UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
----------------------------
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
-------------
Commission File Number: 0-19609
---------
FirstFed Bancorp, Inc.
-------------------------------------------
(Exact name of Small Business Issuer 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)
Issuer's telephone number, including area code: (205) 428-8472
--------------
Check whether the issuer (1) 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at July 31, 2000
---------------------------- ----------------------------
Common Stock, $.01 par value 2,527,289 shares
Transitional Small Business Disclosure Format
(Check one):
YES [ ] NO [ X ]
<PAGE>
FIRSTFED BANCORP, INC.
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF JUNE 30, 2000 AND DECEMBER 31, 1999................................. 2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE
AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999............................... 3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999........................... 4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
SIX MONTHS ENDED JUNE 30, 2000 AND 1999................................... 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ....................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION.................................................. 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................. 13
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS......................... 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................... 13
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.
i.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FIRSTFED BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
------------------------------------------------------------------
(Dollar amounts in thousands)
June 30, December 31,
ASSETS 2000 1999
----------- -----------
<S> <C> <C>
Cash and Cash Equivalents:
Cash on hand and in banks $ 5,251 $ 6,132
Interest-bearing deposits in other banks 6,118 6,455
Federal funds sold 3,150 5,250
----------- -----------
14,519 17,837
----------- -----------
Securities available-for-sale, at fair value 13,281 12,383
Loans held for sale 365 255
Securities held-to-maturity, at amortized cost, fair
value of $17,398 and $18,602, respectively 17,605 18,825
Loans receivable, net 116,388 114,404
Land, buildings and equipment, net 3,046 3,151
Goodwill 1,146 1,200
Real estate owned 976 709
Accrued interest receivable 1,789 1,603
Other assets 928 880
----------- -----------
$ 170,043 $ 171,247
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 149,860 $ 151,579
Accrued interest payable 161 147
Dividends payable 177 175
Other liabilities 342 366
----------- -----------
150,540 152,267
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none outstanding -- --
Common stock, $.01 par value, 10,000,000 shares
authorized, 3,103,710 shares issued and 2,523,808
shares outstanding at June 30, 2000 and 3,084,133
shares issued and 2,347,886 shares
outstanding at December 31, 1999 31 31
Paid-in capital 7,888 7,773
Retained earnings 16,448 16,155
Deferred compensation obligation 1,444 1,307
Deferred compensation treasury stock (159,550 shares at
June 30, 2000 and 156,345 shares at December 31, 1999) (1,544) (1,433)
Treasury stock, at cost, 579,902 shares at June
30, 2000, and December 31, 1999 (3,752) (3,752)
Unearned compensation (861) (934)
Accumulated other comprehensive income (151) (167)
----------- -----------
19,503 18,980
----------- -----------
$ 170,043 $ 171,247
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
FIRSTFED BANCORP, INC.
----------------------
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------------------
(Dollar amounts in thousands, except per share amounts)
-------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 2,669 $ 2,496 $ 5,243 $ 4,976
Interest and dividends on
securities 493 362 951 661
Other interest income 155 357 333 782
---------- ---------- ---------- ----------
Total interest income 3,317 3,215 6,527 6,419
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits 1,532 1,646 3,050 3,425
---------- ---------- ---------- ----------
Total interest expense 1,532 1,646 3,050 3,425
---------- ---------- ---------- ----------
Net interest income 1,785 1,569 3,477 2,994
Provision for loan losses 28 28 57 57
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 1,757 1,541 3,420 2,937
---------- ---------- ---------- ----------
NONINTEREST INCOME:
Fees and other noninterest
income 223 230 439 469
---------- ---------- ---------- ----------
Total noninterest income 223 230 439 469
---------- ---------- ---------- ----------
NONINTEREST EXPENSE:
Salaries and employee benefits 740 712 1,477 1,362
Office building and equipment
expenses 145 157 294 304
Amortization of goodwill 27 27 54 54
Other operating expenses 367 348 727 671
---------- ---------- ---------- ----------
Total noninterest expense 1,279 1,244 2,552 2,391
---------- ---------- ---------- ----------
Income before income taxes 701 527 1,307 1,015
Provision for income taxes 265 194 486 371
---------- ---------- ---------- ----------
NET INCOME $ 436 $ 333 $ 821 $ 644
========== ========== ========== ==========
AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC 2,443,782 2,400,787 2,440,401 2,393,622
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ .18 $ .14 $ .34 $ .27
========== ========== ========== ==========
AVERAGE NUMBER OF SHARES
OUTSTANDING - DILUTED 2,506,679 2,476,106 2,508,959 2,470,880
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE $ .17 $ .13 $ .32 $ .26
========== ========== ========== ==========
DIVIDENDS DECLARED PER SHARE $ .07 $ .07 $ .21 $ .21
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
FIRSTFED BANCORP, INC.
----------------------
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-------------------------------------------------------------------
For the Six Months Ended June 30, 2000 and 1999
(Dollar amounts in thousands, except per share amounts)
Unrealized
Deferred Gain (Loss)
Deferred Compen- on Securities
Compen- sation Unearned Available Compre-
Common Paid-In Retained sation Treasury Treasury Compen- for Sale, hensive
Stock Capital Earnings Obligation Stock Stock sation Net Income
----- ------- -------- ---------- ----- ----- ------ --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 $ 30 $ 7,502 $ 15,622 $ 1,199 $ (1,373) $ (3,752) $ (1,064) $ 39
Net income -- -- 644 -- -- -- -- -- $ 644
Change in unrealized gain
(loss) on securities
available for sale, net
of tax of $84 -- -- -- -- -- -- -- (114) (114)
------
Comprehensive income -- -- -- -- -- -- -- -- $ 530
======
Amortization of unearned
compensation -- -- -- -- -- -- 75 --
Dividends declared ($.21
per share) -- -- (521) -- -- -- -- --
Exercise of stock options -- 60 -- -- -- -- -- --
Change in stock value of Employee
Stock Ownership Plan -- (13) -- -- -- -- -- --
Amortization of Deferred
Compensation -- -- -- 21 -- -- -- --
Purchase of Deferred
Compensation Plan -- -- -- 23 (23) -- -- --
Stock issued under Dividend
Reinvestment Plan 1 89 -- -- -- -- --
-------- -------- -------- -------- -------- --------- --------
BALANCE, June 30, 1999 $ 31 $ 7,638 $ 15,745 $ 1,243 $ (1,396) $ (3,752) $ (989) $ (75)
======== ======== ======== ======== ======== ========= ======== ========
BALANCE, December 31, 1999 $ 31 $ 7,773 $ 16,155 $ 1,307 $ (1,433) $ (3,752) $ (934) $ (167)
Net income -- -- 821 -- -- -- -- -- $ 821
Change in unrealized gain
(loss) on securities
available for sale, net
of tax of $6 -- -- -- -- -- -- -- 16 16
------
Comprehensive income -- -- -- -- -- -- -- -- $ 837
======
Amortization of unearned
compensation -- -- -- -- -- -- 73 --
Dividends declared ($.21
per share) -- -- (528) -- -- -- -- --
Exercise of stock options -- 39 -- -- -- -- -- --
Amortization of Deferred
Compensation -- -- -- 26 -- -- -- --
Purchase of Deferred
Compensation Treasury -- -- -- 111 (111) -- -- --
Stock issued under Dividend
Reinvestment Plan -- 76 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
BALANCE, June 30, 2000 $ 31 $ 7,888 $ 16,448 $ 1,444 $ (1,544) $ (3,752) $ (861) $ (151)
======== ======== ======== ======== ======== ========= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
FIRSTFED BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
Six Months Ended
June 30,
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 2000 1999
-------- --------
<S> <C> <C>
Net income $ 821 $ 644
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, amortization and accretion 192 200
Loan fees deferred, net 23 196
Provision for loan losses 57 57
Loss (gain) on sale of real estate, net 64 (26)
Origination of loans held for sale (3,010) (8,003)
Proceeds from loans held for sale 2,900 9,453
Amortization of goodwill 54 54
Provision for deferred compensation 111 --
Decrease (increase) in assets:
Accrued interest receivable (186) (105)
Other assets (60) 247
Increase (decrease) in liabilities:
Accrued interest payable 14 (2)
Other liabilities (24) (131)
-------- --------
Net cash provided by operating activities 956 2,584
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available-for-sale 450 1,800
Proceeds from the sale of securities available-for-sale 536 --
Purchase of securities available-for-sale (1,847) (7,252)
Proceeds from maturities and payments received on securities held-to-maturity 1,183 6,330
Purchase of securities held-to-maturity -- (5,000)
Proceeds from sale of real estate and repossessed assets 116 668
Net loan originations (2,365) (2,351)
Capital expenditures (106) (229)
-------- --------
Net cash used in investing activities (2,033) (6,034)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in deposits, net (1,719) (4,354)
Dividends paid (526) (525)
Proceeds from dividend reinvestment 76
89
Proceeds from exercise of stock options 39 60
Purchase of treasury stock for Deferred Compensation Plan (111) --
-------- --------
Net cash used in financing activities (2,241) (4,730)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,318) (8,180)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,837 43,635
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,519 $ 35,455
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for -
Income taxes $ 584 $ 20
Interest 3,036 3,427
Non-cash transactions -
Transfer of loans receivable to real estate owned 357 169
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
FIRSTFED BANCORP, INC.
----------------------
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
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"), 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 unaudited condensed consolidated financial statements as of
June 30, 2000, and December 31, 1999, and for the three and six months ended
June 30, 2000 and 1999, include the accounts of the Company and the Banks. All
significant intercompany transactions and accounts have been eliminated in
consolidation.
In the opinion of management, all adjustments (none of which are other than
normal recurring accruals) 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 June 30, 2000, are not necessarily indicative of the
results of operations which may be expected for the entire fiscal year.
These unaudited condensed consolidated 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-KSB for the year ended
December 31, 1999. The accounting policies followed by the Company are set forth
in the Summary of Significant Accounting Policies in the Company's December 31,
1999, Consolidated Financial Statements.
2. EARNINGS AND DIVIDENDS PER SHARE:
---------------------------------
Earnings per share for the three and six months ended June 30, 2000 and 1999,
respectively, were as follows:
<TABLE>
<CAPTION>
Three Months Three Months
Ended June 30, 1999 Ended June 30, 2000
---------------------------------------- ----------------------------------------
Dilutive Dilutive
Effect of Effect of
Options Options
Basic Issued Diluted Basic Issued Diluted
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 436,000 -- $ 436,000 $ 333,000 -- $ 333,000
Shares available to
common shareholders 2,443,782 62,897 2,506,679 2,400,787 75,319 2,476,106
---------- ---------- ---------- ---------- ---------- ----------
Earnings per share $ 0.18 -- $ 0.17 $ 0.14 -- $ 0.13
========== ========== ========== ========== ========== ==========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Six Months Six Months
Ended June 30, 1999 Ended June 30, 2000
---------------------------------------- ----------------------------------------
Dilutive Dilutive
Effect of Effect of
Options Options
Basic Issued Diluted Basic Issued Diluted
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 821,000 -- $ 821,000 $ 644,000 -- $ 644,000
Shares available to
common shareholders 2,440,401 68,558 2,508,959 2,393,622 77,258 2,470,880
---------- ---------- ---------- ---------- ---------- ----------
Earnings per share $ 0.34 -- $ 0.32 $ 0.27 -- $ 0.26
========== ========== ========== ========== ========== ==========
</TABLE>
Dividends declared for the quarter ended June 30, 2000, consisted
of a $.07 per share quarterly dividend and for the six months
ended June 30, 2000, consisted of $.14 per share quarterly
dividends and a $.07 per share special dividend.
3.SEGMENT DISCLOSURE:
------------------
The holding company is considered a separate reportable segment
from the banking operations since it does not offer products or
services or interact with customers, but does meet the
quantitative threshold as outlined in the accounting standards.
The Company's segment disclosure is as follows for the three and
six months ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000
---------------------------------------------------
Banking Holding Total
Operations Company Eliminations Company
---------- ------- ------------ -------
(In thousands)
<S> <C> <C> <C> <C>
Net interest income $ 1,763 $ 22 $ -- $ 1,785
Provision for loan losses 28 -- -- 28
Noninterest income 223 -- -- 223
Noninterest expense 1,124 155 -- 1,279
-------- -------- --------- --------
Income before income
taxes 834 (133) -- 701
Income tax expense 313 (48) -- 265
-------- -------- --------- --------
Net income $ 521 $ (85) $ -- $ 436
======== ======== ========= ========
Total assets $169,615 $ 19,738 $ (19,310) $170,043
======== ======== ========= ========
<CAPTION>
Three Months Ended June 30, 1999
---------------------------------------------------
Banking Holding Total
Operations Company Eliminations Company
---------- ------- ------------ -------
(In thousands)
<S> <C> <C> <C> <C>
Net interest income $ 1,546 $ 23 $ - $ 1,569
Provision for loan losses 28 - - 28
Noninterest income 230 - - 230
Noninterest expense 1,116 128 - 1,244
-------- -------- --------- --------
Income before income
taxes 632 (105) - 527
Income tax expense 229 (35) - 194
-------- -------- --------- --------
Net income $ 403 $ (70) $ - $ 333
======== ======== ========= ========
Total assets $181,794 $ 18,446 $ (18,339) $181,901
======== ======== ========= ========
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
---------------------------------------------------
Banking Holding Total
Operations Company Eliminations Company
---------- ------- ------------ -------
(In thousands)
<S> <C> <C> <C> <C>
Net interest income $ 3,435 $ 42 $ -- $ 3,477
Provision for loan losses 57 -- -- 57
Noninterest income 439 -- -- 439
Noninterest expense 2,260 292 -- 2,552
-------- -------- --------- --------
Income before income
taxes 1,557 (250) -- 1,307
Income tax expense 573 (87) -- 486
-------- -------- --------- --------
Net income $ 984 $ (163) $ -- $ 821
======== ======== ========= ========
Total assets $169,615 $ 19,738 $ (19,310) $170,043
======== ======== ========= ========
<CAPTION>
Six Months Ended June 30, 1999
---------------------------------------------------
Banking Holding Total
Operations Company Eliminations Company
---------- ------- ------------ -------
(In thousands)
<S> <C> <C> <C> <C>
Net interest income $ 2,946 $ 48 $ -- $ 2,994
Provision for loan losses 57 -- -- 57
Noninterest income 469 -- -- 469
Noninterest expense 2,175 216 -- 2,391
-------- -------- --------- --------
Income before income
taxes 1,183 (168) -- 1,015
Income tax expense 429 (58) -- 371
-------- -------- --------- --------
Net income $ 754 $ (110) $ -- $ 644
======== ======== ========= ========
Total assets $181,794 $ 18,446 $ (18,339) $181,901
======== ======== ========= ========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Management's discussion and analysis includes certain forward-looking statements
addressing, among other things, the Company's prospects for earnings, asset
growth and net interest margin. Forward-looking statements are accompanied by,
and identified with, such terms as "anticipates," "believes," "expects,"
"intends," and similar phrases. Management's expectations for the Company's
future necessarily involve a number of assumptions and estimates. Factors that
could cause actual results to differ from the expectations expressed herein are:
substantial changes in interest rates, changes in the general economy, and
changes in the Company's strategies for credit-risk management, interest-rate
risk management and investment activities. Accordingly, any forward-looking
statements included herein do not purport to be predictions of future events or
circumstances and may not be realized.
Comparison of Financial Condition as of June 30, 2000, and December 31, 1999
----------------------------------------------------------------------------
All dollar amounts, except per share amounts, included hereafter in Management's
Discussion and Analysis are in thousands.
Cash and cash equivalents decreased $3,318, or 18.6%, to $14,519 at June 30,
2000, from $17,837 at December 31, 1999. This decrease is primarily related to
the decrease in deposits and an increase in loans for the same period.
8
<PAGE>
Securities available-for-sale and held-to-maturity decreased $322, or 1.0%, to
$30,886 at June 30, 2000, primarily due to repayments, sells and calls less
purchases totaling $1,847.
Loans receivable, net, at June 30, 2000, were $116,388, an increase of $1,984,
or 1.7%, from $114,404 at December 31, 1999. The increase in loans receivable,
net, was primarily due to an increase in the origination of mortgage loans that
were retained in the Banks' portfolios.
The Company's consolidated allowance for loan losses decreased slightly to $983
at June 30, 2000, from $1,038 at December 31, 1999. This decrease of $55 was due
to net charge-offs over recoveries of $112 offset by a provision of $57.
Nonperforming loans, which includes nonaccruing loans and accruing loans
delinquent ninety days or more, at June 30, 2000, increased to $2,779, or 2.39%
of loans receivable, from $2,027, or 1.77% of loans receivable at December 31,
1999. At June 30, 2000, there were no material loans not included in
nonperforming 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 $976 at June 30, 2000, an increase of $267 from December
31, 1999, as a result of foreclosures net of sells during the six months ended
June 30, 2000.
Deposits decreased $1,719, or 1.1%, to $149,860 at June 30, 2000, from $151,579
at December 31, 1999. The decrease in deposits is primarily the result of the
maturity of certificates of deposit generated in special programs. Some rate
sensitive funds were not retained.
The Company had stockholders' equity of $19,503 as of June 30, 2000, an increase
of $523, or 2.8%, from $18,980 as of December 31, 1999. The primary components
of the change were net income for the six months ended June 30, 2000, of $821
less dividends of $.21 per share totaling $528.
Liquidity and Capital Resources
-------------------------------
Traditionally, the Banks' principal sources of funds have been deposits,
principal and interest payments on loans and mortgage-backed securities, and
proceeds from interest on and maturities of investments. In addition, First
Federal has borrowing ability from the Federal Home Loan Bank of Atlanta if the
need for additional funds arises. At June 30, 2000, the Banks had commitments to
originate and fund loans of $8.7 million. The Banks anticipate that they will
have sufficient funds available to meet their current commitments.
First Federal is required by regulation to maintain minimum levels of liquid
assets. The liquidity ratio of First Federal at June 30, 2000, was 16.4%, which
exceeded the applicable regulatory requirement. Under applicable regulations,
First Federal, First State and the Company are each required to maintain minimum
capital ratios. Set forth below are actual capital ratios and the minimum
regulatory capital requirements as of June 30, 2000.
9
<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 $12,960 15.67% $ 4,084 15.68% $ 18,508 16.99%
Minimum Required 3,307 4.00% 1,042 4.00% 4,358 4.00%
------- ----- ------- ----- --------- -----
Excess $ 9,653 11.67% $ 3,042 11.68% $ 14,150 12.99%
======= ===== ======= ===== ======== =====
Total Capital:
Tier 1 Capital plus allowances
for loan losses $13,680 16.54% $ 4,347 16.69% $ 19,491 17.89%
Minimum Required 6,614 8.00% 2,084 8.00% 8,716 8.00%
------- ----- ------- ----- --------- -----
Excess $ 7,066 8.54% $ 2,263 8.69% $ 10,775 9.89%
======= ===== ======= ===== ========= =====
Total Risk-weighted Assets $82,685 $26,051 $108,950
======= ======= ========
LEVERAGE RATIO
Tier 1 Capital $12,960 10.49% $ 4,084 9.11% $ 18,508 10.96%
Minimum Leverage Requirement 4,944 4.00% 1,793 4.00% 6,754 4.00%
------- ----- ------- ----- --------- -----
Excess $ 8,016 6.49% $ 2,291 5.11% $ 11,754 6.96%
======= ===== ======= ===== ======== =====
TANGIBLE CAPITAL RATIO
Tangible Capital $12,960 10.49% N/A N/A
Tangible Capital Requirement 4,944 1.50%
-------- -----
Excess $ 8,016 8.99%
======== =====
</TABLE>
As of June 30, 2000, management was not aware of any trends, events or
uncertainties that will have or are reasonably likely to have a material effect
on the Company's or the Banks' liquidity, capital resources or operations.
Results of Operations - Comparison of the Three Months Ended June 30, 2000
and 1999
--------------------------------------------------------------------------------
Net income for the three months ended June 30, 2000, was $436, an increase of
$103, or 30.9%, from net income of $333 for the three months ended June 30,
1999. The increase was primarily attributable to an increase in net interest
income resulting from an increase in interest rate spread. The increase in
interest rate spread is the result of the Banks maintaining on average less
assets in short-term liquid investments, coupled with an increase in yield on
adjustable rate loans, and the repricing and movement of higher yielding
certificates of deposit.
Interest Income
---------------
Total interest income increased $102, or 3.2%, to $3,317 for the three months
ended June 30, 2000. This increase was primarily due to an increase in the
average yield on interest-earning assets to 8.5%, from 7.7% for the
corresponding quarter of the previous year, offset by a decrease in the average
balance of interest-earning assets.
Interest Expense
----------------
Interest expense for the quarter ended June 30, 2000, was $1,532, a decrease of
$114, or 6.9%, from $1,646 for the quarter ended June 30, 1999. The decrease was
primarily the result of a decrease in the average balance of deposits of 9.3%
for the three months ended June 30, 2000, compared to the same quarter a year
ago, offset by a slight increase in the average rate paid on deposits for the
three months ended June 30, 2000, to 4.1% from 4.0% for the corresponding
quarter of the previous year.
10
<PAGE>
Net Interest Income
-------------------
Net interest income for the quarter ended June 30, 2000, was $1,785 compared to
$1,569 for the quarter ended June 30, 1999. The average net interest spread
increased to 4.2% for the three months ended June 30, 2000, from 3.7% for the
same period in the prior year. The net interest margin increase to 4.6% for the
three months ended June 30, 2000, from 3.8% for the three months ended June 30,
1999.
Provision for Loan Losses
-------------------------
Management increased the Company's total allowance for loan losses by a
provision of $28 during the quarter ended June 30, 2000. The Company's allowance
for loan losses is based on management's evaluation of losses inherent in the
loan portfolio and consider, 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 during the quarter ended June 30, 2000, decreased $7, to
$223, from the June 30, 1999, level of $230. The decrease in noninterest income
is primarily the result of a decrease in secondary market fees for loans sold.
Noninterest Expenses
--------------------
Noninterest expenses during the quarter ended June 30, 2000, increased $35 to
$1,279 from the June 30, 1999, level of $1,244. The increase in noninterest
expense is primarily attributable to a slight increase in compensation expense.
Income Taxes
------------
The provision for income taxes increased $71, or 36.6%, to $265 for the quarter
ended June 30, 2000, as compared to the corresponding quarter in 1999. The
increased tax expense was due to the increase in pretax income.
Results of Operations-Comparison of the Six Months Ended June 30, 2000 and 1999
--------------------------------------------------------------------------------
Net income for the six months ended June 30, 2000, was $821, an increase of
$177, or 27.5%, from net income of $644 for the six months ended June 30, 1999.
The increase was primarily attributable to an increase in the Banks' interest
rate spread. The increase in interest rate spread is the result of the Banks
maintaining on average less assets in short-term liquid investments, coupled
with an increase in yield on adjustable rate loans, and the repricing and
movement of higher yielding certificates of deposit.
Interest Income
---------------
Total interest income increased $108, or 1.7%, to $6,527 for the six months
ended June 30, 2000. This increase was primarily the result of an increase in
the average yield on the interest-earning assets to 8.3% during the six months
ended June 30, 2000, from 7.6% during the six months ended June 30, 1999. The
11
<PAGE>
increase was partially offset by a decrease in the average balance of
interest-earning assets during the six months ended June 30, 2000, as compared
to the six months ended June 30, 1999.
Interest Expense
----------------
Interest expense for the six months ended June 30, 2000, decreased $375, or
11.0%, to $3,050, from $3,425 during the six months ended June 30, 1999. This
decrease was primarily attributable to a reduction in the average balance of
deposits of 8.8% for the six months ended June 30, 2000, compared to the same
period a year ago, coupled with a decrease in the average rate paid on deposits
to 4.1% for the six month period ended June 30, 2000, compared to 4.2% for the
same period a year ago.
Net Interest Income
-------------------
Net interest income for the six months ended June 30, 2000, increased $453, or
15.1%, to $3,447, from $2,994 for the six months ended June 30, 1999. This
increase was due primarily to an increase in the average net interest spread to
4.3% for the six months ended June 30, 2000, from 3.4% for the six months ended
June 30, 1999. The net interest margin increased to 4.4% in the six months ended
June 30, 2000, from 3.5% in the six months ended June 30, 1999.
Provision for Loan Losses
-------------------------
The Company's consolidated allowance for loan losses is based on management's
evaluation of 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 allowance for loan losses was increased by provisions
totaling $57 for the six months ended June 30, 2000. These provisions were
recorded to maintain the allowance for loan losses at an adequate level based on
management's best estimates.
Noninterest Income
------------------
Noninterest income for the six months ended June 30, 2000, totaled $439 as
compared to $469 for the six months ended June 30, 1999. The decrease in
noninterest income is primarily the result of a decrease in secondary market
fees for loans sold.
Noninterest Expenses
--------------------
Noninterest expenses during the six months ended June 30, 2000, increased $161
to $2,552 from the 1999 level of $2,391. The increase in noninterest expense is
primarily attributable to a slight increase in compensation expense.
Income Taxes
------------
The provision for income taxes increased $115, to $486 for the six months ended
June 30, 2000, as compared to $371 for the corresponding period of the prior
year. The increased tax expense was due to the increase in pretax income.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Banks are parties to routine legal proceedings occurring
in the ordinary course of business. At June 30, 2000, 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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 25, 2000, the Company held the 2000 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:
For Withheld
--------- -------
Fred T. Blair 2,025,566 129,303
Malcolm E. Lewis 2,027,687 127,182
G. Larry Russell 2,030,294 124,575
There were no broker non-votes in the above matter.
ITEM 5. OTHER INFORMATION
On May 19, 2000, the Federal Reserve Bank of Atlanta approved the
Company and FSC as financial holding companies.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule (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 thereunto duly authorized.
FIRSTFED BANCORP, INC.
Date: August 11, 2000 \s\ B. K. Goodwin, III
--------------- ----------------------
B. K. Goodwin, III,
Chairman of the Board,
Chief Executive Officer
and President
Date: August 11, 2000 \s\ Lynn J. Joyce
--------------- -----------------
Lynn J. Joyce
Chief Financial Officer, Vice
President, Secretary and
Treasurer
