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 Quarter Ended March 31, 1997
FIDELITY FEDERAL BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 0-22880 35-1894432
- ---------------------------- ---------- -------------------
(State of other jurisdiction Commission (IRS Employer
of Incorporation of File No. Identification No.)
Organization)
700 S. Green River Road, Suite 2000
Evansville, Indiana 47715
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(812) 469-2100
--------------------------------------------------
Registrant's telephone number, including area code
Indicate by checkmark 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 twelve months and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------ -----
As of May 9, 1997, there were 2,487,387 shares of the Registrant's common
stock, $1 stated value, issued and outstanding.
Exhibit Index is on page 21.
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
Index
Page
PART I - FINANCIAL INFORMATION
ITEM 1--Financial Statements:
Consolidated balance sheet . . . . . . . . . . . . . . . . . 3
Consolidated statement of income . . . . . . . . . . . . . . 4
Consolidated statement of changes in stockholders' equity . . 5
Consolidated statement of cash flows . . . . . . . . . . . . 6
Notes to consolidated financial statements . . . . . . . . . 7
ITEM 2--Management's Discussion and Analysis of Results of
Operation and Financial Condition
Results of Operations . . . . . . . . . . . . . . . . . . . 10
Financial Condition . . . . . . . . . . . . . . . . . . . . . 13
Capital Resources and Capital Requirements . . . . . . . . . 17
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
______________________________________________________________________________________________________
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,173,004 $ 1,111,737
Short-term interest-bearing deposits 4,167,364 4,101,143
Federal funds sold 5,000,000
------------ ------------
Total cash and cash equivalents 5,340,368 10,212,880
Interest-bearing deposits 5,493 5,370
Securities available for sale 16,766,336 17,458,474
Loans 210,360,183 217,221,244
Allowance for loan losses (1,781,806) (1,058,894)
------------ ------------
Net loans 208,578,377 216,162,350
Premises and equipment 6,382,293 5,559,322
Federal Home Loan Bank of Indianapolis stock, at cost 3,919,500 3,919,500
Other assets 9,292,429 8,897,813
------------ ------------
Total assets $250,284,796 $262,215,709
============ ============
LIABILITIES
Deposits
Non-interest bearing $ 5,240,450 $ 5,099,938
Interest-bearing 180,562,631 176,602,082
------------ ------------
Total deposits 185,803,081 181,702,020
Borrowings 48,886,349 62,984,689
Advances by borrowers for taxes and insurance 1,148,749 859,110
Other liabilities 1,581,795 2,374,915
------------ ------------
Total liabilities 237,419,974 247,920,734
STOCKHOLDERS' EQUITY
Preferred stock, no par or stated value
Authorized and unissued - 5,000,000 shares
Common stock, $1 stated value
Authorized - 5,000,000 shares
Issued - 2,500,110 and 2,495,040 shares
Outstanding 2,490,110 and 2,495,040 shares 2,500,110 2,495,040
Capital surplus 8,819,178 8,785,148
Treasury stock - 10,000 shares at cost (101,500)
Stock warrants 263,700 265,500
Retained earnings, substantially restricted 1,442,774 2,888,866
Net unrealized losses on securities and mortgage-
backed securities available for sale (59,440) (139,579)
------------ ------------
Total stockholders' equity 12,864,822 14,294,975
------------ ------------
Total liabilities and stockholders' equity $250,284,796 $262,215,709
============ ============
</TABLE>
See notes to consolidated financial statements.
NOTE: The consolidated balance sheet at June 30, 1996 has been derived from
the audited financial statements.
3
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
------------------------ -------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $4,509,187 $4,407,678 $13,996,332 $14,459,256
Loans held for sale 609,156 616,798
Securities available for sale 268,605 253,820 834,310 825,891
Federal funds sold 51,700 8,491 70,358 65,151
Interest-bearing deposits 29,919 8,795 92,631 48,117
Other interest and dividend income 75,865 77,961 230,548 211,472
---------- ---------- ----------- -----------
Total interest income 4,935,276 5,365,901 15,224,179 16,226,685
---------- ---------- ----------- -----------
INTEREST EXPENSE
Deposits 2,488,593 2,602,263 7,545,477 7,981,922
Federal Home Loan Bank advances 483,079 858,797 1,680,002 2,677,619
Federal funds purchased 39,269 48,992 121,159
Other interest expense 428,344 342,721 1,209,642 1,021,360
---------- ---------- ----------- -----------
Total interest expense 3,400,016 3,843,050 10,484,113 11,802,060
---------- ---------- ----------- -----------
NET INTEREST INCOME 1,535,260 1,522,851 4,740,066 4,424,625
Provision for loan losses 60,000 75,000 915,000 245,000
---------- ---------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,475,260 1,447,851 3,825,066 4,179,625
---------- ---------- ----------- -----------
NON-INTEREST INCOME
Fee income-real estate development and management 90,178 924,314 261,669 3,551,453
Service charges on deposit accounts 78,544 46,054 225,012 119,120
Gain on sale of
Real estate loans 19,453 (18,318) 81,243 313,548
Premises and equipment 614 718,765
Letter of credit fees 184,949 133,995 508,922 310,929
Real estate mortgage banking fees 535,489 373,500 998,739 687,145
Agent fee income 111,455 15,401 290,739 15,401
Other income 189,160 205,706 687,465 782,220
---------- ---------- ----------- -----------
Total non-interest income 1,209,228 1,680,652 3,054,403 6,498,581
---------- ---------- ----------- -----------
NON-INTEREST EXPENSE
Salaries and employee benefits 1,145,391 1,201,811 3,415,438 3,319,152
Net occupancy expense 103,085 122,963 334,788 361,167
Equipment expense 97,360 93,723 276,708 283,142
Data processing expense 77,142 75,258 230,121 216,746
Deposit insurance expense 18,284 108,873 1,276,165 309,269
Legal and professional fees 70,182 219,071 254,273 378,646
Other expense 451,780 440,359 1,612,907 1,574,387
---------- ---------- ----------- -----------
Total non-interest expense 1,963,224 2,262,058 7,400,400 6,442,509
---------- ---------- ----------- -----------
INCOME BEFORE INCOME TAX 721,264 866,445 (520,931) 4,235,697
Income tax expense 192,273 297,168 (320,672) 1,611,321
---------- ---------- ----------- -----------
NET INCOME $528,991 $569,277 (200,259) 2,624,376
========== ========== =========== ===========
PER SHARE:
Primary net income $ 0.20 $ 0.20 (0.07) 0.95
Fully diluted net income 0.20 0.20 (0.07) 0.95
AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING 2,630,667 2,811,261 2,686,040 2,772,535
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
BEGINNING BALANCES $12,605,003 $14,230,779 $14,294,975 12,405,369
Net income 528,991 569,277 (200,259) 2,624,376
Net change in unrealized gain (loss) on securities
available for sale (27,399) (87,855) 80,139 (66,794)
Cash dividends (248,935) (565,601) (1,245,840) (1,458,701)
Purchase of treasury stock (101,500)
Exercise of stock warrants 5,169 74,755 33,388 607,957
Exercise of stock options 1,993 3,919 109,148
----------- ----------- ----------- ----------
BALANCES, MARCH 31 $12,864,822 $14,221,355 12,864,822 14,221,355
=========== =========== =========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1997 1996
------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ (200,259) $2,624,376
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 915,000 245,000
Loss on sale of premises and equipment 7,201 59,309
Gain on sale of premises and equipment (2,401) (718,500)
Net decrease in real estate loans held for sale 1,923,099
Depreciation 305,438 265,527
Investment securities amortization (accretion), net 5,780 (38,348)
Amortization of net loan origination fees and points (5,314) (129,190)
Changes in:
Interest receivable and other assets (394,616) (2,432,375)
Interest payable and other liabilities (582,262) 1,043,263
---------- ----------
Net cash provided by operating activities 48,567 2,842,161
---------- ----------
INVESTING ACTIVITIES
Net change in interest-bearing deposits (123) (127)
Purchases of investment securities available for sale (2,015,033) (8,764,283)
Proceeds from investment securities available for sale,
sales and maturities 2,820,740 6,216,473
Net changes in loans 6,674,287 (18,735,820)
Purchases of premises and equipment (1,133,209) (1,323,539)
Purchase of land (333,352)
Proceeds from sale of real estate 1,000,000
Purchases of FHLB of Indianapolis stock (828,400)
---------- ----------
Net cash provided (used) by investing activities 6,346,662 (22,769,048)
---------- ----------
FINANCING ACTIVITIES
Net change in:
Noninterest-bearing, NOW, savings and money
market deposits 448,529 12,020,078
Certificates of deposit 3,652,532 (1,275,013)
Proceeds from borrowings 8,326,529 4,904,998
Repayment of borrowings (7,555,495) (11,085,395)
Proceeds from FHLB advances 7,600,000 16,556,000
Repayment of FHLB advances (22,469,374) (14,012,035)
Net change in advances by borrowers for taxes and insurance 289,639 480,248
Purchase of treasury stock (101,500)
Cash dividends (1,495,908) (1,162,712)
Proceeds from exercise of stock warrants 33,388 607,957
Proceeds from exercise of stock options 3,919 109,148
---------- ----------
Net cash provided (used) by financing activities (11,267,741) 7,143,274
---------- ----------
Net change in Cash and Cash Equivalents (4,872,512) (12,783,613)
Cash and Cash Equivalents, beginning of year 10,212,880 16,432,965
---------- ----------
Cash and Cash Equivalents, March 31 $5,340,368 $3,649,352
========== ==========
Additional Cash Flows and Supplementary information
Cash paid for income taxes, net of refunds $ 590,000 $1,742,000
Cash paid for interest 9,721,585 11,364,355
Transfers of other real estate 34,900
Reclassification of real estate loans held for sale 29,058,640
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- - ACCOUNTING POLICIES
The significant accounting policies followed by Fidelity Federal Bancorp (the
"Company") and its wholly owned subsidiaries for interim financial reporting
are consistent with the accounting policies followed for annual financial
reporting. All adjustments which are necessary for a fair presentation of the
results for the periods reported, consist only of normal recurring
adjustments, and have been included in the accompanying unaudited consolidated
condensed financial statements. The results of operations for the nine months
ended March 31, 1997 are not necessarily indicative of those expected for the
remainder of the year.
- - NET INCOME PER SHARE
Primary and fully diluted earnings per share have been computed based on the
weighted average common and common equivalent shares outstanding during the
periods. Common stock options and warrants are considered to be common
equivalent shares to the extent they are dilutive.
- - STOCKHOLDERS' EQUITY
Stockholders' equity has been adjusted to reflect the 10% stock dividend
distributed on May 27, 1996. All per share and average share data have been
adjusted to reflect the stock dividend.
In connection with the Company's second debt and equity rights offering
completed January 31, 1995, the Company has reserved 346,500 shares of its
common stock for issuance upon exercise of 1,500 outstanding warrants. Each
warrant represents the right to purchase 231 shares of common stock. The
warrants were valued at $100 per warrant, carry an exercise price of $8.93 per
share, and expire on January 31, 2005. At March 31, 1997, a total of 39,732
of the shares originally reserved had been issued and 306,768 remained
reserved and unissued.
In connection with the Company's first debt and equity rights offering
completed on April 30, 1994, the Company has reserved 415,500 shares of its
common stock for issuance upon exercise of 1,500 outstanding warrants. Each
warrant represents the right to purchase 277 shares of common stock. The
warrants were valued at $100 per warrant, carry an exercise price of $6.22 per
share, and expire on April 30, 2004. At March 31, 1997, a total of 52,907 of
the shares originally reserved had been issued and 362,593 remained reserved
and unissued.
- - CASH DIVIDEND
On January 15, 1997, the Board of Directors declared a dividend of $0.10 per
share payable on April 7, 1997 to stockholders of record on March 3, 1997.
7
<PAGE>
- - COMPANY SUBSIDIARIES
United Fidelity Bank, fsb ("Savings Bank") and Village Securities Corporation
are two subsidiaries of the Company. The Savings Bank is a federally
chartered savings bank, and is regulated by the Office of Thrift Supervision.
Village Securities Corporation was formed in December, 1994, but is presently
inactive.
The Savings Bank's subsidiaries, Village Housing Corporation, Village
Management Corporation and Village Community Development Corporation, and
Fidelity Federal Capital Corporation (the "Affordable Housing Group") are
involved in various aspects of financing, owning, developing, building,
renting and managing affordable housing projects. The Company has found that
it may be advantageous for the Affordable Housing Group to finance, develop,
build, rent and manage many types of housing, including IRS Section 42
housing, condominiums, market-rate multifamily housing, and others. Another
subsidiary of the Savings Bank, Village Insurance Corporation, is engaged in
the business of selling various insurance products.
Fidelity Federal Capital Corporation ("FFCC") is a mortgage banking company.
On December 31, 1995, the Company transferred ownership of FFCC to the Savings
Bank for a nominal amount. The transaction had the effect of increasing bank
capital and regulatory capital ratios. FFCC will continue to be the mortgage
banking arm of the Company in the financing of real estate, including holding
and placing debt and equity interests in real estate. While loans packaged by
FFCC to date have been referred to the Savings Bank for origination and/or
participation to other lenders, management anticipates that FFCC may arrange
for financing directly from other lenders, if the opportunity arises.
The proposed activities of Village Securities Corporation include full-service
or discount brokerage services, private placements of securities and other
securities-related activities. Village Securities Corporation is anticipating
providing such services during fiscal 1998.
- - ACCOUNTING FOR MORTGAGE SERVICING RIGHTS
Effective July 1, 1995, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 122, Accounting for Mortgage Servicing Rights. SFAS No.
122 requires the Company to recognize as separate assets, mortgage servicing
rights for loans originated with the intent to sell, as well as purchased
servicing rights. The adoption of SFAS No. 122 did not have a significant
impact on the Company's operating results. Loan servicing costs are amortized
in proportion to, and over the period of, estimated new servicing revenues.
Fair values of mortgage servicing rights are based on the present value of
estimated future cash flows. Impairment of mortgage servicing rights is
assessed based on the fair value of those rights. When participating
interests in loans sold have an average contractual interest rate, adjusted
for normal servicing fees, that differs from the agreed yield to the
purchaser, gains or losses are recognized equal to the present value of such
differential over the estimated remaining lives of such loans. The resulting
asset or liability is amortized over the estimated servicing period using a
method approximating the interest method.
8
<PAGE>
- - SEGMENT INFORMATION
The Company operates principally in two industries, banking and real estate
development and management. The Savings Bank offers traditional banking
products, such as checking, savings, and certificates of deposit, as well as
mortgage, consumer, and commercial loans. Through the Affordable Housing
Group, the Company is involved in various aspects of financing, owning,
developing, building, renting and managing affordable housing projects.
Operating profit is total revenue less operating expenses. In computing
operating profit, income taxes have been deducted.
Identified assets are principally those used in each segment. Real estate
development and management activities conducted by the Company are not asset
intensive. The assets in this segment primarily include cash received in the
form of fees and land to be used for future developments.
Presented below is condensed financial information relating to the Company's
business segments:
<TABLE>
<CAPTION>
(IN THOUSANDS) THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
------------------------ -------------------
<S> <C> <C> <C> <C>
REVENUE:
Banking $ 5,518 $ 5,748 $17,018 $18,486
Real estate development and management 626 1,298 1,260 4,239
-------- -------- ------- -------
Total consolidated $ 6,144 $ 7,046 $18,278 $22,725
======== ======== ======= =======
OPERATING PROFIT:
Banking $ 631 $ 69 $ 296 $ 943
Real estate development and management (102) 500 (496) 1,681
-------- -------- ------- -------
Total consolidated $ 529 $ 569 $ (200) $ 2,624
======== ======== ======= =======
IDENTIFIABLE ASSETS:
Banking $236,833 $264,748 $236,833 $264,748
Real estate development and management 13,452 15,390 13,452 15,390
-------- -------- ------- -------
Total consolidated $250,285 $280,138 $250,285 $280,138
======== ======== ======= =======
DEPRECIATION AND AMORTIZATION:
Banking $ 97 $ 73 $ 255 $ 210
Real estate development and management 18 20 49 56
-------- -------- ------- -------
Total consolidated $ 115 $ 93 $ 304 $ 266
======== ======== ======= =======
CAPITAL EXPENDITURES:
Banking $ 114 $ 480 $ 1,061 $ 1,311
Real estate development and management 8 312 69 380
-------- -------- ------- -------
Total consolidated $ 122 $ 792 $ 1,130 $ 1,691
======== ======== ======= =======
</TABLE>
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
- - RESULTS OF OPERATIONS
The net income for the three months ended March 31, 1997 was $529,000,
compared to $569,000 in net income for the same period last year. Fully
diluted net income per share was $.20 per share for the three months ended
March 31, 1997, compared to same net income per share in 1996. The net loss
for the nine months ended March 31, 1997, was $200,000, compared to $2,624,000
in net income for the same period last year. Fully diluted net loss per share
was $0.07 for the nine months ended March 31, 1997, compared to net income of
$0.95 per share for the same period in 1996. The federal legislation
resolving the FDIC insurance funding issue signed by President Clinton in
September required thrifts to pay a one-time assessment of approximately $.66
per $100 of deposits within 60 days of September 30, 1996. As a result, the
Company recorded a charge of $1,040,000 during the first quarter of fiscal
1997. The legislation provisions include a reduction of the ongoing insurance
premiums thrifts pay from $.23 - $.31 per $100 of deposits to approximately
$.06 per $100, as well as the ultimate merger of the funds by the year 2000.
In anticipation of this and as a result of continued consolidation and
standardization of the bank and thrift industries, the Company, in an ongoing
effort to more closely resemble a commercial banking operation, set aside
$850,000 in loan loss allowances during the first quarter of fiscal 1997. The
Company's fee income from real estate development and management was down from
$3,551,000 last year to $683,000 in the first nine months of fiscal 1997.
These fees, which are transaction-based, are volatile in nature. There is no
assurance that individual transactions, once initiated, will be completed.
While the Company may continue to participate in development activities, it
has shifted its focus to financing multifamily real estate for non-affiliated
borrowers. The Company has not exited the development industry, but has
reduced its activities prospectively. However it intends to remain active in
financing multifamily transactions.
The Company announced on January 21, 1997 an expense reduction plan calling
for $1 million in after tax savings. The plan calls for the Company to work
towards achieving optimum efficiency within its banking and real estate
management, development, and financing units by eliminating duplicative and
less profitable activities. The Company's long term plan originally called
for rapid internal growth to approximately $500 million in assets. Management
mobilized for the ambitious goal by appropriately staffing the Company to meet
the increased demands of a larger organization. Recently, management
determined that a more conservative growth plan would allow the Company to
grow profitably without straining its capital resources. As such, some
infrastructure that has been developed will not be required in the short run.
On April 25, 1997 the Company announced its third quarter results and the
completion of the cost reduction program. The Company completed the cost
reduction program ahead of schedule and is anticipating an annual savings of
approximately $2.0 million on a pretax basis or about $.44 per share after
tax.
NET INTEREST INCOME. Net interest income, the Company's largest component of
income, represents the difference between interest and fees earned on loans,
investments and other interest earning assets, and interest paid on interest
bearing liabilities. It also measures how effectively management has balanced
and allocated the Company's interest rate-sensitive assets and liabilities.
Net interest income for the three months ended March 31, 1997, was $1,535,000
compared to $1,523,000 for the three month period ending March 31, 1996, an
increase of $12,000. For the nine months ended March 31, 1997, net interest
income increased $315,000 over the nine months ending March 31, 1996, a 7.1%
increase.
The Company's net interest margin for the quarter increased from 2.35% at
March 31, 1996, to 2.64% at March 31, 1997. The average yield on interest
earning assets increased 19 basis points to 8.46% at March 31, 1997, compared
to 8.27% at March 31, 1996. The average yield on interest bearing liabilities
decreased 10 basis points from March 31, 1996, to 5.87% at March 31, 1997.
The yield decrease was primarily in certificates of deposits, agent-acquired
deposits and other borrowings. The agent-acquired funds previously acquired
were at varying terms but at higher rates than would have been paid in the
retail market. As a result of the Company's plan to reduce the rapid growth
rate, the average balance of agent-acquired funds has decreased $16,073,000
from March 31, 1996. The Company sold over $57,000,000 of its fixed-rate
mortgage loan portfolio during the latter part of fiscal 1996, thus allowing
the Company the flexibility to allow the agent acquired funds, which typically
bear a higher rate, to mature or rollover at the prevailing rate, creating a
favorable impact on the Company's net interest margin. Interest income for
the quarter ended March 31, 1997, was $4,935,000 compared to $5,366,000 for
the quarter ended March 31, 1996, a decrease of $431,000. These decreases are
primarily due to the interest income lost from the above mentioned loan sale.
Interest expense for the quarter ended March 31, 1997, decreased $443,000 over
the corresponding period in 1996. This is the result of paying off FHLB
advances and allowing agent acquired funds mature or rollover at the
prevailing rate. The Company's year-to-date margin increased 40 basis from
2.24% at March 31, 1996, to 2.64% at March 31, 1997. The Company is
continuing to monitor the net interest margin which has been an area of
increased concentration this year.
10
<PAGE>
NON-INTEREST INCOME. Non-interest income for the quarter ended March 31,
1996, was $1,209,000 compared to $1,681,000 for the same period in 1996, a
decrease of $472,000.
<TABLE>
<CAPTION>
NON-INTEREST INCOME
- ---------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
MARCH 31, INCREASE
1997 1996 (DECREASE)
---- ---- ----------
<S> <C> <C> <C>
Net income from real estate development and management $ 261,669 $3,551,453 $(3,289,784)
Letter of credit fees 508,922 310,929 197,993
Service charges on deposit accounts 225,012 119,120 105,892
Net gain on sale of loans 81,243 313,548 (232,305)
Gain on sale of fixed assets 18,401 718,765 (700,364)
Loan servicing rights net of amortization 64,684 322,222 (257,538)
Dividend income 13,770 85,535 (71,765)
Real estate mortgage banking fees 998,739 687,145 311,594
Agent fee income 290,739 15,401 275,338
Servicing fees on loans sold 133,562 39,061 94,501
Other loan fees 96,565 40,184 56,381
Other 361,097 295,218 65,879
---------- ---------- ------------
Total non-interest income $3,054,403 $6,498,581 $(3,444,178)
========== ========== ============
</TABLE>
Non-interest income for the nine months ended March 31, 1997, decreased by
$3,444,000 as compared to the nine months ended March 31, 1996. Net income
from real estate development and management decreased by $3,330,000 as
compared to the prior year. The Affordable Housing Group has encountered
increased competition in the financing and development of multifamily housing.
The IRS Section 42 tax credit program has been used by the Company to develop
affordable housing for individuals with low to moderate incomes. The Company
has provided financing for other developers which began utilizing the program.
Since the IRS Section 42 tax credit program was created in 1986, competition
has consistently increased in this area. As a result of the increase in the
number of competitors in this industry, the Company has noted a significant
reduction in the amount of fees it has been able to collect on individual
transactions. The Company continues to develop new and innovative
housing-related products to supplement its Section 42 activity. However, there
is no assurance that those new products will be able to replace any loss of
income from current activities. The Company has recognized $509,000 in letter
of credit fees compared to $311,000 in fiscal 1996, as an integral part of the
Affordable Housing Group's real estate activities. Mortgage banking fees
increased $312,000 to $999,000 for the nine months ended March 31, 1997, as
the Company remains active in the financing of multifamily housing
transactions through its savings bank subsidiary, FFCC.
The Company's savings bank subsidiary sold a parcel of real estate during the
first quarter of fiscal 1996 resulting in a gain of $719,000. The Company has
no plans at this time to sell additional real estate. Gain on sale of real
estate loans decreased $232,000 as the volume of loans sold has decreased from
the prior year. Also, a decrease in loan servicing rights of $258,000 was
impacted by the decrease in loans sold, but was partially offset by the
increase in servicing fees on loans sold of $95,000 as the Company's servicing
portfolio continues to grow. Service charges on deposit accounts increased
$106,000 over the prior fiscal year as the Company's deposit base continues to
grow. During the first nine months of fiscal 1996, the Company's savings bank
subsidiary received $87,000 in dividend income on the stock the Savings Bank
holds with its data processing co-operative, compared to $14,000 in fiscal
1997. Agent fee income increased $275,000 over March 31, 1996, as a result of
the Company originating auto loans as agent for another institution. Other
loan fees increased $56,000 over the prior year due to prepayment penalties
received on multifamily loans. Other non-interest income increased $66,000
from the prior year as dealer interest recapture increased $26,000 and title
fee income increased $25,000.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the current
quarter decreased $15,000 compared to the quarter ended March 31, 1996. The
provision for loan losses increased $670,000 to $915,000 for the nine months
ended March 31, 1997, compared to $245,000 for the same period in 1996. As a
result of the continued consolidation and standardization of the bank and
thrift institutions, the Company, in an ongoing effort to more closely
resemble a commercial banking operation, set aside $850,000 in loan loss
allowance during the first quarter of fiscal 1997. The increase in the
provision for the current year does not result from the identification of any
particular problem credit or credits, but does reflect the increase of
multifamily construction and commercial loans in the Company's loan portfolio.
11
<PAGE>
NON-INTEREST EXPENSE. Non-interest expense for the quarter ended March 31,
1997, was $1,963,000 compared to $2,262,000 for the same period in 1996, an
decrease of only $299,000 as the Company continues to work toward controlling
non-interest expense items.
<TABLE>
<CAPTION>
NON-INTEREST EXPENSE
- -------------------------------------------------------------------------------------------
NINE MONTHS ENDED
MARCH 31, INCREASE
1997 1996 (DECREASE)
---- ---- ----------
<S> <C> <C> <C>
Salaries and employee benefits $3,415,438 $3,319,152 $ 96,286
Legal and professional 254,273 378,646 (124,373)
Occupancy expense 334,788 361,167 (26,379)
Equipment expense 276,708 283,142 (6,434)
Deposit insurance 1,276,165 309,269 966,896
Data processing expense 230,121 216,746 13,375
Advertising 177,272 199,018 (21,746)
Loan participation expenses 51,713 (51,713)
Printing and supplies 143,695 156,817 (13,122)
Travel and lodging 40,472 105,105 (64,633)
Telephone 86,234 94,671 (8,437)
Postage 78,826 87,724 (8,898)
Abandoned projects 177,090 59,614 117,476
Loss on investment 130,154 54,213 75,941
Other operating expense 779,164 765,512 13,652
---------- ---------- ------------
Total non-interest expense $7,400,400 $6,442,509 $ 957,891
========== ========== ============
</TABLE>
Non-interest expense for the nine months ended March 31, 1997, was $7,400,000
compared to $6,443,000 for the same period in 1996, an increase of $958,000.
Non-interest expense declined by $82,000, when accounting for the BIF-SAIF
assessment of $1,040,000.
Salaries and employee benefits increased by $96,000 as staffing level
increases associated with the Company's loan diversification strategy, were
the primary reasons for this increase. As mentioned in our earlier
discussion, the cost reduction program has been completed and the Company
should begin to reap benefits starting in the fourth quarter and continuing
into fiscal 1998. Legal and professional fees decreased $124,000 from the
prior year due to decreased activity in the Company's housing subsidiaries.
Occupancy and equipment expense decreases of $26,000 and $6,000, respectively,
were primarily a result of decreases in real estate taxes and repairs and
maintenance expense compared to the nine months ending March 31, 1996. Data
processing expense increased $13,000 over prior year due to the increased
activity and volume associated with the growth of the Company. Advertising
expense decreased $22,000 due to a decrease in promotions. Loan
participations expenses were zero in the current year to date compared to
$52,000 last year when the Company had several large affordable housing loans
that were participated. Printing and supplies also decreased $13,000 from the
prior year. Travel and lodging decreased $65,000 due to the decrease in
affordable housing activity. Telephone and postage expense decreased $8,000
and $9,000, respectively from the prior year as usage was down. The Company's
housing subsidiaries continue to search for new sites to develop and/or
finance, but sometimes expenses are incurred on potential sites that do not
materialize and are expensed as abandoned projects. Abandoned projects
expense was $177,000 compared to $60,000 in the prior year, an increase
of$117,000. The Company accounts for its investment in various affordable
housing partnerships on the equity method. Currently the Company has written
down its investment in various developments by $130,000 for the year-to-date
compared to the prior year of $54,000. These writedowns are offset by tax
credits received for the investments in these developments. Other operating
expenses increased $14,000 from the prior year as the Company continues to
place emphasis on controlling cost.
INCOME TAX EXPENSE. Income tax expense decreased $1,932,000 for the nine
months ended March 31, 1997, compared to the same period in 1996, due to the
taxable net loss for the current year compared to the previous year's taxable
net income.
12
<PAGE>
- - FINANCIAL CONDITION
Total assets decreased by $11,931,000 from June 30, 1996, to approximately
$250,285,000 at March 31, 1997. The decrease is the result of the Company
continuing to sell current fixed 1-4 family mortgages, the pass through of
various consumer loans to another institution that meet certain criteria and
the normal reduction in assets due to paydowns and payoffs.
LOANS. The following table shows the composition of the Company's loan
portfolio as of March 31, 1997, and June 30, 1996, excluding loans held for
sale.
<TABLE>
<CAPTION>
LOANS OUTSTANDING
- ---------------------------------------------------------------------------------------------------
(in thousands)
MARCH 31, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Real estate mortgage loans
First mortgage loans
Conventional $ 94,321 $106,288
Construction 37,328 36,938
Commercial 28,673 18,267
Multifamily loans 10,321 15,420
First mortgage real estate loans purchased 3,208 7,612
Real estate contracts 44 56
Commercial loans - other than secured by real estate 12,100 9,393
Consumer and home equity loans 24,249 23,062
Loans to depositors secured by savings 116 185
-------- --------
Total loans 210,360 217,221
======== ========
Total assets $250,285 $262,216
======== ========
Total loans to total assets 84.0% 82.8%
======== ========
</TABLE>
Total loans decreased by $6.9 million or 3.2% to $210.4 million at March 31,
1997, compared to June 30, 1996. Beginning in fiscal 1996, the Company opted
to sell new single family loan production, recognize the gain or loss on the
sale, and use the proceeds to fund new single family loan production. The
Savings Bank is continually offering new and competitive first mortgage and
multifamily loan products. The Company's construction loan category, which
includes approximately $32.6 million in commercial and multi-family loans and
$4.7 million in 1-4 family real estate loans, has increased slightly since
June 30, 1996, while commercial real estate loans have increased $10.4 million
as the Company continues to expand the portfolio. The Company has also
experienced commercial loan growth of $2.7 million as the Company continues to
expand the commercial loan operations to further diversify its loan portfolio.
13
<PAGE>
NON-PERFORMING LOANS. The Company discontinues the accrual of interest income
on loans when, in the opinion of management, there is reasonable doubt as to
the timely collectibility of interest or principal. Non-accrual loans are
returned to an accrual status when, in the opinion of management, the
financial position of the borrower indicates that there is no longer any
reasonable doubt as to the timely payment of principal and interest.
Management believes that loans now current where there are reasonable doubts
as to the ability of the borrower to comply with the present loan repayment
terms are immaterial. The Company adopted SFAS Nos. 114 and 118, Accounting
by Creditors for Impairment of a Loan and Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures on July 1, 1995. The
adoption of SFAS Nos. 114 and 118 did not have a material impact on the
Company's financial position or results of operations. The Company has not
experienced any impaired loans since the adoption of SFAS Nos. 114 and 118.
<TABLE>
<CAPTION>
NON-PERFORMING LOANS
- ------------------------------------------------------------------------
(in thousands)
MARCH 31, JUNE 30,
1997 1996
--------- --------
<S> <C> <C>
Nonaccrual loans $238 $342
Restructured
90 days or more past due 95 43
----- -----
Total $333 $385
===== =====
Percent of total loans 0.16% 0.18%
===== =====
</TABLE>
The ratio decreased from 0.18% at June 30, 1996, to 0.16% at March 31, 1997 as
non-performing loans decreased $52,000. Management is not aware of any loans
that have not been disclosed that represent or result from trends or
uncertainties which may have a material impact on the Company's future
operating results, liquidity or capital resources.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES. The Company establishes its provision
for loan losses and evaluates the adequacy of its allowance for loan losses
based on management's evaluation of its loan portfolio and changes in loan
activity. Such evaluation, which includes a review of all loans for which
full collectiblity may not be reasonably assured, considers among other
matters, the estimated fair value of the underlying collateral, economic
conditions, historical loan loss experience, the composition of the loan
portfolio and other factors that warrant recognition in providing for an
adequate loan loss allowance. This evaluation is performed on a monthly basis
and is designed to ensure that all relevant matters affecting loan
collectibility will consistently be identified in a detailed loan review and
that the outcome of the review will be considered in a disciplined manner by
management in determining the necessary allowance and the provision for loan
losses. The amounts actually reported in each period will vary with the
outcome of this detailed review.
The following table sets forth an analysis of the allowance for loan losses
for the nine months ended March 31, 1997, and the year ended June 30, 1996.
<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES
- ----------------------------------------------------------------------------
(IN THOUSANDS)
MARCH 31, JUNE 30,
1997 1996
---------------------------
<S> <C> <C>
Allowance for loan losses:
Balances, beginning of year $1,059 $ 713
Provision for losses 915 455
Loans charged off (203) (140)
Recoveries on loans 11 31
------ ------
Balances, end of quarter $1,782 $1,059
====== ======
</TABLE>
As of March 31, 1997, net loan charge-offs were $192,000, or 0.22%
(annualized) of average loans for the period, compared to $109,000 or 0.05% of
average loans as of June 30, 1996. The provision for loan losses increased
$460,000 for the nine months ended March 31, 1997 compared to the previous
year as the Company set aside $850,000 in loan loss allowance in the first
quarter in an ongoing effort to more closely resemble commercial banking
allowance
14
<PAGE>
levels. The allowance for loan losses to total loans outstanding increased
from .49% at June 30, 1996 to .85% at March 31, 1997. Management considers
the allowance for loan losses adequate to meet losses inherent in the loan
portfolio as of March 31, 1997.
INVESTMENT SECURITIES. The Savings Bank's investment policy is annually
reviewed by its Board of Directors and any significant changes to the policy
must be approved by the Board. The Board has an asset/liability management
committee which is responsible for keeping the investment policy current.
As of March 31, 1997, the investment portfolio represented 6.7% of the
Company's assets compared to same at June 30, 1996, and is managed in a manner
designed to meet the Board's investment policy objectives. The primary
objectives, in order of priority, are to further the safety and soundness of
the Company, to provide the liquidity necessary to meet day to day funding
needs, cyclical and long-term changes in the mix of our assets and
liabilities, and to provide for diversification of risk and management of
interest rate and economic risk. At March 31, 1997, the entire investment
portfolio was classified as available for sale, in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investment
in Debt and Equity Securities". The net unrealized loss at March 31, 1997 was
$59,000, which was comprised of gross gains of $78,000, gross losses of
$190,000, and a tax benefit of $53,000. The decrease of $80,000 over June 30,
1996 was caused by market interest rate changes during the period. Although
the entire portfolio is available for sale, management has not identified
individual investments for sale in future periods.
The following table sets forth the components of the Savings Bank's securities
available for sale as of the dates indicated.
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Securities available for sale:
U.S. Treasury securities $ 995 $ 504
Federal agencies securities 3,418 4,365
Federal Home Loan Mortgage Corporation
mortgage-backed securities 5,888 6,727
Federal National Mortgage Association
mortgage-backed securities 1,643 1,697
Government National Mortgage Association
mortgage-backed securities 3,789 4,165
Municipal revenue bonds 1,033
------- -------
Total securities available for sale $16,766 $17,458
======= =======
</TABLE>
The Savings Bank's total investment securities portfolio decreased by $692,000
at March 31, 1997, from June 30, 1996. The Savings Bank receives payments of
principal and interest on its mortgage-backed securities on a monthly basis.
These certificates represent ownership of pools of one-to-four family mortgage
loans. As interest rates decline, principal of the underlying mortgage loans
typically is returned more quickly in the form of payoffs and refinancings.
FUNDING SOURCES
DEPOSITS. The Savings Bank attracts both short-term and long-term deposits
from the retail market by offering a wide assortment ofaccounts with
different terms and different interest rates. These deposit alternatives
include checking accounts, regular savings accounts, money market deposit
accounts, fixed rate certificates with varying maturities, variable interest
rate certificates, negotiable rate jumbo certificates ($100,000 or more), and
variable rate IRA certificates.
Average deposits increased by $444,000 during the first nine months of fiscal
1997. Most of the decreases were due to certificates of deposit acquired
through agents, which decreased $15.0 million to $72.3 million at March 31,
1997 and money market accounts which decreased $2.0 million as a shift was
seen to new products associated with NOW accounts. These decreases were
offset by increases in demand and NOW accounts of $1.2 million and $10.4
million, respectively. The Company's savings bank subsidiary began to
actively market NOW account products during the second quarter of fiscal 1996,
which has significantly contributed to the $10.4 million increase in NOW
accounts. Retail certificates of deposit have also increased $5.6 million
since June 30, 1996 as the Savings Bank continues to grow its core deposits.
15
<PAGE>
The following table sets forth the average balances of and the average rate
paid on deposits by deposit category for the year ended June 30, 1996 and for
the nine months ended March 31, 1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 JUNE 30, 1996
----------------- -------------------
AVERAGE AVERAGE
BALANCE RATE BALANCE RATE
------- ---- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Average Deposits
Demand $ 5,093 $ 3,898
Now accounts 20,528 4.22% 10,092 3.95%
Money market accounts 4,098 2.72 6,066 2.97
Savings accounts 5,518 2.54 5,346 2.90
Certificates of deposit 76,963 5.67 71,337 5.77
Agent-acquired certificates of deposit 72,349 6.32 87,366 6.52
-------- ----- -------- -----
Total $184,549 5.43% $184,105 5.73%
======== ===== ======== =====
</TABLE>
BORROWINGS. The following table summarizes the Company's borrowings as of
March 31, 1997, and June 30, 1996.
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Note payable, 7% adjusted annually, payable $16,943
per month, including interest, due April 1, 2009,
secured by specific multifamily mortgages $ 2,249 $ 2,266
Note payable, 7.75% adjusted annually, payable $7,272
per month, including interest, due September 14, 2010,
secured by specific multifamily mortgages 1,011 1,015
Note payable, 7.75% adjusted annually, payable $11,119
per month, including interest, due September 22, 2010,
secured by specific multifamily mortgages 1,545 1,552
Junior subordinated notes, 9 1/8%, interest paid
semi-annually, due April 30, 2001, unsecured 1,476 1,485
Junior subordinated notes, 9 1/4% interest paid
semi-annually, due January 31, 2002 unsecured 1,494 1,500
Senior subordinated notes, 10%, interest paid semi-
annually, due June 1, 2005, unsecured 7,000 7,000
Guaranteed investment contracts, interest rates ranging from
5% to 5.63%, interest paid monthly, secured by qualifying
first mortgage loans in an amount equal to 120% of the
amount outstanding, due at various dates during
1997 or on demand 6,398 5,564
Treasury tax and loan note option 109 129
Federal Home Loan Bank advances 27,604 42,474
------- -------
Total $48,886 $62,985
======= =======
</TABLE>
Borrowings decreased $14.1 million to $48.9 million at March 31, 1997.
Borrowings have been slower or reduced during fiscal 1997 as the Company has
continued selling its fixed rate 1-4 family loan production. This allows the
Company to use the proceeds from the sale of loans to fund new loan
originations and ease the need for additional borrowings in the future.
16
<PAGE>
CAPITAL RESOURCES AND CAPITAL REQUIREMENTS
The ratio of stockholders' equity to total assets for the Savings Bank, was
6.63% at March 31, 1997, compared to 7.05% at June 30, 1996. The net loss for
the period, dividends paid and declared on common stock, and the purchase of
treasury stock decreased theratio, while a decrease in the unrealized loss on
available for sale investments and the exercise of stock warrants and options
partially offset the decrease. The Company's book value per share at March
31, 1997 was $5.17 as compared to $5.54 at June 30, 1996, as adjusted for the
10 percent stock dividend distributed on May 27, 1996.
The OTS has adopted capital standards under which savings associations must
maintain (i) "core capital" in an amount not less than 3% of total assets,
(ii) "tangible capital" in an amount not less than 1.5% of total adjusted
assets, and (iii) a level of risk-based capital equal to 8.0% of risk-weighted
assets. The capital standards established by the OTS for savings associations
must generally be no less stringent than those applicable to national banks.
Under OTS regulations "core capital" includes common stockholders' equity,
noncumulative perpetual preferred stock and related surplus, and minority
interests in the equity accounts of consolidated subsidiaries, less intangible
assets other than certain qualifying supervisory goodwill and certain
purchased mortgage servicing rights. In determining compliance with the
capital standards, a savings association must deduct from capital its entire
investment in and loans to any subsidiary engaged in activities not
permissible for a national bank, other than subsidiaries (i) engaged in such
non-permissible activities solely as agent for their customers; (ii) engaged
in mortgage banking activities; or (iii) that are themselves savings
associations, or companies the only investment of which is another insured
depository institution, acquired prior to May 1, 1989.
In determining total risk-weighted assets for purposes of the risk based
requirement, (i) each off-balance sheet asset must beconverted to its
on-balance sheet credit equivalent amount by multiplying the face amount of
each such item by a credit conversion factor ranging from 0% to 100%
(depending upon the nature of the asset), (ii) the credit equivalent amount of
each off-balance sheet asset and the book value of each on-balance sheet asset
must be multiplied by a risk factor ranging from 0% to 100% (again depending
upon the nature of the asset), and (iii) the resulting amounts are added
together and constitute total risk-weighted assets. Total capital, for
purposes of the risk-based capital requirement, equals the sum of core capital
plus supplementary capital (which, as defined, includes, among other items,
perpetual preferred stock not counted as core capital, limited life preferred
stock, subordinated debt, and general loan and lease loss allowances up to
1.25% of risk-weighted assets) less certain deductions including the savings
association's interest-rate risk component. The amount of supplementary
capital that may be counted towards satisfaction of the total capital
requirement may not exceed 100% of core capital.
At March 31, 1997, actual and required minimum levels of regulatory capital
for the Savings Bank were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Required
Amount Percent Amount Percent Excess
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Core $16,230 6.63% $ 7,343 3.0% $ 8,887
Tangible $16,230 6.63% $ 3,671 1.5% $12,559
Risk-based $22,812 10.89% $16,758 8.0% $ 6,054
</TABLE>
Pursuant to HOLA of 1933, as amended, the OTS is required to issue capital
standards that are no less stringent than those applicable to national banks.
In April 1991, the OTS proposed to amend its capital regulations to reflect
amendments made by the OCC to the leverage ratio capital requirement for
national banks. The proposal would establish a core capital leverage ratio
(core capital to adjusted total assets) of 3% for savings associations rated
composite 1 under the OTS MACRO rating system. For all other savings
associations, the minimum core capital leverage ratio would be 3% plus at
least an additional 100 to 200 basis points. Under the proposal, the OTS may
impose higher regulations for individual savings associations. The OTS has
not adopted this regulation in final form. The prompt corrective action
regulation adopted by the OTS provides that a savings association that has a
leverage capital ratio of less than 4% will be considered "undercapitalized"
and may be subject to certain restrictions. At December 31, 1996 the Savings
Bank had a core capital leverage ratio (as defined in the proposal) of 6.63%.
The OTS adopted a final regulation adding an interest-rate risk component to
its risk-based capital rule. A savings association's interest-rate risk is
generally defined as the change that occurs to its net portfolio value as a
result of a hypothetical two hundred basis point increase or decrease in
market interest rates. A "normal level" of interest-rate
17
<PAGE>
risk is defined as any decline in net portfolio value of up to 2% of the
institution's assets. If the 2% threshold is exceeded, a savings association
will be required to deduct from its capital, for purposes of determining
whether the institution meets its risk-based capital requirements,an amount
equal to one-half of the difference between the measured risk and 2% of
assets.
Capital requirements higher than the generally applicable minimum requirement
may be established for a particular savings association if the OTS determines
that the institution's capital was or may become inadequate in view of its
particular circumstances. Individual minimum capital requirements may be
appropriate where the savings association is receiving special supervisory
attention, has a high degree of exposure to interest rate risk, or poses other
safety or soundness concerns.
LIQUIDITY
Liquidity for a savings bank represents its ability to accommodate growth in
loan demand and/or reduction in deposits. The Savings Bank liquidity ratio
was 6.77% on March 31, 1997, down from 10.64% on June 30, 1996. Management
believes that this level of liquidity is sufficient to meet any anticipated
requirements for the Bank's operations. Federal regulations have historically
required the Bank to maintain minimum levels of liquid assets. The required
percentage has varied from time to time based on economic condition and
savings flows, and is currently 5% of net withdrawable savings deposits and
borrowings payable on demand or in one year or less during the preceding
calendar month.
18
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS:
------------------
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the Registrant's business, to which
the Registrant or its subsidiaries are a party of or which any of
their property is the subject.
ITEM 2 CHANGES IN SECURITIES:
----------------------
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES:
--------------------------------
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
----------------------------------------------------
None
ITEM 5 OTHER INFORMATION:
------------------
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K:
---------------------------------
a. The following exhibit is submitted herewith:
27 Financial Data Schedule
Reports on Form 8-K
a. Report on Form 8-K was filed on March 31, 1997.
The Company announced that David L. Maraman, President, CEO,
and director of United Fidelity Bank and director of the
Company, has resigned effective March 25, 1997 to pursue other
interest.
Jack Cunningham, a 40 year employee, has been named President
and CEO of the savings bank, and will continue to serve as Vice
Chairman and director of the Company.
19
<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.
FIDELITY FEDERAL BANCORP
Date: MAY 15, 1997 By: /s/ M. BRIAN DAVIS
------------------------ -------------------------------
M. Brian Davis
President and CEO
By: /s/ DONALD R. NEEL
-------------------------------
Donald R. Neel,
Executive Vice President, CFO
and Treasurer
(Principal Financial Officer)
20
<PAGE>
Exhibit Index
Reg. S-K
Exhibit No. Description of Exhibit Page
- -----------------------------------------------------------------------------
27 Financial Data Schedule 22
21
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIDELITY
FEDERAL BANCORP CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE
CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,173
<INT-BEARING-DEPOSITS> 4,173
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 16,766
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 210,360
<ALLOWANCE> 1,782
<TOTAL-ASSETS> 250,285
<DEPOSITS> 185,803
<SHORT-TERM> 6,507
<LIABILITIES-OTHER> 2,731
<LONG-TERM> 42,379
0
0
<COMMON> 2,500
<OTHER-SE> 10,365
<TOTAL-LIABILITIES-AND-EQUITY> 250,285
<INTEREST-LOAN> 13,996
<INTEREST-INVEST> 997
<INTEREST-OTHER> 231
<INTEREST-TOTAL> 15,224
<INTEREST-DEPOSIT> 7,545
<INTEREST-EXPENSE> 2,939
<INTEREST-INCOME-NET> 4,740
<LOAN-LOSSES> 915
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,400
<INCOME-PRETAX> (521)
<INCOME-PRE-EXTRAORDINARY> (521)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (200)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
<YIELD-ACTUAL> 2.64
<LOANS-NON> 238
<LOANS-PAST> 95
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,059
<CHARGE-OFFS> 203
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 1,782
<ALLOWANCE-DOMESTIC> 1,782
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
