loss) $ 420 $ (325) $ 854 $ 35
========== ========== ========== ==========
EARNINGS (LOSS) PER SHARE
(Note 2) $ .35 $ (.26) $ .69 $ .03
========== ========== ========== ==========
AVERAGE NUMBER OF SHARES
OUTSTANDING 1,199,624 1,248,004 1,244,497 1,246,378
========== ========== ========== ==========
DIVIDENDS DECLARED PER SHARE
(Note 2) $ .125 $ .10 $ .35 $ .28
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
FIRSTFED BANCORP, INC.
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
----------- -----------
<S> <C> <C>
Net income $ 854 $ 35
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 139 132
Amortization of unearned compensation 39 77
Amortization of premiums, net 39 43
Accretion of deferred income (expense), net 15 (16)
Loan fees (cost) deferred, net (38) (91)
Loss on sale of real estate owned, net 2 -
Provision for loan losses 102 85
Net loans originated for sale (1,047) (138)
Amortization of goodwill 54 56
Change in assets and liabilities:
(Increase)decrease in accrued interest receivable 87 (88)
(Increase) decrease in other assets 10 (113)
Increase (decrease) in accrued interest payable 12 (9)
Increase (decrease) in income taxes payable (101) (213)
Increase (decrease)in other liabilities (184) 1,085
----------- -----------
Net cash provided by (used in) operating activities (17) 845
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available for sale 950 850
Purchase of securities available for sale (1,499) (1,838)
Proceeds from maturities of securities 2,002 1,061
Purchase of securities - (3,992)
Principal payments received on mortgage-backed securities 1,449 816
Purchase of mortgage-backed securities - (5,873)
Proceeds from sale of real estate owned 54 5
Net loan originations (repayments) 4,672 (1,252)
Capital expenditures (518) (52)
----------- -----------
Net cash provided by (used in) investing activities 7,110 (10,275)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net (538) 11,268
Payment of FHLB advances - (352)
Proceeds from exercise of stock options 58 39
Purchase of treasury stock (1,539) -
Dividends paid (390) (318)
----------- -----------
Net cash provided by financing activities (2,409) 10,637
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,684 1,207
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,965 12,114
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,649 $ 13,321
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for-
Income taxes $ 536 $ 42
=========== ===========
Interest $ 3,623 $ 3,609
=========== ===========
Noncash transactions-
Transfers of loans receivable to real estate owned $ 686 $ 92
Declaration of cash dividends $ 144 $ 122
(Decrease) increase in unrealized loss on securities
available for sale, net of deferred tax $ 72 $ 22
=========== ===========
</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 of First State
Corporation ("FSC"), which in turn 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 condensed consolidated financial statements as of September 30,
1997 (unaudited) and March 31, 1997, and for the three and six months ended
September 30, 1997 and 1996 (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 six months ended September 30, 1997, 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, 1997. The
accounting policies followed by the Company are set forth in the summary of
Significant Accounting Policies in the footnotes to the Company's March 31,
1997, Consolidated Financial Statements.
2. EARNINGS AND DIVIDENDS PER SHARE:
---------------------------------
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." This
Statement establishes standards for computing and presenting earnings per share
("EPS"). This Statement will simplify the standards for computing EPS previously
found in APB Opinion No. 15, "Earnings per Share," and will make them comparable
to international EPS standards. It will replace the presentation of primary EPS
with a presentation of basic EPS and will require dual presentation of basic and
diluted EPS on the face of the income statement. Also, disclosure will be made
of a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
This Statement is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods, and requires restatement of
all prior-period EPS data presented. The Company will adopt the Statement at
fiscal year-end 1998. Had the Company implemented SFAS No. 128 on April 1, 1996,
the pro forma EPS results would have been as follows:
5
<PAGE>
<TABLE>
<CAPTION>
Six Months Six Months
Ended September 30, 1997 Ended Septemer 30, 1996
------------------------------------ ------------------------------------
Dilutive Dilutive
Effect of Effect of
Options Options
Basic Issued Diluted Basic Issued Diluted
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 854,000 --- $ 854,000 $ 35,000 --- $ 35,000
Shares available to
common shareholders 1,194,144 50,354 1,199,498 1,218,690 27,688 1,246,378
---------- ---------- ---------- ---------- ---------- ----------
Earnings per share $ 0.71 $ 0.02 $ 0.69 $ 0.03 --- $ 0.03
========== ========== ========== ========== ========== ==========
</TABLE>
Dividends declared for the quarter ended September 30, 1997, consisted of a
$.125 per share quarterly dividend.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Financial Condition as of September 30, 1997, and March 31, 1997
- -------------------------------------------------------------------------------
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.
Fed funds increased $5,975, or 142.26%, to $10,175 at September 30, 1997. This
increase is primarily the result of funds received from the repayments of loans
receivable.
Securities available for sale and held to maturity decreased $1,336, or 8.0%, to
$15,367 at September 30, 1997. This decrease reflects the purchase of $1,499
of government securities and government agency notes, offset by the effect of
securities totaling $2,952 maturing or being called prior to maturity.
Mortgage-backed securities decreased $1,486, or 11.15%, to $11,843 at September
30, 1997, from $13,329 at March 31, 1997. This decrease is primarily the result
of principal repayments and prepayments.
Loans receivable, net, at September 30, 1997, were $121,412, a decrease of
$5,437, or 4.3%, from $126,849 at March 31, 1997. The decrease in loans
receivable, net, is primarily the result of repayments and the origination of
loans for sale in the secondary market rather than for retention in the Banks'
portfolios.
The Company's consolidated allowances for loan losses increased to $784 at
September 30, 1997, from $733 at March 31, 1997. This increase is primarily due
to a provision of $102 offset by the net of charge-offs over recoveries of
$51. Non-performing loans at September 30, 1997, were $1,569 or 1.3% of loans
receivable, a decrease from the March 31, 1997, level of $1,900 or 1.5% of
loans receivable. At September 30, 1997, there were no loans not included in
nonperforming
6
<PAGE>
loans which represented material credits about which management was aware of any
information which caused management to have serious doubts as to the ability of
such borrowers to comply with the loan repayment terms.
Real estate owned was $833 at September 30, 1997, an increase of $702 from March
31, 1997, primarily as a result of foreclosures on loans that had been
nonperforming at March 31, 1997. Three real estate properties have been
foreclosed since March 31, 1997. Based on the evaluations of the current values
of such properties, management does not believe that the Company will suffer any
loss upon their disposition.
Deposits decreased $538, or 0.3%, to $157,432 at September 30, 1997, from
$157,970 at March 31, 1997. The decrease is primarily related to a relatively
small portion of previously issued certificates of deposit that matured and were
not renewed. The deposits were part of a special offer related to First
Federal's 60th Anniversary.
The Company had stockholders' equity of $16,997 as of September 30, 1997, a
decrease of $926, or 5.2%, from $17,923 as of March 31, 1997. The net decrease
is primarily attributable to the purchase of treasury stock totaling $1,539, and
dividends declared of $411, or $.35 per share, slightly offset by net income for
the six months ended September 30, 1997 of $854. Included in such dividends was
a special dividend of $.10 per share which was paid in the quarter ended June
30, 1997.
Liquidity and Capital Resources
- -------------------------------
Traditionally, the Company's principal sources of funds have been deposits,
principal and interest payments on loans, and proceeds from maturities of
mortgage-backed securities and other securities. In addition, First Federal has
borrowing ability from the Federal Home Loan Bank of Atlanta if the need for
additional funds arises. At September 30, 1997, the Banks had commitments to
originate and fund loans of $5,897. The Company anticipates that sufficient
funds will be available to meet these current loan commitments.
First Federal is required by regulation to maintain minimum levels of liquid
assets. The liquidity of First Federal at September 30, 1997, was 14.0%, which
exceeded the applicable 5.0% regulatory requirement.
Under applicable regulations, First Federal, First State and the Company are
each required to maintain minimum capital ratios. Set forth below are their
actual capital ratios and the minimum regulatory capital requirements as of
September 30, 1997.
7
<PAGE>
<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 $ 10,945 7.91% $ 2,922 7.94% $ 16,995 9.69%
Minimum Required 5,537 4.00% 1,472 4.00% 6,991 4.00%
-------- -------- -------- -------- -------- --------
Excess $ 5,408 3.91% $ 1,450 3.94% $ 10,004 5.67%
======== ======== ======== ======== ======== ========
Total Capital
Tier 1 Capital plus allowances
for loan losses $ 11,413 13.73% $ 3,181 15.40% $ 17,722 17.08%
Minimum Required 6,646 8.00% 1,653 8.00% 8,300 8.00%
-------- -------- -------- -------- -------- --------
Excess $ 4,767 5.73% $ 1,528 7.40% $ 9,422 9.08%
======== ======== ======== ======== ======== ========
Total Risk-weighted assets $ 83,094 $ 20,657 $103,751
======== ======== ========
LEVERAGE RATIOS
Tier 1 Capital $ 10,945 7.91% $ 2,922 7.94% $ 16,995 9.69%
Minimum Leverage Requirement 4,153 3.00% 1,104 3.00% 5,257 3.00%
-------- -------- -------- -------- -------- --------
Excess $ 6,792 4.91% $ 1,818 4.94% $ 11,738 6.69%
======== ======== ======== ======== ======== ========
TANGIBLE CAPITAL RATIO
Tangible Capital $ 10,945 7.91%
Tangible Capital Requirement 2,070 1.50%
-------- --------
Excess $ 8,875 6.41%
======== ========
</TABLE>
General Results of Operations - Comparison of the Three Months Ended September
- ------------------------------------------------------------------------------
30, 1997 and 1996
- -----------------
For the three months ended September 30, 1997, the Company recorded a net income
of $420, compared to a net loss of ($325) for the three months ended September
30, 1996. The increase is primarily the result of two nonrecurring items
recorded in the prior year: the accrual of the Savings Association Insurance
Fund ("SAIF") special assessment of approximately $725 and the accrual of a
lawsuit judgment of $325. Excluding the effect of these two nonrecurring items
recorded by the Company, net income for the three months ended September 30,
1996, would have been $365. The increase in net income for the three months
ended September 30, 1997, compared to the same period a year ago, without
considering the nonrecurring items, is primarily the result of an increase in
net interest income and noninterest income.
Interest Income
- ---------------
Total interest income decreased $1, to $3,371 for the three months ended
September 30, 1997. This generally constant level of interest income is the
result of a decrease in the average balance of interest earning assets during
the three months ended September 30, 1997, as compared to the three months ended
September 30, 1996. This decrease was partially offset by an increase in the
average yield on interest earning assets to 8.3% during the three months ended
September 30, 1997, from 8.1% for the corresponding quarter of the previous
year.
8
<PAGE>
Interest income and fees on loans decreased $39, or 1.4%, to $2,796 during the
three months ended September 30, 1997, from $2,835 for the three months ended
September 30, 1996. The decrease in interest income on loans is attributable to
a 1.8% decrease in the average balance of loans during the second quarter of
fiscal 1998 as compared to the second quarter of fiscal 1997. The decrease was
partially offset by an increase in the average yield on loans to 8.9% for three
months ended September 30, 1997, compared to 8.8% for the corresponding quarter
of the previous year.
Interest earned on mortgage-backed securities increased $54, or 38.0%, to $196
for the three months ended September 30, 1997, from $142 for the corresponding
three months ended September 30, 1996. The increase is primarily attributable
to a 36.6% increase in the average balance of mortgage-backed securities during
the quarter ended September 30, 1997, as compared to the quarter ended September
30, 1996. The increase in the average balance of mortgage-backed securities is
primarily the result of the purchase of mortgage-backed securities during the
latter part of fiscal 1997, net of principal repayments and prepayments.
Interest and dividends on the securities portfolio decreased $57, or 20.2%,
during the second quarter of fiscal 1998 from the second quarter of fiscal 1997.
This decrease reflects a 22.1% decrease in the average balance of securities
from the corresponding quarter of the previous year. The decrease in the
average balance was partially offset by a slight increase in the average yield.
Interest Expense
- ----------------
Interest expense for the quarter ended September 30, 1997, decreased $65, or
3.5%, to $1,811, from $1,876 during the quarter ended September 30, 1996. This
decrease is primarily attributable to a decrease in the average balance of
deposits of 0.3% and a decrease in the average rate paid on deposits to 4.6%
during the quarter ended September 30, 1997, from 4.7% for the quarter ended
September 30, 1996.
Net Interest Income
- -------------------
Net interest income for the quarter ended September 30, 1997, increased $64, or
4.3%, to $1,560 from $1,496 for the quarter ended September 30, 1997. The
increase is due in part to an increase in the average net interest spread to
3.6% in the second quarter of fiscal 1998 from 3.3% in the second quarter of
fiscal 1997. The increase was partially offset by a decrease in the average
balance of interest-earning assets and interest-bearing liabilities. The net
interest margin was 3.8% in the second quarter of fiscal 1998 as compared to
3.6% in the second quarter of fiscal 1997.
Provision for Loan Losses
- -------------------------
Management increased the Company's consolidated allowances for loan losses by a
provision of $51 during the quarter ended September 30, 1997. This provision
was recorded to maintain the allowances for loan losses at adequate levels.
9
<PAGE>
The allowances for loan losses are based on management's evaluation of possible
losses inherent in the loan portfolios. Among other factors, management
considers historical loss experience, current economic conditions, distribution
of the loan portfolio by risk class and the estimated value of the underlying
collateral.
Noninterest Income
- ------------------
Noninterest income for the quarter ended September 30, 1997, totaled $210 as
compared to $204 for the quarter ended September 30, 1996. The increase is
primarily the result of the fee income from various deposit services.
Noninterest Expenses
- --------------------
Noninterest expenses during the quarter ended September 30, 1997, decreased
$1,060 to $1,081 from the fiscal 1997 second quarter level of $2,141. The
decrease in noninterest expense reflects the one-time accrual of the SAIF
special assessment of approximately $725 and the accrual of a lawsuit judgment
of $325 recorded in the prior year.
Income Taxes
- ------------
The provision for income taxes increased $389 to $218 for the quarter ended
September 30, 1997, as compared to a credit of ($171) for the corresponding
quarter of the prior year. The tax credit is the result of the net operating
loss for the quarter ended September 30, 1996 primarily as a result of the
nonrecurring noninterest expense items recorded during the period.
General Results of Operations - Comparison of the Six Months Ended September 30,
- --------------------------------------------------------------------------------
1997 and 1996
- -------------
Net income for the six months ended September 30, 1997, was $854, an increase of
$819, from net income of $35 for the six months ended September 30, 1996. The
increase is primarily attributable to two nonrecurring items recorded in the
prior year: the accrual of the SAIF special assessment of approximately $725
and the accrual of a lawsuit judgment in the amount of $325. Excluding the
effect of these two nonrecurring items, net income for the six months ended
September 30, 1996 would have been $725.
Interest Income
- ---------------
Total interest income increased $230, or 3.5%, to $6,785 for the six months
ended September 30, 1997. This increase is primarily the result of an increase
in the average yield on the interest-earning assets to 8.3% during the six
months ended September 30, 1997, from 8.0% during the six months ended September
30, 1996. This increase was partially offset by a decrease in the average
balance of interest earning assets during the six months ended September 30,
1997, as compared to the six months ended September 30, 1996.
10
<PAGE>
Interest and fees on loans increased $39, or 0.7%, to $5,648 during the six
months ended September 30, 1997, from $5,609 for the six months ended September
30, 1996. The increase is primarily the result of an increase in the average
yield on loans to 9.0% for the six months ended September 30, 1997, from 8.7% at
September 30, 1996. This increase was partially offset by a slight decrease in
the average balance of loans during the second quarter of fiscal 1998 as
compared to the same period of fiscal 1997.
Interest earned on mortgage-backed securities increased $177, or 78.3%, to $403
for the six months ended September 30, 1997, from $226 for the corresponding six
months ended September 30, 1996. The increase reflects a 84.1% increase in the
average balance of mortgage-backed securities during the six months ended
September 30, 1997, as compared to the six months ended September 30, 1996.
The increase in the average balance of mortgage-backed securities was the result
of the purchase of mortgage-backed securities during the latter part of fiscal
1997, net of principal repayments and prepayments.
Interest and dividends on the securities portfolio decreased $16, or 3.2%, for
the six months ended September 30, 1997, compared to the six months ended
September 30, 1996, reflecting a decrease in the average balance of investment
securities.
Interest Expense
- ----------------
Interest expense for the six months ended September 30, 1997, increased $35, or
1.0%, to $3,635, from $3,600 during the six months ended September 30, 1996.
This increase was attributable to an increase in the average level of deposits
of 2.8% for the six months ended September 30, 1997. The increase was also the
result of a 1% decrease in the average rate paid on deposits for the six month
periods ended September 30,1997, compared to the same period a year ago.
Net Interest Income
- -------------------
Net interest income for the six months ended September 30, 1997, increased $195,
or 6.6%, to $3,150, from $2,955 for the six months ended September 30, 1996.
This increase was due primarily to an increase in the average net interest
spread to 3.7% for the six months ended September 30, 1997, from 3.3% for the
six months ended September 30, 1996. The net interest margin increased to 3.9%
in the six months ended September 30, 1997, from 3.6% in the six months ended
September 30, 1996.
Provisions for Loan Losses
- --------------------------
The Company's consolidated allowances for loan losses are based on management's
evaluation of possible losses inherent in the loan portfolios. Among other
factors, management considers historical loss experience, current economic
conditions, distribution of the loan portfolios by risk class and the estimated
value of the underlying collateral. The allowances for loan losses were
increased by provisions of $102 for the six months ended September 30, 1997.
These provisions were recorded to maintain the allowances for loan losses at
adequate levels.
11
<PAGE>
Noninterest Income
- ------------------
Noninterest income for the six months ended September 30, 1997, totaled $439 as
compared to $398 for the six months ended September 30, 1996. The increase is
primarily the result of an increase in various deposit related services.
Noninterest Expenses
- --------------------
Noninterest expenses during the six months ended September 30, 1997, decreased
$1,021 to $2,188 from the fiscal 1997 level of $3,209. The decrease in
noninterest expense is primarily the result of the accrual of the SAIF special
assessment of approximately $725 and the accrual of a lawsuit judgment of $325,
both of which were recorded in the prior year.
Income Taxes
- ------------
The provision for income taxes increased $421, to $445 for the six months ended
September 30, 1997, as compared to the corresponding period of the prior year.
The increased tax expense was due to the increase in pretax income.
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company and the Banks are parties to routine legal
proceedings occurring in the ordinary course of business. At September 30, 1997,
there were no legal proceedings to which the Company or the Banks were a party
or parties, or to which any of their property was subject, which were expected
by management to result in a material loss to the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
12
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 29, 1997, the Company held the 1997 Annual Meeting of Stockholders.
The election of Fred T. Blair, Malcolm E. Lewis, and G. Larry Russell as
directors was submitted to a vote of the stockholders. The following is the
result of the vote:
<TABLE>
<CAPTION>
For Withheld
--------- --------
<S> <C> <C>
Fred T. Blair 1,091,973 4,738
Malcolm E. Lewis 1,091,188 5,523
G. Larry Russell 1,091,973 4,738
</TABLE>
There were no broker non-votes in the above matter.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
(i) Exhibit 27 (SEC use only)
(b) Reports on Form 8-K
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
FIRSTFED BANCORP, INC.
Date: November 5, 1997 /s/ B.K. Goodwin, III
-------------------------
B. K. Goodwin, III
Chairman of the Board,
Chief Executive Officer
and President
(Duly Authorized Officer)
Date: November 5, 1997 /s/ Lynn J. Joyce
-------------------------
Lynn J. Joyce
Vice President, Secretary
and Treasurer
(Principal Financial and
Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<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> 6,986
<INT-BEARING-DEPOSITS> 1,488
<FED-FUNDS-SOLD> 10,175
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,374
<INVESTMENTS-CARRYING> 16,214
<INVESTMENTS-MARKET> 16,320
<LOANS> 121,412
<ALLOWANCE> 784
<TOTAL-ASSETS> 176,464
<DEPOSITS> 157,432
<SHORT-TERM> 1,000
<LIABILITIES-OTHER> 1,036
<LONG-TERM> 0
0
0
<COMMON> 15
<OTHER-SE> 16,981
<TOTAL-LIABILITIES-AND-EQUITY> 176,464
<INTEREST-LOAN> 5,648
<INTEREST-INVEST> 889
<INTEREST-OTHER> 248
<INTEREST-TOTAL> 6,785
<INTEREST-DEPOSIT> 3,598
<INTEREST-EXPENSE> 3,635
<INTEREST-INCOME-NET> 3,150
<LOAN-LOSSES> 102
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,188
<INCOME-PRETAX> 1,299
<INCOME-PRE-EXTRAORDINARY> 1,299
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 854
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.69
<YIELD-ACTUAL> 8.3
<LOANS-NON> 796
<LOANS-PAST> 588
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 733
<CHARGE-OFFS> 97
<RECOVERIES> 46
<ALLOWANCE-CLOSE> 784
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 784
</TABLE>
