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 SEPTEMBER 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 October 31, 2000
---------------------------- -------------------------------
Common Stock, $.01 par value 2,530,939 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 SEPTEMBER 30, 2000 AND DECEMBER 31, 1999............................2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999.........................3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999.....................4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 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..................................14
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.
i.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRSTFED BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
As of September 30, 2000 and December 31, 1999
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
----------------- --------------
Cash and Cash Equivalents:
<S> <C> <C>
Cash on hand and in banks $ 5,436 $ 6,132
Interest-bearing deposits in other banks 3,567 6,455
Federal funds sold 5,075 5,250
----------- -----------
14,078 17,837
----------- -----------
Securities available-for-sale, at fair value 9,926 12,383
Loans held for sale 438 255
Securities held-to-maturity, at amortized cost, fair
value of $17,014 and $18,602, respectively 17,093 18,825
Loans receivable, net 117,015 114,404
Land, buildings and equipment, net 3,036 3,151
Goodwill 1,119 1,200
Real estate owned 1,148 709
Accrued interest receivable 1,732 1,603
Other assets 668 880
----------- -----------
$ 166,253 $ 171,247
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 145,670 $ 151,579
Accrued interest payable 170 147
Dividends payable 177 175
Other liabilities 397 366
----------- -----------
146,414 152,267
----------- -----------
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none outstanding -- --
Common stock, $.01 par value, 10,000,000 shares
authorized, 3,108,067 shares issued and 2,528,165 shares outstanding
at September 30, 2000 and 3,084,133 shares issued 2,504,231
shares outstanding at December 31, 1999 31 31
Paid-in capital 7,915 7,773
Retained earnings 16,658 16,155
Deferred compensation obligation 1,505 1,307
Deferred compensation treasury stock (173,257 shares at
September 30, 2000 and 156,345 shares at December 31,
1999) (1,592) (1,433)
Treasury stock, at cost, 579,902 shares at September
30, 2000 and December 31, 1999 (3,752) (3,752)
Unearned compensation (839) (934)
Accumulated other comprehensive income (87) (167)
----------- -----------
19,839 18,980
----------- -----------
$ 166,253 $ 171,247
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
FIRSTFED BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2000 and 1999
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
2000 1999 2000 1999
---------- ---------- ---------- -----------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 2,778 $ 2,516 $ 8,021 $ 7,492
Interest and dividends on
securities 487 444 1,438 1,105
Other interest income 78 324 411 1,106
---------- ---------- ---------- -----------
Total interest income 3,343 3,284 9,870 9,703
---------- ---------- ---------- -----------
INTEREST EXPENSE:
Interest on deposits 1,542 1,614 4,592 5,039
---------- ---------- ---------- -----------
Total interest expense 1,542 1,614 4,592 5,039
---------- ---------- ---------- -----------
Net interest income 1,801 1,670 5,278 4,664
Provision for loan losses 39 29 96 86
---------- ---------- ---------- -----------
Net interest income after
provision for loan losses 1,762 1,641 5,182 4,578
---------- ---------- ---------- -----------
NONINTEREST INCOME:
Fees and other noninterest
income 228 234 667 703
---------- ---------- ---------- -----------
Total noninterest income 228 234 667 703
---------- ---------- ---------- -----------
NONINTEREST EXPENSE:
Salaries and employee benefits 809 738 2,286 2,100
Office building and equipment
expenses 150 155 444 459
Amortization of goodwill 27 27 81 81
Other operating expenses 386 357 1,113 1,028
---------- ---------- ---------- -----------
Total noninterest expense 1,372 1,277 3,924 3,668
---------- ---------- ---------- -----------
Income before income taxes 618 598 1,925 1,613
Provision for income taxes 231 220 717 591
---------- ---------- ---------- -----------
NET INCOME $ 387 $ 378 $ 1,208 $ 1,022
========== ========== ========== ===========
AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC 2,459,361 2,406,485 2,442,360 2,397,957
========== ========== ========== ===========
BASIC EARNINGS PER SHARE $ .16 $ .16 $ .50 $ .43
========== ========== ========== ===========
AVERAGE NUMBER OF SHARES
OUTSTANDING - DILUTED 2,517,460 2,471,593 2,507,869 2,469,224
========== ========== ========== ===========
DILUTED EARNINGS PER SHARE $ .16 $ .15 $ .48 $ .41
========== ========== ========== ===========
DIVIDENDS DECLARED PER SHARE $ .07 $ .07 $ .28 $ .28
========== ========== ========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
FIRSTFED BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 2000 and 1999
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Deferred
Deferred Compen-
Compen- sation
Common Paid-In Retained sation Treasury
Stock Capital Earnings Obligation Stock
--------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 $ 30 $ 7,502 $ 15,622 $ 1,199 $ (1,373)
Net income -- -- 1,022 -- --
Change in unrealized gain
(loss) on securities
available for sale, net
of tax of $84 -- -- -- -- --
Comprehensive income -- -- -- -- --
Amortization of unearned
compensation -- -- -- -- --
Dividends declared ($.28
per share) -- -- (695) -- --
Exercise of stock options -- 60 -- -- --
Change in stock value of Employee
Stock Ownership Plan -- (13) -- -- --
Amortization of Deferred
Compensation -- -- -- 34 --
Purchase of Deferred
Compensation Treasury -- -- -- 47 (47)
Stock issued under Dividend
Reinvestment Plan 1 124 -- -- --
--------- ---------- ---------- ----------- ----------
BALANCE, September 30, 1999 $ 31 $ 7,673 $ 15,949 $ 1,280 $ (1,420)
========= ========== ========== =========== ==========
BALANCE, December 31, 1999 $ 31 $ 7,773 $ 16,155 $ 1,307 $ (1,433)
Net income -- -- 1,208 -- --
Change in unrealized gain
(loss) on securities
available for sale, net
of tax of $65 -- -- -- -- --
Comprehensive income -- -- -- -- --
Amortization of unearned
compensation -- -- -- -- --
Dividends declared ($.28
per share) -- -- (705) -- --
Exercise of stock options -- 39 -- -- --
Amortization of Deferred
Compensation -- -- -- 39 --
Purchase of Deferred
Compensation Treasury -- -- -- 159 (159)
Stock issued under Dividend
Reinvestment Plan -- 103 -- -- --
--------- ---------- ---------- ----------- ----------
BALANCE, September 30, 2000 $ 31 $ 7,915 $ 16,658 $ 1,505 $ (1,592)
========= ========== ========== =========== ==========
<CAPTION>
Accumulated
Other
Unearned Compre- Compre-
Treasury Compen- hensive hensive
Stock sation Income Income
----------- ------------ ----------- ---------
BALANCE, December 31, 1998 $ (3,752) $ (1,064) $ 39
Net income -- -- -- $ 1,022
Change in unrealized gain
(loss) on securities
available for sale, net
of tax of $84 -- -- (128) (128)
---------
Comprehensive income -- -- -- $ 894
=========
Amortization of unearned
compensation -- 112 --
Dividends declared ($.28
per share) -- -- --
Exercise of stock options -- -- --
Change in stock value of Employee
Stock Ownership Plan -- -- --
Amortization of Deferred
Compensation -- -- --
Purchase of Deferred
Compensation Treasury -- -- --
Stock issued under Dividend
Reinvestment Plan -- -- --
----------- ------------ -----------
BALANCE, September 30, 1999 $ (3,752) $ (952) $ (89)
=========== ============ ===========
BALANCE, December 31, 1999 $ (3,752) $ (934) $ (167)
Net income -- -- -- $ 1,208
Change in unrealized gain
(loss) on securities
available for sale, net
of tax of $65 -- -- 80 80
---------
Comprehensive income -- -- -- $ 1,288
=========
Amortization of unearned
compensation -- 95 --
Dividends declared ($.28
per share) -- -- --
Exercise of stock options -- -- --
Amortization of Deferred
Compensation -- -- --
Purchase of Deferred
Compensation Treasury -- -- --
Stock issued under Dividend
Reinvestment Plan -- -- --
----------- ------------ -----------
BALANCE, September 30, 2000 $ (3,752) $ (839) $ (87)
=========== ============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
FIRSTFED BANCORP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 2000 1999
----------- -----------
<S> <C> <C>
Net income $ 1,208 $ 1,022
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, amortization and accretion 333 350
Loan fees deferred, net 123 240
Provision for loan losses 96 86
Loss (gain) on sale of real estate, net 93 17
Origination of loans held for sale (4,724) (10,498)
Proceeds from loans held for sale 4,541 12,213
Provision for deferred compensation 159 47
Decrease (increase) in assets:
Accrued interest receivable (129) (75)
Other assets 147 (220)
Increase (decrease) in liabilities:
Accrued interest payable 23 25
Other liabilities 31 205
-------- --------
Net cash provided by operating activities 1,901 3,412
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available-for-sale 950 2,800
Proceeds from the sale of securities available-for-sale 3,516 --
Purchase of securities available-for-sale (1,847) (9,184)
Proceeds from maturities and payments received on securities held-to-maturity 1,692 7,376
Purchase of securities held-to-maturity -- (10,000)
Proceeds from sale of real estate and repossessed assets 193 768
Net loan originations (3,448) (3,393)
Capital expenditures (87) (296)
-------- --------
Net cash provided by (used in) investing activities 969 (11,929)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in deposits, net (5,909) (5,572)
Dividends paid (703) (699)
Proceeds from dividend reinvestment 103 125
Proceeds from exercise of stock options 39 60
Purchase of treasury stock for Deferred Compensation Plan (159) (47)
-------- --------
Net cash used in financing activities (6,629) (6,133)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,759) (14,650)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,837 43,635
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,078 $ 28,985
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for -
Income taxes $ 694 $ 404
Interest 4,569 5,014
Non-cash transactions -
Transfer of loans receivable to real estate owned 702 216
</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
September 30, 2000, and December 31, 1999, and for the three and nine months
ended September 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 nine months ended September 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 nine months ended September 30, 2000 and
1999, respectively, were as follows:
<TABLE>
<CAPTION>
Three Months Three Months
Ended September 30, 2000 Ended September 30, 1999
--------------------------------------------- -----------------------------------------------
Dilutive Dilutive
Effect of Effect of
Options Options
Basic Issued Diluted Basic Issued Diluted
--------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 387,000 --- $ 387,000 $ 378,000 --- $ 378,000
Shares available to
common shareholders 2,457,147 63,375 2,520,522 2,406,485 65,108 2,471,593
--------------------------------------------- -----------------------------------------------
Earnings per share $ 0.16 --- $ 0.16 $ 0.16 --- $ 0.15
============================================= ===============================================
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended September 30, 2000 Ended September 30, 1999
--------------------------------------------- -----------------------------------------------
Dilutive Dilutive
Effect of Effect of
Options Options
Basic Issued Diluted Basic Issued Diluted
--------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 1,208,000 --- $ 1,208,000 $ 1,022,000 --- $ 1,022,000
Shares available to
common shareholders 2,445,212 67,800 2,513,012 2,397,957 71,267 2,469,224
--------------------------------------------- -----------------------------------------------
Earnings per share $ 0.50 --- $ 0.48 $ 0.43 --- $ 0.41
============================================= ===============================================
</TABLE>
Dividends declared for the quarter ended September 30, 2000, consisted of a $.07
per share quarterly dividend and for the nine months ended September 30, 2000,
consisted of $.21 per share quarterly dividends and a $.07 per share special
dividend.
Options to purchase 37,675 and 12,985 shares of common stock for the three and
nine months ended September 30, 2000, respectively, at prices ranging from $9.00
to $12.38 per share were outstanding but not included in the computation of
diluted EPS because the options' exercise price was greater than the average
market price of the common stock. The options will expire at various times over
the next nine years.
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 nine months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended September 30, 2000
------------------------------------------------------
Banking Holding Total
Operations Company Eliminations Company
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net interest income $ 1,779 $ 22 $ - $ 1,801
Provision for loan losses 39 - - 39
Noninterest income 228 - - 228
Noninterest expense 1,165 207 - 1,372
----------- ---------- ------------ -----------
Income before income
taxes 803 (185) - 618
Income tax expense 297 (66) - 231
----------- ---------- ------------ -----------
Net income $ 506 $ (119) $ - $ 387
=========== ========== ============ ===========
Total assets $ 166,125 $ 20,163 $ (20,035) $ 166,253
=========== ========== ============ ===========
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999
------------------------------------------------------
Banking Holding Total
Operations Company Eliminations Company
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net interest income $ 1,648 $ 22 $ - $ 1,670
Provision for loan losses 29 - - 29
Noninterest income 234 - - 234
Noninterest expense 1,118 159 - 1,277
----------- ---------- ------------ -----------
Income before income
taxes 735 (137) - 598
Income tax expense 267 (47) - 220
----------- ---------- ------------ -----------
Net income $ 468 $ (90) $ - $ 378
=========== ========== ============ ===========
Total assets $ 181,000 $ 19,103 $ (18,782) $ 181,321
=========== ========== ============ ===========
<CAPTION>
Nine Months Ended September 30, 2000
------------------------------------------------------
Banking Holding Total
Operations Company Eliminations Company
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net interest income $ 5,214 $ 64 $ - $ 5,278
Provision for loan losses 96 - - 96
Noninterest income 667 - - 667
Noninterest expense 3,425 499 - 3,924
----------- ---------- ------------ -----------
Income before income
taxes 2,360 (435) - 1,925
Income tax expense 870 (135) - 717
----------- ---------- ------------ -----------
Net income $ 1,490 $ (282) $ - $ 1,208
=========== ========== ============ ===========
Total assets $ 166,125 $ 20,163 $ (20,035) $ 166,253
=========== ========== ============ ===========
<CAPTION>
Nine Months Ended September 30, 1999
------------------------------------------------------
Banking Holding Total
Operations Company Eliminations Company
----------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net interest income $ 4,594 $ 70 $ - $ 4,664
Provision for loan losses 86 - - 86
Noninterest income 703 - - 703
Noninterest expense 3,296 372 - 3,668
----------- ---------- ------------ -----------
Income before income
taxes 1,915 (302) - 1,613
Income tax expense 696 (105) - 591
----------- ---------- ------------ -----------
Net income $ 1,219 $ (197) $ - $ 1,022
=========== ========== ============ ===========
Total assets $ 181,000 $ 19,103 $ (18,782) $ 181,321
=========== ========== ============ ===========
</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,"
8
<PAGE>
"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 September 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 $3,759, or 21.1%, to $14,078 at September
30, 2000, from $17,837 at December 31, 1999. This decrease was primarily related
to a decrease in deposits and an increase in loans for the same period.
Securities available-for-sale and held-to-maturity decreased $4,189, or 13.4%,
to $27,019 at September 30, 2000, primarily due to repayments, sales and calls
of $6,158 less purchases totaling $1,847.
Loans receivable, net, at September 30, 2000, were $117,015, an increase of
$2,611, or 2.3%, from $114,404 at December 31, 1999. The increase in loans
receivable, net, was primarily due to an increase in the origination of mostly
adjustable-rate mortgage loans that were retained in the Banks' portfolios.
The Company's consolidated allowance for loan losses decreased slightly to $982
at September 30, 2000, from $1,038 at December 31, 1999. This decrease of $56
was due to a provision of $96 offset by net charge-offs over recoveries of $40.
Nonperforming loans, which included nonaccruing loans and accruing loans
delinquent ninety days or more at September 30, 2000, increased to $2,606, or
2.23% of loans receivable, net, from $2,027, or 1.77% of loans receivable, net
at December 31, 1999. At September 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 $1,148 at September 30, 2000, an increase of $439 from
December 31, 1999, primarily as a result of foreclosures totaling $702, net of
sales of $193 during the nine months ended September 30, 2000.
Deposits decreased $5,909, or 3.9%, to $145,670 at September 30, 2000, from
$151,579 at December 31, 1999. The decrease in deposits was primarily the result
of the maturity of certificates of deposit generated in special programs which
are no longer offered by the Banks. Some rate sensitive funds were not retained.
The Company had stockholders' equity of $19,839 as of September 30, 2000, an
increase of $859, or 4.5%, from $18,980 as of December 31, 1999. The primary
components of the change were net income for the nine months ended September 30,
2000, of $1,208, less dividends of $.28 per share, totaling $705.
9
<PAGE>
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 September 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 September 30, 2000, was 11.2%,
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 September 30, 2000.
<TABLE>
<CAPTION>
First Federal First State The Company
-------------------- ------------------- ----------------------
RISK-BASED CAPITAL RATIOS
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Capital:
Stockholders' Equity less goodwill $ 13,370 15.73% $ 4,217 16.16% $ 18,807 17.80%
Minimum Required 3,401 4.00% 1,044 4.00% 4,226 4.00%
-------- ----- ------- ----- ---------- -----
Excess $ 9,969 11.73% $ 3,173 12.16% $ 14,581 13.80%
======== ===== ======= ===== ========== =====
Total Capital:
Tier 1 Capital plus allowances
for loan losses $ 14,079 16.56% $ 4,490 17.21% $ 19,789 18.73%
Minimum Required 6,802 8.00% 2,088 8.00% 8,451 8.00%
-------- ----- ------- ----- --------- -----
Excess $ 7,277 8.56% $ 2,402 9.21% $ 11,338 10.73%
======== ===== ======= ===== ========= =====
Total Risk-weighted Assets $ 85,020 $26,095 $ 105,640
======== ======= =========
LEVERAGE RATIO
Tier 1 Capital $ 13,370 11.14% $ 4,217 9.45% $ 18,807 11.19%
Minimum Leverage Requirement 4,799 4.00% 1,785 4.00% 6,725 4.00%
-------- ----- ------- ----- --------- -----
Excess $ 8,571 7.14% $ 2,432 5.45% $ 12,082 7.19%
======== ===== ======= ===== ========= =====
TANGIBLE CAPITAL RATIO
Tangible Capital $ 13,370 11.14% N/A N/A
Tangible Capital Requirement 1,800 1.50%
-------- -----
Excess $ 11,570 9.64%
======== =====
</TABLE>
As of September 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 September 30, 2000
--------------------------------------------------------------------------------
and 1999
--------
Net income for the three months ended September 30, 2000, was $387, an increase
of $9, or 2.4%, from net income of $378 for the three months ended September 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 was 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.
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Interest Income
---------------
Total interest income increased $59, or 1.8%, to $3,343 for the three months
ended September 30, 2000. This increase was primarily due to an increase in the
average yield on interest-earning assets to 8.8%, from 8.0% 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 September 30, 2000, was $1,542, a
decrease of $72, or 4.5%, from $1,614 for the quarter ended September 30, 1999.
The decrease was primarily the result of a decrease of 6.3% in the average
balance of deposits for the three months ended September 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 September 30, 2000, to 4.3% from
4.2% for the corresponding quarter of the previous year.
Net Interest Income
-------------------
Net interest income for the quarter ended September 30, 2000, was $1,801
compared to $1,670 for the quarter ended September 30, 1999. The average net
interest spread increased to 4.5% for the three months ended September 30, 2000,
from 3.8% for the same period in the prior year. The net interest margin
increased to 4.8% for the three months ended September 30, 2000, from 4.0% for
the three months ended September 30, 1999.
Provision for Loan Losses
-------------------------
Management increased the Company's consolidated allowance for loan losses by a
provision of $39 during the quarter ended September 30, 2000, compared to a
provision of $29 for the quarter ended September 30, 1999. The Company's
consolidated 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 September 30, 2000, decreased $6, to
$228, from the quarter ended September 30, 1999, level of $234. The decrease in
noninterest income was primarily the result of a decrease in secondary market
fees for loans sold due to decreased activity.
Noninterest Expense
-------------------
Noninterest expense during the quarter ended September 30, 2000, increased $95
to $1,372 from the quarter ended September 30, 1999, level of $1,277. The
increase in noninterest expense was primarily attributable to slight increases
in compensation expense and other operating expense.
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<PAGE>
Income Taxes
------------
The provision for income taxes increased $11, or 5.0%, to $231 for the quarter
ended September 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 Nine Months Ended September 30, 2000
--------------------------------------------------------------------------------
and 1999
--------
Net income for the nine months ended September 30, 2000, was $1,208, an increase
of $186, or 18.2%, from net income of $1,022 for the nine months ended September
30, 1999. The increase was primarily attributable to an increase in the Banks'
interest rate spread. The increase in interest rate spread was 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 $167, or 1.7%, to $9,870 for the nine months
ended September 30, 2000. This increase was primarily the result of an increase
in the average yield on the interest-earning assets to 8.5% during the nine
months ended September 30, 2000, from 7.7% during the nine months ended
September 30, 1999. The increase was partially offset by a decrease in the
average balance of interest-earning assets during the nine months ended
September 30, 2000, as compared to the nine months ended September 30, 1999.
Interest Expense
----------------
Interest expense for the nine months ended September 30, 2000, decreased $447,
or 8.9%, to $4,592, from $5,039 during the nine months ended September 30, 1999.
This decrease was primarily attributable to a reduction of 9.4% in the average
balance of deposits for the nine months ended September 30, 2000, compared to
the same period a year ago. The average rate paid on deposits was 4.1% for the
nine month periods ended September 30, 2000 and September 30, 1999.
Net Interest Income
-------------------
Net interest income for the nine months ended September 30, 2000, increased
$614, or 13.2%, to $5,278, from $4,664 for the nine months ended September 30,
1999. This increase was due primarily to an increase in the average net interest
spread to 4.4% for the nine months ended September 30, 2000, from 3.6% for the
nine months ended September 30, 1999. The net interest margin increased to 4.5%
in the nine months ended September 30, 2000, from 3.7% in the nine months ended
September 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 $96 for the nine
12
<PAGE>
months ended September 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 nine months ended September 30, 2000, totaled $667 as
compared to $703 for the nine months ended September 30, 1999. The decrease in
noninterest income was primarily the result of a decrease in secondary market
fees for loans sold due to decreased activity.
Noninterest Expense
-------------------
Noninterest expense during the nine months ended September 30, 2000, increased
$256 to $3,924 from the 1999 level of $3,668. The increase in noninterest
expense is primarily attributable to slight increases in compensation expense
and other operating expense.
Income Taxes
------------
The provision for income taxes increased $126, or 21.3%, to $717 for the nine
months ended September 30, 2000, as compared to $591 for 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 Banks are parties to routine legal
proceedings occurring in the ordinary course of business. At September 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
None.
ITEM 5. OTHER INFORMATION
None.
13
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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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRSTFED BANCORP, INC.
Date: November 11, 2000 /s/ B. K. Goodwin, III
----------------- ---------------------------------
B. K. Goodwin, III,
Chairman of the Board,
Chief Executive Officer
and President
Date: November 11, 2000 /s/ Lynn J. Joyce
----------------- ---------------------------------
Lynn J. Joyce
Chief Financial Officer, Vice
President, Secretary and
Treasurer
15
