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 December 31, 1996
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 February 11, 1997, there were 2,498,279 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 Financial
Results of Operations and Condition . . . . . . . . . . . . . . . 10
Capital Resources and Capital Requirements . . . . . . . . . . . . 17
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 922,428 $ 1,111,737
Short-term interest-bearing deposits 7,368,593 4,101,143
Federal funds sold 5,000,000 5,000,000
-------------- --------------
Total cash and cash equivalents 13,291,021 10,212,880
Interest-bearing deposits 5,493 5,370
Securities available for sale 17,160,849 17,458,474
Loans 211,858,261 217,221,244
Allowance for loan losses (1,835,743) (1,058,894)
-------------- --------------
Net loans 210,022,518 216,162,350
Premises and equipment 6,375,588 5,559,322
Federal Home Loan Bank of Indianapolis stock, at cost 3,919,500 3,919,500
Other assets 9,396,344 8,897,813
-------------- --------------
Total assets $ 260,171,313 $ 262,215,709
============== ==============
Liabilities
Deposits
Non-interest bearing $ 5,793,331 $ 5,099,938
Interest-bearing 182,439,815 176,602,082
-------------- --------------
Total deposits 188,233,146 181,702,020
Borrowings 55,052,211 62,984,689
Advances by borrowers for taxes and insurance 716,953 859,110
Other liabilities 3,564,000 2,374,915
-------------- --------------
Total liabilities 247,566,310 247,920,734
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 - 2,499,072 and 2,495,040 shares
Outstanding 2,489,072 and 2,495,040 shares 2,499,072 2,495,040
Capital surplus 8,812,761 8,785,148
Treasury stock - 10,000 shares
at cost (101,500)
Stock warrants 264,000 265,500
Retained earnings, substantially restricted 1,162,711 2,888,866
Net unrealized losses on securities and mortgage-
backed securities available for sale (32,041) (139,579)
-------------- --------------
Total stockholders' equity 12,605,003 14,294,975
-------------- --------------
Total liabilities and stockholders' equity $ 260,171,313 $ 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 SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------------------ --------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $4,732,394 $5,127,179 $ 9,487,145 $10,051,578
Loans held for sale - 4,032 - 7,642
Securities available for sale 280,263 294,039 565,705 572,071
Federal funds sold 1,669 6,653 18,658 56,660
Interest-bearing deposits 45,515 8,918 62,712 39,322
Other interest and dividend income 77,342 70,240 154,683 133,511
---------- ---------- ---------- -----------
Total interest income 5,137,183 5,511,061 10,288,903 10,860,784
---------- ---------- ---------- -----------
INTEREST EXPENSE
Deposits 2,584,575 2,678,950 5,056,884 5,379,659
Federal Home Loan Bank advances 544,336 948,180 1,196,923 1,818,822
Federal funds purchased 9,191 77,946 48,992 81,890
Other interest expense 372,206 315,877 781,298 678,639
---------- ---------- ---------- -----------
Total interest expense 3,510,308 4,020,953 7,084,097 7,959,010
---------- ---------- ---------- -----------
NET INTEREST INCOME 1,626,875 1,490,108 3,204,806 2,901,774
Provision for loan losses 5,000 60,000 855,000 170,000
---------- ---------- ---------- -----------
Net interest income after provision for loan losses 1,621,875 1,430,108 2,349,806 2,731,774
---------- ---------- ---------- -----------
NON-INTEREST INCOME
Fee income-real estate development and management 92,681 1,220,145 171,491 2,627,139
Service charges on deposit accounts 76,922 42,662 146,468 73,066
Gain on sale of
Real estate loans 33,742 220,518 61,790 331,866
Premises and equipment 146 75 614 718,765
Letter of credit fees 169,768 85,946 323,973 176,934
Real estate mortgage banking fees 460,750 282,295 463,250 313,645
Other income 403,067 309,003 677,589 576,514
---------- ---------- ---------- -----------
Total non-interest income 1,237,076 2,160,644 1,845,175 4,817,929
---------- ---------- ---------- -----------
NON-INTEREST EXPENSE
Salaries and employee benefits 1,148,419 1,042,216 2,270,047 2,117,341
Net occupancy expense 119,555 115,485 231,703 238,204
Equipment expense 95,385 91,363 179,348 189,419
Data processing expense 79,952 76,172 152,979 141,488
Deposit insurance expense 107,153 109,417 1,257,881 200,396
Legal and professional fees 61,635 99,445 184,091 159,575
Other expense 542,425 608,983 1,161,127 1,134,028
---------- ---------- ---------- -----------
Total non-interest expense 2,154,524 2,143,081 5,437,176 4,180,451
---------- ---------- ---------- -----------
Income before income tax 704,427 1,447,671 (1,242,195) 3,369,252
Income tax expense 189,283 533,724 (512,945) 1,314,153
---------- ---------- ---------- -----------
NET INCOME $ 515,144 $ 913,947 (729,250) 2,055,099
========== ========== ========== ===========
PER SHARE:
Primary net income $ 0.19 $ 0.33 (0.27) 0.75
Fully diluted net income 0.19 0.33 (0.27) 0.73
Average common and common equivalent shares
outstanding 2,692,865 2,814,890 2,710,652 2,812,260
</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 SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------------------- --------------------------
<S> <C> <C> <C> <C>
BEGINNING BALANCES $12,545,764 $13,389,593 $14,294,975 $12,405,369
Net income 515,144 913,947 (729,250) 2,055,099
Net change in unrealized gain (loss) on securities
available for sale 84,647 56,011 107,538 21,061
Cash dividends (497,802) (564,028) (996,905) (893,100)
Purchase of treasury stock (69,250) - (101,500) -
Exercise of stock warrants 26,500 373,938 28,219 533,202
Exercise of stock options - 61,318 1,926 109,148
----------- ----------- ----------- -----------
BALANCES, DECEMBER 31 $12,605,003 $14,230,779 12,605,003 14,230,779
=========== =========== =========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
FIDELITY FEDERAL BANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1996 1995
--------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ (729,250) $ 2,055,099
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 855,000 170,000
Loss on sale of premises and equipment 7,201 57,371
Gain on sale of premises and equipment (2,401) (718,675)
Net decrease in real estate loans held for sale 1,923,099
Depreciation 188,859 173,275
Investment securities amortization, net 4,873 7,879
Amortization of net loan origination fees and points (2,807) (108,388)
Changes in:
Interest receivable and other assets (498,531) (7,000,586)
Interest payable and other liabilities 1,135,350 (168,714)
------------ ------------
Net cash provided by operating activities 958,294 (3,609,640)
------------ ------------
INVESTING ACTIVITIES
Net change in interest-bearing deposits (123) (127)
Purchases of investment securities available for sale (2,015,033) (3,421,702)
Proceeds from investment securities available for sale,
sales and maturities 2,470,259 2,677,249
Net changes in loans 5,287,639 (15,959,527)
Purchases of premises and equipment (1,012,725) (865,063)
Proceeds from sale of premises and equipment 2,800 1,000,000
Purchases of FHLB of Indianapolis stock - (828,400)
------------ ------------
Net cash used by investing activities 4,732,817 (17,397,570)
------------ ------------
FINANCING ACTIVITIES
Net change in:
Noninterest-bearing, NOW, savings and money
market deposits 335,296 3,244,168
Certificates of deposit 6,195,830 1,803,141
Net increase in federal funds purchased - 4,650,000
Proceeds from borrowings 7,682,254 2,743,239
Repayment of borrowings (6,106,686) (9,325,868)
Proceeds from FHLB advances 7,600,000 16,556,000
Repayment of FHLB advances (17,108,046) (13,691,458)
Net change in advances by borrowers for taxes and insurance (142,157) 144,222
Purchase of treasury stock (101,500) -
Cash dividends (998,106) (598,684)
Proceeds from exercise of stock warrants 28,219 533,202
Proceeds from exercise of stock options 1,926 109,148
------------ ------------
Net cash provided by financing activities (2,612,970) 6,167,110
------------ ------------
Net change in Cash and Cash Equivalents 3,078,141 (14,840,100)
Cash and Cash Equivalents, beginning of year 10,212,880 16,432,965
------------ ------------
Cash and Cash Equivalents, December 31 $13,291,021 $ 1,592,865
============ ============
Additional Cash Flows and Supplementary information
Cash paid for income taxes, net of refunds $ 470,000 $ 1,521,000
Cash paid for interest 7,161,066 7,913,462
Other real estate transfers - 25,795
Reclassification of real estate loans held for sale - 37,397,604
</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 six months ended December 31,
1996 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 December 31, 1996, 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 December 31, 1996, a total of 52,076 of the shares
originally reserved had been issued and 363,424 remained reserved and unissued.
CASH DIVIDEND
On November 20, 1996, the Board of Directors of the Company declared a dividend
of $0.20 per share payable on January 6, 1997 to stockholders of record on
December 2, 1996.
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 the third quarter of fiscal 1997.
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 SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------------------ ---------------------
<S> <C> <C> <C> <C>
REVENUE:
Banking $ 6,183 $ 6,118 $ 11,806 $ 12,678
Real estate development and management 191 1,554 328 3,001
-------- -------- -------- --------
Total consolidated $ 6,374 $ 7,672 $ 12,134 $ 15,679
======== ======== ======== ========
OPERATING PROFIT:
Banking $ 455 $ 284 $ (335) $ 774
Real estate development and management 60 630 (394) 1,281
-------- -------- -------- --------
Total consolidated $ 515 $ 914 $ (729) $ 2,055
======== ======== ======== ========
IDENTIFIABLE ASSETS:
Banking $247,601 $264,873 $247,601 $264,873
Real estate development and management 12,570 12,653 12,570 12,653
-------- -------- -------- --------
Total consolidated $260,171 $277,526 $260,171 $277,526
======== ======== ======== ========
DEPRECIATION AND AMORTIZATION:
Banking $ 87 $ 69 $ 158 $ 137
Real estate development and management 17 18 31 36
-------- -------- -------- --------
Total consolidated $ 104 $ 87 $ 189 $ 173
======== ======== ======== ========
CAPITAL EXPENDITURES:
Banking $ 584 $ 531 $ 947 830
Real estate development and management 60 61 61 69
-------- -------- -------- --------
Total consolidated $ 644 $ 592 $ 1,008 $ 899
======== ======== ======== ========
</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 December 31, 1996 was $515,000,
compared to $914,000 in net income for the same period last year. Fully
diluted net income per share was $.19 per share for the three months ended
December 31, 1996, compared to net income of $.33 per share for the same period
in 1995. The net loss for the six months ended December 31, 1996 was $719,000,
compared to $2,055,000 in net income for the same period last year. Fully
diluted net loss per share was $0.27 for the six months ended December 31, 1996,
compared to net income of $0.73 per share for the same period in 1995. 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.
The Company's fee income from real estate development and management was down
from $2,627,000 last year to $171,000 in the first six 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 was
shifted its focus to financing multifamily real estate for non-affiliated
borrowers. 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 $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.
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 December 31, 1996 was $1,627,000
compared to $1,490,000 for the three month period ending December 31, 1995, an
increase of $137,000 or 9.2%. For the six months ended December 31, 1996 the
net interest income increased $303,000 over the six months ending December 31,
1995, an 10.4% increase.
The Company's net interest margin for the quarter increased from 2.21% at
December 31, 1995 to 2.69% at December 31, 1996. The average yield on interest
earning assets increased 34 basis points to 8.50% at December 31, 1996 compared
to 8.16% at December 31, 1995. The average yield on interest bearing
liabilities decreased 15 basis points from December 31, 1995 to 5.81% at
December 31, 1996. 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 balance of agent-acquired funds has decreased
$21,131,000 from December 31, 1995. 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 let 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 December 31, 1996, was $5,137,000 compared to
$5,511,000 for the quarter ended December 31, 1995, a decrease of $374,000.
These decreases are primarily due to the interest income lost from the above
mentioned loan sale. Interest expense for the quarter ended December 31, 1996
decreased $511,000 over the corresponding period in 1995. This is the result of
paying off FHLB advances and allowing agent acquired funds mature or rollover at
the prevailing rate. The Company year-to-date margin increased 44 basis from
2.18% at December 31, 1995 to 2.62% at December 31, 1996. 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 December 31,
1996, was $1,237,000 compared to $2,161,000 for the same period in 1995, a
decrease of $924,000.
<TABLE>
<CAPTION>
NON-INTEREST INCOME
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, INCREASE
1996 1995 (DECREASE)
---------- ---------- ------------
<S> <C> <C> <C>
Net income from real estate development and management $ 171,491 $2,627,139 $(2,455,648)
Letter of credit fees 323,973 176,934 147,039
Service charges on deposit accounts 146,468 73,066 73,402
Net gain on sale of loans 61,790 331,866 (270,076)
Gain on sale of fixed assets 614 718,765 (718,151)
Loan servicing rights net of amortization 47,568 241,198 (193,630)
Dividend income 4,031 87,245 (83,214)
Real estate mortgage banking fees 463,250 313,645 149,605
Agent fee income 179,284 - 179,284
Servicing fees on loans sold 89,184 18,113 71,071
Other loan fees 83,674 15,650 68,024
Other 273,848 214,308 59,540
---------- ---------- ------------
Total non-interest income $1,845,175 $4,817,929 $(2,972,754)
========== ========== ============
</TABLE>
Non-interest income for the six months ended December 31, 1996, decreased by
$2,973,000 as compared to the six months ended December 31, 1995. Net income
from real estate development and management decreased by $2,456,000 as compared
to the prior year. The Affordable Housing Group has begun to encounter 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 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 $324,000 in letter of credit fees compared to $177,000 in fiscal
1996, as an integral part of the Affordable Housing Group's real estate
activities. Mortgage banking fees increased $150,000 to $463,000 for the six
months ended December 31, 1996 as the Company continues to increase its
multifamily housing transactions completed by the 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 $270,000 as the volume of loans sold has decreased from
the prior year. Also, a decrease in loan servicing rights of $194,000 was
impacted by the decrease in loans sold, but it partially was offset by the
increase in servicing fees on loans sold of $71,000 as the Company's servicing
portfolio continues to grow. Service charges on deposit accounts increased
$73,000 over the prior fiscal year as the Company's deposit base continues to
grow. During the first six 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 $4,000 in fiscal 1997.
Agent fee income increased $179,000 over December 31, 1995 as a result of the
Company originating auto loans as agent for another institution. Other loan
fees increased $68,000 over the prior year due to prepayment penalties received
on multifamily loans. Other non-interest income increased $60,000 from the
prior year as dealer interest recapture increased $23,000 and title fee income
increased $25,000.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the current
quarter decreased $55,000 compared to the quarter ended December 31, 1995. The
provision for loan losses increased $685,000 to $855,000 for the six months
ended December 31, 1996 compared to $170,000 for the same period in 1995. 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 for 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 December 31,
1996, was $2,155,000 compared to $2,143,000 for the same period in 1995, an
increase of only $12,000 as the Company continues to work toward controlling
non-interest expense items.
<TABLE>
<CAPTION>
NON-INTEREST EXPENSE
- ---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
DECEMBER 31, INCREASE
1996 1995 (DECREASE)
---------- ---------- -----------
<S> <C> <C> <C>
Salaries and employee benefits $2,270,047 $2,119,222 $ 150,825
Legal and professional 184,091 159,575 24,516
Occupancy expense 231,703 238,204 (6,501)
Equipment expense 179,348 189,462 (10,114)
Deposit insurance 1,257,881 200,396 1,057,485
Data processing expense 152,979 141,488 11,491
Advertising 126,895 146,042 (19,147)
Loan participation expenses 44,639 (44,639)
Printing and supplies 107,871 121,322 (13,451)
Travel and lodging 29,966 74,829 (44,863)
Telephone 56,303 63,780 (7,477)
Postage 50,559 57,999 (7,440)
Abandoned projects 145,136 59,614 85,522
Loss on investment 114,555 31,356 83,199
Other operating expense 529,842 532,523 (2,681)
---------- ---------- -----------
Total non-interest expense $5,437,176 $4,180,451 $1,256,725
========== ========== ===========
</TABLE>
Non-interest expense for the six months ended December 31, 1996, was $5,437,000
compared to $4,180,000 for the same period in 1995, an increase of $1,257,000.
Of the $1,257,000 increase, $1,044,000 was associated with the BIF-SAIF special
assessment during the first quarter of fiscal 1997.
Salaries and employee benefits increased by $151,000 as staffing level increases
associated with the Company's loan diversification strategy, were the primary
reasons for this increase. Legal and professional fees increased $25,000 over
prior year due to activity in the Company's housing subsidiaries. Occupancy and
equipment expense decreases of $7,000 and $10,000, respectively, were primarily
a result of decreases in repairs and maintenance expense compared to the six
months ending December 31, 1995. Data processing expense increased $11,000 over
prior year due to the increased activity and volume associated with the growth
of the Company. Advertising expense decreased $19,000 due to a decrease in
promotions. Loan participations expenses were zero in the current year to date
compared to last year when the Company had several large affordable house
projects that closed last year required loan participations, therefore creating
the brokerage expenses. Printing and supplies also decreased $13,000 from the
prior year. Travel and lodging decreased $45,000 as travel demand to various
affordable housing projects in the construction and closing phase has decreased
from prior the year. 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 $145,000 compared to $60,000 in the prior year.
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 $115,000 for the year-to-date compared to
the prior year of $31,000. Other operating expenses decreased $3,000 from the
prior year.
INCOME TAX EXPENSE. Income tax expense decreased $1,827,000 for the six months
ended December 31, 1996 compared to the same period in 1995, 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 $2,045,000 from June 30, 1996 to approximately
$260,171,000 at December 31, 1996. The decrease is the result of the Company
continuing to sell current fixed 1-4 family mortgage and passing through 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 December 31, 1996 and June 30, 1996, excluding loans held for
sale.
<TABLE>
<CAPTION>
LOANS OUTSTANDING
- -------------------------------------------------------------------------------------------------------
(in thousands)
DECEMBER 31, JUNE 30,
1996 1996
------------ --------
<S> <C> <C>
Real estate mortgage loans
First mortgage loans
Conventional $101,510 $106,288
Construction 37,037 36,938
Commercial 23,763 18,267
Multifamily loans 10,702 15,420
First mortgage real estate loans purchased 2,772 7,612
Real estate contracts 44 56
Commercial loans - other than secured by real estate 12,802 9,393
Consumer and home equity loans 23,099 23,062
Loans to depositors secured by savings 129 185
-------- --------
Total loans 211,858 217,221
======== ========
Total assets $260,171 $262,216
======== ========
Total loans to total assets 81.4% 82.8%
======== ========
</TABLE>
Total loans decreased by $5.4 million or 2.5% to $211.9 million at December 31,
1996, compared to June 30, 1996. Beginning in fiscal 1996, the Company opted to
sell new loan production, recognize the gain or loss on the sale, and use the
proceeds to fund new 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 $29.5 million in
commercial and multi-family loans and $7.5 million in 1-4 family real estate
loans, has increased slightly since June 30, 1996, while commercial real estate
loans have increased $5.5 million. The Company has also experienced commercial
loan growth of $3.4 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.
NON-PERFORMING LOANS
- ----------------------------------------------------------------------
(IN THOUSANDS)
DECEMBER 31, JUNE 30,
1996 1996
------------ --------
Nonaccrual loans $389 $342
Restructured
90 days or more past due 121 43
---- ----
Total $510 $385
==== ====
Percent of total loans 0.24% 0.18%
==== ====
The ratio increased from 0.18% at June 30, 1996, to 0.24% at December 31, 1996
as non performing loans increased $125,000. 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 six months ended December 31, 1996, and the year ended June 30, 1996.
ALLOWANCE FOR LOAN LOSSES
- -------------------------------------------------------------------------
(IN THOUSANDS)
DECEMBER 31, JUNE 30,
1996 1996
-----------------------------
Allowance for loan losses:
Balances, beginning of year $1,059 $ 713
Provision for losses 855 455
Loans charged off (85) (140)
Recoveries on loans 7 31
------ ------
Balances, end of quarter $1,836 $1,059
====== ======
As of December 31, 1996, net loan charge-offs were $78,000, or 0.07%
(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
$400,000 for the six months ended December 31, 1996 compared to the previous
year end as the Company set aside $850,000 in loan loss allowance in the first
quarter in an ongoing effort to more closely resemble a commercial banking
operation. Management considers the allowance for loan losses adequate to meet
losses inherent in the loan portfolio as of December 31, 1996.
14
<PAGE>
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 December 31, 1996, the investment portfolio represented 6.6% of the
Company's assets compared to 6.7% 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 December 31, 1996, 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 December 31, 1996 was $32,000, which
was comprised of gross gains of $71,000, gross losses of $140,000, and a tax
benefit of $37,000. The decrease of $108,000 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 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>
DECEMBER 31, JUNE 30,
1996 1996
------------ --------
(IN THOUSANDS)
<S> <C> <C>
Securities available for sale:
U.S. Treasury securities $ 1,000 $ 504
Federal agencies securities 3,433 4,365
Federal Home Loan Mortgage Corporation
mortgage-backed securities 6,073 6,727
Federal National Mortgage Association
mortgage-backed securities 1,680 1,697
Government National Mortgage Association
mortgage-backed securities 3,938 4,165
Municipal revenue bonds 1,037
------- -------
Total securities available for sale $17,161 $17,458
======= =======
</TABLE>
The Savings Bank's total investment securities portfolio decreased by $297,000
at December 31, 1996, 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 decreased by $263,000 during the first six months of fiscal
1997. Most of the decreases were due to certificates of deposit acquired
through agents, which decreased $13.4 million to $74.0 million at December 31,
1996 and money market accounts which decreased $1.7 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 $1.3 million and $9.9 million,
respectively. The Company's savings bank subsidiary began to market new NOW
account products during the second quarter of fiscal 1996, which has
significantly contributed to the $9.9 million increase in NOW accounts. Retail
certificate deposits have also increased $3.4 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 six
months ended December 31, 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1996 JUNE 30, 1996
------------------- ---------------------
AVERAGE AVERAGE
BALANCE RATE BALANCE RATE
------- ---- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Average Deposits
Demand $ 5,200 $ 3,898
Now accounts 20,009 4.25% 10,092 3.95%
Money market accounts 4,381 2.72 6,066 2.97
Savings accounts 5,498 2.55 5,346 2.90
Certificates of deposit 74,798 5.67 71,337 5.77
Agent-acquired certificates of deposit 73,956 6.33 87,366 6.52
-------- --------
Total $183,842 5.44% $184,105 5.73%
======== ========
</TABLE>
BORROWINGS. The following table summarizes the Company's borrowings as of
December 31, 1996, and June 30, 1996.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 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 $ 2,255 $ 2,266
Note payable, 7.75% adjusted annually, payable $7,272
per month, including interest, due September 14, 2010,
secured by specific multifamily mortgages 1,013 1,015
Note payable, 7.75% adjusted annually, payable $11,119
per month, including interest, due September 22, 2010,
secured by specific multifamily mortgages 1,549 1,552
Junior subordinated notes, 9 1/8%, interest paid
semi-annually, due April 30, 2001, unsecured 1,479 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 7,151 5,564
Treasury tax and loan note option 145 129
Federal Home Loan Bank advances 32,966 42,474
------- -------
Total $55,052 $62,985
======= =======
</TABLE>
Borrowings decreased $7.9 million to $55.1 million at December 31, 1996.
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
6.45% at December 31, 1996, 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 December
31, 1996 was $5.06 as compared to $5.54 at June 30, 1996, as adjusted for the 10
percent stock dividend distributed on May 27, 1995.
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 December 31, 1996, 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 $16,262 6.45% $ 7,563 3.0% $ 8,699
Tangible $16,262 6.45% $ 3,782 1.5% $12,480
Risk-based $22,897 11.04% $16,598 8.0% $ 6,299
</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 6.45%.
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
17
<PAGE>
hypothetical two hundred basis point increase or decrease in market interest
rates. A "normal level" of interest-rate 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
9.12% on December 31, 1996, 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 January 21, 1997.
The Company reduced the cash dividend from twenty cents per share
to ten cents per share in order to facilitate additional capital
formation.
b. Report on Form 8-K was filed on January 24, 1997.
The Board of Directors of Fidelity Federal Bancorp announced the
approval of an expense reduction plan for the Company. 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 is attempting to find
after tax cost savings of approximately $1,000,000 or $0.36 per
share.
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: FEBRUARY 14, 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'S CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31,1996 AND THE
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 922
<INT-BEARING-DEPOSITS> 7,369
<FED-FUNDS-SOLD> 5,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,161
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 211,858
<ALLOWANCE> 1,836
<TOTAL-ASSETS> 260,171
<DEPOSITS> 188,233
<SHORT-TERM> 7,296
<LIABILITIES-OTHER> 4,281
<LONG-TERM> 47,756
0
0
<COMMON> 2,499
<OTHER-SE> 10,106
<TOTAL-LIABILITIES-AND-EQUITY> 260,171
<INTEREST-LOAN> 9,487
<INTEREST-INVEST> 647
<INTEREST-OTHER> 155
<INTEREST-TOTAL> 10,289
<INTEREST-DEPOSIT> 5,057
<INTEREST-EXPENSE> 2,027
<INTEREST-INCOME-NET> 7,084
<LOAN-LOSSES> 855
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,437
<INCOME-PRETAX> (1,242)
<INCOME-PRE-EXTRAORDINARY> (1,242)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (729)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
<YIELD-ACTUAL> 2.62
<LOANS-NON> 510
<LOANS-PAST> 121
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,059
<CHARGE-OFFS> 85
<RECOVERIES> 7
<ALLOWANCE-CLOSE> 1,836
<ALLOWANCE-DOMESTIC> 1,836
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
