SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-24648
FSF FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Minnesota 41-1783064
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
201 Main Street South, Hutchinson, Minnesota 55350-2573
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 234-4500
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicated the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date August 5, 1996.
--------------
Class Outstanding
$.10 par value common stock 3,477,694 shares
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
Page
Number
------
PART I - CONSOLIDATED FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
------------------------
(In thousands)
ASSETS
------
Cash and cash equivalents:
<S> <C> <C>
Interest bearing ............................................... $ 2,858 $ 12,448
Non-interest bearing ........................................... 2,806 2,407
Securities available for sale, at fair value:
Equity securities .............................................. 17,153 16,165
Mortgage-backed and related securities ......................... 16,180 16,141
Securities held to maturity, at amortized cost:
Debt securities (estimated fair value of $40,932 and $40,097) .. 44,340 41,914
Mortgage-backed and related securities (estimated fair
value of $36,947 and $35,112) .............................. 38,573 37,110
Loans held for sale (fair value of $464 and $251) ................. 455 230
Loan receivable, net .............................................. 201,430 170,832
Accrued interest receivable ....................................... 2,280 2,097
Foreclosed real estate ............................................ 148 89
Premises and equipment ............................................ 3,786 3,758
Other assets ...................................................... 1,386 1,414
--------- ---------
Total Assets ............................................ $ 331,395 $ 304,605
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits ..................................................... 188,386 $ 171,516
Federal Home Loan Bank borrowings ............................ 93,769 73,807
Other liabilities ............................................ 1,616 1,931
--------- ---------
Total liabilities ....................................... 283,771 247,254
--------- ---------
Commitments and contingencies:
Stockholders' equity:
Serial preferred stock, no par value 5,000,000 shares
authorized, no shares issued - -
Common stock, $.10 par value 10,000,000 shares authorized,
4,501,277 and 4,499,905 shares issued ................... 450 450
Additional paid in capital ................................... 43,139 43,069
Retained earnings, substantially restricted .................. 22,356 22,158
Treasury stock at cost (1,023,583 and 224,825 shares) ........ (13,101) (2,589)
Unearned ESOP shares at cost (281,452 and 310,254 shares) .... (2,815) (3,103)
Unearned MSP stock grants at cost (138,840 and 159,322 shares) (1,470) (1,688)
Unrealized (loss) on securities available for sale ........... (935) (946)
--------- ---------
Total stockholders' equity .............................. 47,624 57,351
--------- ---------
Total Liabilities and Stockholders' Equity .............. $ 331,395 $ 304,605
========= =========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
1
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For Three Months For Nine Months
Ended June 30, Ended June 30,
---------------------------------- -----------------------------
1996 1995 1996 1995
---------------------------------- -----------------------------
(In thousands, except per share data)
Interest income:
<S> <C> <C> <C> <C>
Loans receivable $ 4,070 $ 2,904 $ 11,633 $ 7,903
Mortgage-backed and related securities 861 884 2,386 2,700
Investment securities 967 1,048 2,950 3,288
---------------------------- -----------------------------
Total interest income 5,898 4,836 16,969 13,891
---------------------------- -----------------------------
Interest expense:
Deposits 2,076 1,797 6,184 4,812
Borrowed funds 1,351 726 3,797 1,833
---------------------------- -----------------------------
Total interest expense 3,427 2,523 9,981 6,645
---------------------------- -----------------------------
Net interest income 2,471 2,313 6,988 7,246
Provision for loan losses 15 6 27 18
---------------------------- -----------------------------
Net interest income after provision for loan losses 2,456 2,307 6,961 7,228
---------------------------- -----------------------------
Noninterest income:
Gain on loans sold - net 3 - 17 4
Other service charges and fees 78 42 173 66
Service charges on deposit accounts 204 153 555 449
Commission income 87 53 190 121
Other 20 63 81 158
---------------------------- -----------------------------
Total noninterest income 392 311 1,016 798
---------------------------- -----------------------------
Noninterest expense:
Compensation and benefits 1,063 1,074 3,294 3,021
Occupancy and equipment 193 151 596 527
Deposit insurance premiums 103 88 297 268
Data processing 97 140 293 424
Professional fees 64 70 187 178
Other 236 242 707 660
---------------------------- -----------------------------
Total noninterest expense 1,756 1,765 5,374 5,078
---------------------------- -----------------------------
Income before provision for income taxes and
cumulative effect of change in accounting princi 1,092 853 2,603 2,948
Income tax expense 408 322 1,038 1,165
---------------------------- -----------------------------
Income before cumulative effect of change in
accounting principle 684 531 1,565 1,783
Cumulative effect of change in accounting for securities
available for sale - - - 382
---------------------------- -----------------------------
Net income $ 684 $ 531 $ 1,565 $ 2,165
============================ =============================
Earnings per share
Before cumulative effect of change in
accounting principle $ 0.21 $ 0.14 $ 0.44 $ 0.45
Cumulative effect of change in accounting principle - - - 0.10
---------------------------- -----------------------------
Total $ 0.21 $ 0.14 $ 0.44 $ 0.55
============================ =============================
Weighted average number of shares outstanding 3,354 3,887 3,578 3,947
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
2
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
June 30, June 30,
------------------------------------------------
1996 1995 1996 1995
------------------------------------------------
Cash flows from operating activities: (In thousands)
<S> <C> <C> <C> <C>
Net income $ 684 $ 531 $ 1,565 $ 2,165
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 85 80 249 233
Net amortization of discounts and premiums on
securities held for investment (9) (22) (27) (47)
Provision for loan losses 15 6 27 18
Net market value adjustment on ESOP shares 15 23 51 23
Amortization of ESOP and MSP stock compensation 169 134 517 447
Gain on sale of REO - 44 - 44
Net loan fees deferred and amortized 73 129 162 113
Federal Home Loan Bank stock dividend - - (81) -
Change in accounting for securities available for sale - - - (382)
(Increase) decrease in:
Loans held for sale (262) 12 (225) 498
Accrued interest receivable (317) (332) (183) (681)
Other assets 163 9 27 515
Increase (decrease) in:
Net deferred tax liability (99) (121) (112) (127)
Accrued interest payable 1 39 (21) 1
Accrued income tax 37 93 (107) 411
Accrued liabilities 78 7 158 (478)
Deferred compensation payable 99 87 64 242
--------------------------------------------
Net cash provided by operating activities 732 719 2,064 2,995
--------------------------------------------
Cash flows from investing activities:
Loan originations and principal payments on loans, net (9,389) (12,262) (20,427) (23,072)
Purchase of loans - (5,806) (10,410) (8,905)
Purchase of securities available for sale (395) (699) (919) (1,183)
Principal payments on mortgage-related securities
held to maturity 5 17 33 73
Purchase of mortgage-related securities held to maturity
- (2,380) (1,494) (3,924)
Purchases of securities held to maturity (9,000) (999) (19,552) (13,626)
Proceeds from maturities of securities held to maturity 1,000 2,100 17,150 2,100
Investment in foreclosed real estate (2) (33) (9) (36)
Proceeds from sale of foreclosed real estate - 502 - 502
Purchases of equipment and property improvements (34) (32) (277) (256)
--------------------------------------------
Net cash (used in) investing activities $(17,815) $(19,592) $(35,905) $(48,327)
--------------------------------------------
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
3
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
June 30, June 30,
-------------------------------------------------------------
1996 1995 1996 1995
-------------------------------------------------------------
Cash flows from financing activities: (In thousands)
<S> <C> <C> <C> <C>
Net increase (decrease) in deposits, $ (435) $ 11,966 $ 16,871 $ 11,036
Net increase (decrease) in short-term borrowings 9,922 7,927 19,961 14,897
Net increase in mortgage escrow funds (359) (294) (311) (233)
Expenses related to stock offering - - - (1,496)
Treasury stock purchased (4,970) (2,589) (10,559) (2,589)
Purchase of stock for MSP - - - (1,905)
Proceeds from exercise of stock options 15 38 55 38
Dividend paid on common stock (439) (450) (1,367) (1,012)
Refund of proceeds from stock offering - - - (23,032)
-------------------------------------------------------------
Net cash provided by (used in) financing activities 3,734 16,598 24,650 (4,296)
-------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (13,349) (2,275) (9,191) (49,628)
Cash and cash equivalents:
Beginning of period 19,013 22,638 14,855 69,991
-------------------------------------------------------------
End of period $ 5,664 $ 20,363 $ 5,664 $ 20,363
=============================================================
Supplemental disclosures of cash flow information:
Cash payments for:
Interest on advances and other borrowed money $ 1,328 $ 679 $ 3,784 $ 1,779
Interest on deposits 2,078 1,757 6,197 4,817
Taxes paid 469 307 1,262 837
Supplemental schedule of noncash investing and
financing activities:
Reinvested amounts of capital gains and dividend
from mutual fund investments
89 169 192 542
Refinancing of sale of real estate owned - 436 - 436
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
4
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The unaudited consolidated financial statements as of and for the
three and nine month periods ended June 30, 1996, include the
accounts of FSF Financial Corp. ("the Corporation") and its wholly
owned subsidiary, First Federal fsb (the "Bank") and Firstate
Services, a wholly owned subsidiary of the Bank. The Corporation's
business is conducted principally through the Bank. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-Q and,
therefore, do not include information or footnotes necessary for a
complete presentation of consolidated financial condition, results of
operations, and cash flows in conformity with generally accepted
accounting principles. However, all adjustments, consisting of normal
recurring accruals, which, in the opinion of management, are
necessary for fair presentation of the consolidated financial
statements have been included. The results of operations for the
period ended June 30, 1996, are not necessarily indicative of the
results which may be expected for the entire fiscal year or any other
period. For further information, refer to consolidated financial
statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended September 30, 1995.
Reclassification
Certain items previously reported have been reclassified to conform
with the current period's reporting format.
NOTE 3 - NEW ACCOUNTING STANDARDS
The Bank adopted Statement of Financial Accounting Standards (SFAS)
No. 114, "Accounting for Creditors for Impairment of a Loan," on
October 1, 1995. SFAS No. 114, issued in May 1993, requires
measurement of impairment based on the present value of expected
future cash flows discounted at the loan's effective interest rate or
the fair value of the collateral if the loan is collateral dependent.
Regardless of the measurement method, impairment is based on the fair
value of the collateral when the Bank determines that foreclosure is
probable. The Bank has had no impaired loans during fiscal 1996.
The Bank adopted SFAS No. 122, "Accounting for Mortgage Servicing
Rights - An Amendment of SFAS No. 65," prospectively as of October 1,
1996. Issued in May 1995, SFAS 122 amends certain provisions of SFAS
No. 65 to eliminate the accounting distinction between rights to
service mortgage loans for others that are acquired through loan
origination activities and rights acquired through purchase
transactions. The statement requires a mortgage banking enterprise,
which sells or securitizes loans and retains the related mortgage
servicing rights, to allocate the total cost of the mortgage loans to
the mortgage servicing rights and the loans (without the mortgage
servicing rights) based on their relative fair values. The Bank
amortizes its mortgage servicing rights using a method which results
in charges to income in proportion to, and over the period of, the
estimated net servicing income. The capitalized servicing rights, and
the amortization thereon, are periodically evaluated for impairment
based on fair value. The risk characteristics of the loans underlying
the Bank's mortgage servicing rights are stratified based on loan
type to evaluate impairment of capitalized servicing rights.
5
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Corporation's total assets at June 30, 1996, and September 30, 1995 totaled
859263119$331.4 million and $304.6 million, respectively. The increase of $26.8
million was primarily a result of an increase in loans receivable.
Cash and cash equivalents totaled 859263575$5.7 million at June 30, 1996, which
represented a decrease of $9.2 million or 61.9% as compared with September 30,
1995. The Corporation utilized cash and cash equivalents to repurchase 802,485
shares of its common stock.
Securities available for sale increased $1.0 million between September 30, 1995,
and June 30, 1996, as a result of purchases.
Securities held to maturity increased from $79.0 million at September 30, 1995,
to $82.9 million at June 30, 1996. The increase of $3.9 million, or 4.9%,
represented purchases of additional securities.
Loans held for sale increased $225,000, to $455,000 at June 30, 1996, from
$230,000 at September 30, 1995. As of June 30, 1996, the Bank had a forward
commitment to sell $327,850 of loans held for sale to the Federal Home Loan
Mortgage ("FHLMC") which in effect would reduce the balance of loans held for
sale to $127,000 as of June 30, 1996.
Loans receivable, net increased $30.6 million or 17.9% to $201.4 million at June
30, 1996, from $170.8 million at September 30, 1995. Mortgage loan originations
totaled $48.8 million during the period, and the Bank purchased $5.9 million in
single-family residential mortgages and $4.5 million in commercial loans. All of
the mortgages purchased were single-family residential mortgages located within
Minnesota and individually underwritten by the Bank. The loans were adjustable
rate mortgages ("ARMs") and provided a net yield to the Bank that was
approximately 25 basis points less than the Bank's origination rate. The
commercial loans meet the risk profile established by the Bank, have interest
rates that are based on the "Prime" rate as published in the Wall Street
Journal, and provide the Bank with the opportunity to begin to diversify the
composition of its loan portfolio.
Foreclosed real estate at September 30, 1995, totaled $89,000, and $148,000 as
of June 30, 1996. The foreclosed real estate at June 30, 1996, consisted of two
single-family residential properties. No loss is expected in the disposition of
the properties, however, there can be no assurances that future market
conditions will not affect the market value of such properties.
Deposits after interest credited increased from $171.5 million at September 30,
1995, to $188.4 million at June 30, 1996, an increase of $16.9 million or 9.8%.
Overall cost of funds increased during the period as the Bank attempted to
maintain deposit rates consistent with marketplace competitors.
Federal Home Loan Bank ("FHLB") borrowing increased $20.0 million from $73.8
million at September 30, 1995, to $93.8 million at June 30, 1996. The borrowings
were utilized as an additional source of funding of the overall growth in total
assets.
The Corporation completed the repurchase of 802,485 shares of common stock,
thereby increasing the total number of treasury shares to 1,023,583 at June 30,
1996. Total stockholders' equity decreased from $57.4 million at September 30,
1995, to $47.6 million at June 30, 1996. Repurchased shares are to be used for
general corporate purposes, including the issuance of shares in connection with
the exercise of stock options. The $9.7 million decrease in stockholders' equity
was a direct result of the repurchase of additional shares during the period. As
a result of the repurchases, book value per share increased from $15.07 at
September 30, 1995, to $15.61 at June 30, 1996, an increase of 3.5%.
Loans are reviewed on a regular basis and are placed on a non-accrual status
when, in the opinion of management, the collection of additional interest is
doubtful. Loans are placed on a non-accrual status when either principal or
interest is 90 days or more past due. Interest accrued and unpaid at the time a
loan is placed on non-accrual status is charged against interest income.
Subsequent payments are either applied to the
6
<PAGE>
outstanding principal balance or recorded as interest income, depending of the
assessment of the ultimate collectibility of the loan.
During the nine months ended June 30, 1996, and 1995, approximately $23,963 and
$6,348 respectively, would have been recorded on loans accounted for on a
non-accrual basis if such loans had been current according to the original loan
agreements for the entire period. These amounts were not included in the Bank's
interest income for the respective periods. No interest income on loans
accounted for on a non-accrual basis was included in income during any of these
periods. During the periods indicated the Bank had no restructured loans within
the meaning of SFAS No. 15 and the Bank held no foreign loans.
The following table sets forth information with respect to the Bank's
non-performing domestic loans for the periods indicated:
<TABLE>
<CAPTION>
At June 30,
------------------------------------------------------
1996 1995
------------------------------------------------------
(In Thousands)
Loans accounted for on a non-accrual basis:
Mortgage loans:
<S> <C> <C>
Residential construction loans $ - $ -
Permanent loans secured by one-to-four-family units 22 3
Non-mortgage loans:
Consumer 59 25
------------------------------------------------------
Total non-accrual loans
81 28
Foreclosed real estate
148 73
------------------------------------------------------
Total non-performing assets $ 229 $ 101
======================================================
Total non-performing loans to net loans 0.04% 0.02%
======================================================
Total non-performing loans to total assets 0.02% 0.01%
======================================================
Total non-performing assets to total assets 0.07% 0.04%
======================================================
</TABLE>
Management, in compliance with regulatory guidelines, has instituted an internal
loan review program, whereby loans are classified as special mention,
substandard, doubtful or loss. When a loan is classified as substandard or
doubtful, management is required to establish a general valuation reserve for
loan losses in an amount that is deemed prudent. General allowances represent
allowances which have been established to recognize inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When management classifies a loan as a
loss asset, a reserve equal to 100% of the loan balance is required to be
established or the loan is to be charged-off.
An asset is considered "substandard" if it is inadequately protected by the
paying capacity and net worth of the obligor or the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the institution will sustain "some loss" if the deficiencies are not
corrected. Assets classified as "doubtful" have all of the weaknesses inherent
in those classified "substandard." with the added characteristic that the
weaknesses present make "collection or liquidation in full," "highly
questionable and improbable," on the basis of currently existing facts,
conditions, and values. Assets classified as "loss" are those considered
"uncollectible" and of such little value that their continuance as assets
without the establishment of a specific loss reserve is not warranted. Assets
which do not currently expose the insured institution to a sufficient degree of
risk to warrant classification in one of the aforementioned categories but
possess credit deficiencies or potential weaknesses, including all loans over 60
days delinquent, are required to be designated "special mention" by management.
The OTS has promulgated regulations that discontinue the classification of
assets as special mention. However, the Bank continues to utilize this category.
Management's evaluation of the classification of assets and the adequacy of the
reserve for loan losses is reviewed by regulatory agencies as part of their
periodic examinations. At June 30, 1996, First Federal had total classified
assets of $3.2 million of which $2.0 million were considered substandard and no
assets were classified as loss. Special mention assets totaled $1.2 million at
June 30, 1996. Loans classified as loss include consumer loans which have been
charged off but the Bank is still receiving principal payments.
7
<PAGE>
The following table set forth information with respect to the Bank's allowance
for loan losses at the dates indicated:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
At June 30, At June 30,
----------------------------- -----------------------------
1996 1995 1996 1995
----------------------------- -----------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Total loans outstanding (1) $ 201,885 $ 148,326 $ 201,885 $ 148,326
============================= =============================
Average loans outstanding $ 198,301 $ 139,403 $ 187,228 $ 129,276
============================= =============================
Allowance balance (beginning of period) $ 752 $ 757 $ 764 $ 748
----------------------------- -----------------------------
Provision (credit):
Residential (2) - - - -
Commercial real estate - - - -
Construction - - - -
Non-mortgage and other (including land) 15 6 27 18
----------------------------- -----------------------------
Total provision 15 6 27 18
Charge-off:
Residential (2) - - - -
Non-mortgage and other (including land) 5 4 30 13
----------------------------- -----------------------------
Total charge-offs 5 4 30 13
Recoveries:
Residential (2) - - - -
Commercial real estate - - - -
Non-mortgage and other (including land) - 5 1 10
----------------------------- -----------------------------
Total recoveries - 5 1 10
----------------------------- -----------------------------
Net charge-offs 5 (1) 29 3
---------------------------------------------------------------
Allowance balance (end of period) $ 762 $ 764 $ 762 $ 763
===============================================================
Allowance as percent of total loans 0.38% 0.52% 0.38% 0.52%
Net loans charge off as a percent of average loans - - - -
</TABLE>
---------------------------------------
(1) Includes total loans (including loans held for sale), net of loans in
process.
(2) Includes one- to four-family and multi-family residential real estate
loans.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Net Income. The Corporation recorded net income of $684,000 for the three months
ended June 30, 1996, as compared to net income of $531,000 for the three month
period ended June 30, 1995. The increase in net income of $153,000 or 28.8% was
the result of higher net interest income. In general, interest rates increased
during the three months ended June 30, 1996, and in particular, shorter term
rates increased less than longer term rates, causing a steepening of the yield
curve. The Bank prices many of its lending products against intermediate rates
and its savings products against short term rates. As a result of the steepening
of the yield curve, average interest spread for the three months ended June 30,
1996, decreased to 2.37% from 2.62% for the three months ended June 30, 1995.
Management can make no assertions regarding the future movement of such interest
rates or the impact of interest rate movements on the Bank's interest spread or
interest margin.
Total Interest Income. Total interest income increased by $1.1 million or 22.0%
to $5.9 million for the three months ended June 30, 1996, from $4.8 million for
the three months ended June 30, 1995, due primarily to increases in the average
balance of interest earning assets of $63.1 million which more than offset the
decline in yield. The average yield on loans decreased to 8.21% for the quarter
ended June 30, 1996, from 8.33% for the quarter ended June 30, 1995. The average
balance of mortgage-backed securities increased by $3.7 million from $52.0
million for the three months ended June 30, 1995, to $55.7 million for the three
months ended June 30, 1996. During this same period, the average yield on
mortgage-backed securities decreased from 6.81% to 6.18% or 63 basis points (100
basis points equals 1%). The decrease in yields on interest earning assets was
primarily caused by the lower relative level of interest rates in 1996 versus
1995. The average balance of investment securities were approximately the same
in the comparative periods, while the average yield decreased to 5.56% for 1996
from 6.06% for 1995.
8
<PAGE>
Total Interest Expense. Total interest expense increased to $3.4 million for the
three months ended June 30, 1996, from $2.5 million for the same period in 1995.
The average balance of interest-bearing deposits increased from $161.5 million
for the three months ended June 30, 1995, to $188.1 million for the three months
ended June 30, 1996. This increase was comprised of interest credited and an
increase of non-certificate accounts which generally have interest rates which
are lower than the rates paid on certificate accounts. The average cost of
deposits decreased by 4 basis points to 4.41% for the three months ended June
30, 1996. As the overall mix of deposits changed, the cost decreased slightly.
No assurance can be made that deposits can be maintained in the future without
increasing the cost of funds if interest rates should increase. The average
balance of borrowings increased $42.0 million to $90.6 million for the three
months ended June 30, 1996, from $48.6 million for the three months ended June
30, 1995, however, the cost of such borrowings remained at 5.97%. The overall
cost of funds increased from 4.80% for the three months ended June 30, 1995, to
4.92% for the three months ended June 30, 1996 due to the increase in borrowings
relative to the increase in deposits. The Bank utilized borrowings to supplement
deposits and meet other liquidity needs.
Net Interest Income. Net interest income increased from $2.3 million for the
three months ended June 30, 1995, to $2.5 million for the same period ended June
30, 1996, an increase of $159,000 or 6.9%. Average interest-earning assets
increased $63.1 million, from $260.6 million for the three months ended June 30,
1995, to $323.7million for the three months ended June 30, 1996, while the
average yield on interest-earning assets decreased 13 basis points from 7.42%
for 1995 to 7.29% for 1996. Average interest bearing liabilities increased by
$68.5 million to $278.7 million for the three months ended June 30, 1996, from
$210.2 million for the three months ended June 30, 1995, and the cost of
interest-bearing liabilities increased from 4.80% for 1995 to 4.92% in 1996.
Provision for Loan Losses. The Bank's provision for loan losses was $15,000 for
the three months ended June 30, 1996, compared to $6,000 for the same period in
1995. The Bank's allowance for loan losses was $762,000 and $763,000 at June 30,
1996, and June 30, 1995, respectively. At June 30, 1996, the Bank's allowance
for loan losses constituted 205.8% of non-performing assets as compared to
755.4% of non-performing assets at June 30, 1995. The allowance for losses on
loans is maintained at a level which is considered by management to be adequate
to absorb probable loan losses on existing loans that may become uncollectible,
based on an evaluation of the collectibility of loans and prior loan loss
experience and market conditions. The evaluation takes into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions that may affect the borrower's ability to pay. The allowance for loan
losses is established through a provision for loan losses charged to expense.
While the Bank maintains its allowance for losses at a level which it considers
to be adequate, there can be no assurances that further additions will not be
made to the loss allowances or that such losses will not exceed the estimated
amounts.
9
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
UNAUDITED CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST AND DIVIDENDS
EARNED OR PAID, AND RELATED INTEREST YIELDS AND RATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------------------------------------------------
1996 1995
-------------------------------------------------------------------------------------------
Interest Interest
Average Yields and Average Yields and
Assets: Balance Interest Rates (1) Balance Interest Rates (1)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans receivable (2) $ 198,301 $ 4,070 8.21 % $ 139,403 $ 2,904 8.33 %
Mortgage-backed securities 55,749 861 6.18 51,957 884 6.81
Investment securities (3) 69,643 967 5.56 69,211 1,048 6.06
---------------------------- --------------------------
Total interest-earning assets 323,693 5,898 7.29 260,571 4,836 7.42
-------------- -------------
Other assets 7,960 9,662
------------- ------------
Total assets $ 331,653 $ 270,233
============= ============
Liabilities:
Interest-bearing deposits $ 188,128 $ 2,076 4.41 % $ 161,532 $ 1,797 4.45 %
Borrowings 90,557 1,351 5.97 48,621 726 5.97
---------------------------- --------------------------
Total interest-bearing
liabilities 278,685 3,427 4.92 % 210,153 2,523 4.80 %
-------------- -------------
Other liabilities 3,090 1,917
------------- ------------
Total liabilities 281,775 212,070
Stockholders' equity 49,878 58,163
------------- ------------
Total liabilities and stockholders'
equity $ 331,653 $ 270,233
============= ============
Net interest income $ 2,471 $ 2,313
Net Spread (4) 2.37 % 2.62 %
Net Margin (5) 3.05 % 3.55 %
Ratio of average interest-earning
assets to average interest-
bearing liabilities 1.18X 1.24X
</TABLE>
(1) Annualized
(2) Average balances include non-accrual loans and loans held for sale.
(3) Includes interest-bearing deposits in other financial institutions.
(4) Net spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(5) Net margin represents net interest income as a percentage of average
interest-earning assets.
Non-interest Income. Total non-interest income increased $81,000 during the
three month period ended June 30, 1996, to $392,000 as compared to the same
period in 1995. Loan origination fees increased from $42,000 for the three
months ended June 30, 1995, to $78,000 for the three months ended June 30, 1996,
due to a higher level of originations. Loan and other customer service fees
increased from $153,000 for the three months ended June 30, 1995, to $204,000
for the three months ended June 30, 1996, due to an increase in deposit related
fees and to a larger percentage of mortgages being closed in-house.
10
<PAGE>
Non-interest expense. Total non-interest expense decreased $9,000 over the
periods compared. Compensation and benefits remained relatively stable
decreasing to $1,063,000 for 1996 from $1,074,000 for 1995. Occupancy expense
was $193,000 for the three months ended June 30, 1996, versus $151,000 for the
same period in 1995. The increase can be attributed to the opening of the Bank's
Waite Park office (additional rent expense) and to a decrease in facilities
rented to others. Deposit insurance premiums increased due to an increase in the
overall level of deposits. Data processing decreased from $140,000 for the three
months ended June 30, 1995, to $97,000 for the three months ended June 30, 1996,
as the Bank continued to realize cost savings as a result of the consolidation
of its data processing. Professional fees decreased $6,000 from $70,000 in 1995
to $68,000 in 1996.
Income Tax Expense. Income taxes increased by $86,000 or 26.7%, to $408,000 for
the three month period ended June 30, 1996, from $322,000 for the same period in
1995, primarily due to the increase of $239,000 in income before tax.
COMPARISON OF THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
Net Income. The Corporation recorded net income of $1.6 million for the nine
months ended June 30, 1996, as compared to net income of $2.2 million for the
nine month period ended June 30, 1995. Included in 1995's income was a $382,000
one-time positive adjustment to income resulting from a change in accounting for
securities available for sale due to the adoption of SFAS No. 115. Net income
for the nine months ended June 30, 1995, was $1,783,000 prior to the adjustment,
versus $1,565,000 for the nine months ended June 30, 1996, a decrease of
$218,000.
Total Interest Income. Total interest income increased by $3.1 million or 22.2%
to $17.0 million for the nine months ended June 30, 1996, from $13.9 million for
the nine months ended June 30, 1995. The yield on mortgage-backed securities
decreased to 5.89% and the yield on investment securities increased to 5.69% for
the nine months ended June 30, 1996, compared to the mortgaged-backed securities
yield of 7.05% and the investment securities yield of 5.53% for the same period
ended June 30, 1995.
Total Interest Expense. Total interest expense increased to $10.0 million for
the nine months ended June 30, 1996, from $6.6 million for the nine months ended
June 30, 1995. Average interest bearing liabilities increased from $201.8
million in 1995 to $266.4 million in 1996 and the cost of the liabilities
increased from 4.39% for the nine months ended June 30, 1995, to 5.00% for the
nine months ended June 30, 1996. Interest on deposits increased $1.4 million and
the average rate increased from 4.06% to 4.53% during the comparison period.
Average borrowings increased from $43.6 million for the nine months ended June
30, 1995, to $84.3 million for the nine months ended June 30, 1996, and the cost
of the borrowings increased from 5.60% to 6.00% due to the continued upward
movement in interest rates during most of the period. Management believes that
the Bank may continue to experience upward pressure on deposit and borrowing
rates especially if the Federal Reserve should further increase the discount
rate.
Net Interest Income. Net interest income decreased from $7.2 million for the
nine months ended June 30, 1995, to $7.0 million for the same period ended June
30, 1996, an decrease of $200,000 or 2.8%. The decrease is mostly a result of a
decrease in net spread from 2.74% for the nine months ended June 30, 1995, to
2.29% for the nine months ended June 30, 1996. Although the average yield on
earning assets increased 16 basis points, the average cost of interest bearing
liabilities increased 61 basis points.
Provision for Loan Losses. The Bank's provision for loan losses increased from
$18,000 for the nine months ended June 30, 1995, to $27,000 for the nine months
ended June 30, 1996. See also "Comparison of the Three Months Ended June 30,
1996 and 1995 -- Provision for Loan Losses."
11
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
UNAUDITED CONSOLIDATED AVERAGE BALANCE SHEET, INTEREST AND DIVIDENDS
EARNED OR PAID, AND RELATED INTEREST YIELDS AND RATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
----------------------------------------------------------------------------------------------
1996 1995
----------------------------------------------------------------------------------------------
Interest Interest
Average Yields and Average Yields and
Assets: Balance Interest Rates (1) Balance Interest Rates (1)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans receivable (2) $ 187,228 $ 11,633 8.28 % $ 129,276 $ 7,903 $ 8.15 %
Mortgage-backed securities 54,037 2,386 5.89 51,072 2,700 7.05
Investment securities (3) 69,102 2,950 5.69 79,244 3,288 5.53
-------------------------- -----------------------------
Total interest-
earning assets 310,367 16,969 7.29 295,592 13,891 7.13
---------- -------------
Other assets 10,160 9,741
----------- ------------
Total assets $ 320,527 $ 269,333
=========== ============
Liabilities:
Interest-bearing deposits $ 182,085 $ 6,184 4.53 % $ 158,201 $4,812 4.06
Borrowings 84,337 3,797 6.00 43,639 1,833 5.60
-------------------------- ------------------------------
Total interest-
bearing liabilities 266,422 9,981 5.00 % 201,740 6,645 4.39 %
---------- -------------
Other liabilities 1,820 18,085
----------- ------------
Total liabilities 268,242 219,925
Stockholders' equity 52,285 49,408
----------- ------------
Total liabilities and stockholders'
equity $ 320,275 $ 269,333
=========== ============
Net interest income $ 6,988 $ 7,246
Net Spread (4) 2.29 % 2.74 %
Net Margin (5) 3.00 % 3.72 %
Ratio of average interest-earning
assets to average interest-
bearing liabilities 1.17X 1.29X
</TABLE>
(1) Annualized
(2) Average balances include non-accrual loans and loans held for sale.
(3) Includes interest-bearing deposits in other financial institutions.
(4) Net spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(5) Net margin represents net interest income as a percentage of average
interest-earning assets.
Non-interest Income. Total non-interest income increased from $798,000 for the
nine months ended June 30, 1995, to $1,016,000 for the nine months ended June
30, 1996. Loan origination fees increased from $66,000 for the 1995 fiscal year
to $173,000 for the 1996 fiscal year due to the increased level of originations
and to the origination of more loans with associated fees that could be
recognized in current income. Loan and other customer service fees increased
from $449,000 for the nine months ended June 30, 1995, to $555,000 for the nine
months ended June 30, 1996, or 23.6%, due to an increase in the fees charged for
services.
Non-interest expense. Total non-interest expense increased to $5.4 million for
the nine months ended June 30, 1996, from $5.1 million for the same period in
1995. Compensation and benefits increased from $3.0 million to
12
<PAGE>
$3.3 million for the periods compared as a result of additional expense
associated with the Bank's Management Stock Plan as well as merit increases that
averaged 3.5% for all employees. Occupancy expense increased from $527,000 for
the nine months ended June 30, 1995, to $596,000 for the nine months ended June
30, 1996, due to the opening of the Bank's Waite Park office (additional rent
expense) and to a decrease in facilities rented to others. Deposit insurance
expense increased 10.8% due to an increase in total deposits. Data processing
expense decreased $131,000 from $424,000 for the nine months ended June 30,
1995, to $293,000 for the nine months ended June 30, 1996, as the Bank began to
realize cost savings as a result of converting to a single service provider
during the 1996 fiscal year. Professional fees increased from $178,000 for the
1995 fiscal year to $187,000 for the 1996 fiscal year.
Income Tax Expense. Income tax expense decreased from $1.2 million for the nine
months ended June 30, 1995, to $1.0 for the same period in 1996 as a result of a
decrease in income before taxes before the cumulative effect of change in
accounting principle.
Cumulative Effect. Effective October 1, 1995, the Bank was required to adopt the
SFAS No. 115. This required accounting principle change resulted in a one-time
cumulative effect of $382,000 at the beginning of the nine months ended June 30,
1995.
Liquidity and Capital Resources
Under current Office of Thrift Supervision ("OTS") regulations, the Bank must
have core capital equal to 3% of total assets and risk-based capital equal to 8%
of risk-weighted assets, of which 1.5% must be tangible capital. The OTS has
proposed amending its regulations in such a manner that would increase the core
capital requirements for most thrift institutions to 4% or 5%, depending upon
the institutions financial condition and other factors. Although the final form
of the regulation cannot be foreseen, if adopted as proposed, the Bank would
expect its core capital requirements to increase to at least 4%.
On June 30, 1996, the Bank was in compliance with its three regulatory capital
requirements as follows:
<TABLE>
<CAPTION>
Amount Percent
----------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Tangible capital $ 42,562 13.0 %
Tangible capital requirement 4,919 1.5
----------------------------------------------
Excess over requirement $ 37,643 11.5 %
==============================================
Core capital $ 42,562 13.0 %
Core capital requirement 9,882 3.0
----------------------------------------------
Excess over requirement $ 32,680 10.0 %
==============================================
Risk based capital $ 43,324 27.0 %
Risk based capital requirement 12,854 8.0
----------------------------------------------
Excess over requirement $ 30,470 19.0 %
==============================================
</TABLE>
Management believes that under current regulations, the Bank will continue to
meet its minimum capital requirements in the foreseeable future. Events beyond
the control of the Bank, such as increased interest rates or a downturn in the
economy in areas in which the Bank operates could adversely affect future
earnings and as a result, the ability of the Bank to meet its future minimum
capital requirements.
The Bank's liquidity is a measure of its ability to fund loans, pay withdrawals
of deposits, and other cash outflows in an efficient, cost effective manner. The
Bank's primary sources of funds are deposits and scheduled amortization and
principal payment of loans and mortgage-backed securities. During the past
several years, the Bank has used such funds primarily to fund maturing time
deposits, pay savings withdrawals, fund lending commitments, purchase new
investments, and increase liquidity. The Bank is currently able to fund the
majority of its operations internally and uses borrowed funds from the Federal
Home Loan Bank of Des Moines when deemed appropriate by management. As of June
30, 1996, such borrowed funds totaled $93.8 million. Loan
13
<PAGE>
payments, maturing investments and mortgage-backed security prepayments are
greatly influenced by general interest rates, economic conditions and
competition.
The Bank is required under federal regulations to maintain certain specified
levels of "liquid investments", which include certain United States government
obligations and other approved investments. Current regulations require the Bank
to maintain liquid assets of not less than 5% of its net withdrawable accounts
plus short term borrowings. Short term liquid assets must consist of not less
than 1% of such accounts and borrowings, which amount is also included within
the 5% requirements. Those levels may be changed from time to time by the
regulators to reflect current economic conditions. The Bank has generally
maintained liquidity far in excess of regulatory requirements. The Bank's
regulatory liquidity was 6.5% and 11.0% at June 30, 1996, and September 30,
1995, respectively, and its short term liquidity was 6.5% and 11.0%, at such
dates, respectively.
The amount of certificate accounts which are scheduled to mature during the
twelve months ending June 30, 1997, was approximately $77.6 million. To the
extent that these deposits do not remain at the Bank upon maturity, the Bank
believes that it can replace these funds with new deposits, excess liquidity,
FHLB advances or outside borrowings. It has been the Bank's experience that a
substantial portion of such maturing deposits remain at the Bank.
At June 30, 1996, the Bank had loan commitments outstanding of $8.5 million and
no commitments to purchase mortgage-backed securities. Funds required to fill
these commitments are derived primarily from current excess liquidity, advances,
deposit inflows or loan and security repayments.
IMPACT OF INFLATION AND CHANGING PRICES
The unaudited consolidated financial statements of the Corporation and notes
thereto, presented elsewhere herein, have been prepared in accordance with GAAP,
which requires the measurement of financial position and operating results in
terms of historical dollars without considering the change in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Corporation's operations. Unlike most
industrial companies, nearly all the assets and liabilities of the Corporation
are financial. As a result, interest rates have a greater impact on the
Corporation's performance than do the general levels of inflation. Interest
rates do not necessarily move in the same direction or to the same extent as the
prices of goods and services.
RECENT DEVELOPMENTS
Potential Deposit Insurance Disparity. The FDIC administers two separate
insurance funds. The Bank Insurance Fund ("BIF") insures the deposits of
commercial banks and other institutions which were insured by the FDIC prior to
the enactment of the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"). The Savings Association Insurance Fund ("SAIF") insures the
deposits of savings institutions which were insured by the Federal Savings and
Loan Insurance Corporation ("FSLIC") prior to the enactment of FIRREA. The FDIC
is authorized to increase deposit insurance premiums if it determines such
increases are appropriate to maintain the reserves of either the SAIF or BIF or
to fund the administration of the FDIC. In addition, the FDIC is authorized to
levy emergency special assessments of BIF and SAIF members.
The Bank is subject to a risk-based assessment system that classifies
institutions on the basis of capital ratios, supervisory evaluations by the
institution's primary federal regulatory agency and other information determined
by the FDIC to be relevant. Each of nine resulting subgroups of institutions is
assigned a deposit insurance premium assessment rate which currently ranges from
0.23% to 0.31%. The FDIC recently reduced the deposit insurance assessment for
most BIF insured institutions to 0.004% of insured deposits. In addition, the
FDIC has indicated that it anticipates that the assessment rate for SAIF
institutions would not fall below the current 0.23% of insured deposits before
the year 2002. The change in deposit insurance rates resulted in a substantial
disparity in the deposit insurance premiums paid by BIF and SAIF insured
institutions. The premium differential could reduce earnings and impair the
ability to raise funds in the capital market for members of the SAIF.
Furthermore, the change has placed the Bank at a competitive disadvantage with
BIF-member institutions.
Congress is currently discussing a variety of legislative solutions for
addressing this disparity. Most of the ideas involve a one-time assessment on
each SAIF insured institution ranging from approximately $0.85 to $1.00 for
every $100 of insured deposits as of March 31, 1995. The one time assessment
would be sufficient to recapitalize the SAIF to a level which would at least
approach the BIF. If the assessment is based on March 31,
14
<PAGE>
1995, deposits, as currently proposed, the Bank's assessment base would be
$155.5 million which would result in an assessment ranging from $1.3 million to
$1.6 million, on a pre-tax basis, if the assessment rate is $0.85 and $1.00,
respectively. Such assessment would have an adverse impact of the Bank's results
of operations and regulatory capital, however, there can be no assurances this
or any other ideas for addressing the premium disparity will in fact
materialize.
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Corporation nor the Bank was engaged in any
legal proceeding of a material nature at June 30, 1996.
From time to time, the Corporation is a party to legal
proceedings in the ordinary course of business wherein it
enforces its security interest in loans.
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
Not applicable
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11: Statement regarding computation of
earnings per share.
Exhibit 99.1:Press release dated May 7, 1996
announcing the completion of the
repurchase of 10% of the Corporation's
Common Stock.
(b) Reports on Form 8-K
On May 7, 1996, the Corporation filed a current report on Form 8-K with the
Securities and Exchange Commission announcing that it had received the necessary
approvals from the Office of Thrift Supervision to repurchase up to 10% of the
Corporation's Common Stock. The Corporation noted its intent to purchase up to
10% of its Common Stock in open market and privately negotiated transactions
from time to time during the next six month period.
15
<PAGE>
FSF FINANCIAL CORP. AND SUBSIDIARY
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.
FSF FINANCIAL CORP.
Date: August 6, 1996 By: /s/ Donald A. Glas
- --------------------- ------------------
Donald A. Glas
Chief Executive Officer
Date: August 6, 1996 By: /s/ Richard H. Burgart
- --------------------- ----------------------
Richard H. Burgart
Chief Financial Officer
16
EXHIBIT 11
STATEMENT REGARDING CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
June 30, June 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
-------------------------------- -------------------------------
(Dollars in thousands (Dollars in thousands
except earnings per share) except earnings per share)
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 3,243,548 3,884,007 3,480,910 3,944,283
Common stock equivalent shares on stock options 110,382 2,601 97,952 2,601
-------------------------------- -------------------------------
Weighted average common and common equivalent shares 3,353,980 3,886,608 3,578,862 3,946,884
Net earnings before cumulative effect of change in
accounting principle $ 684 $ 531 $ 1,565 $ 1,783
Cumulative effect of change in accounting principle - - - 382
-------------------------------- -------------------------------
Net earnings $ 684 $ 531 $ 1,565 $ 2,165
================================ ===============================
Earnings per common and common equivalent shares:
Income before cumulative effect of
change in accounting principle $ 0.21 $ 0.14 $ 0.44 $ 0.45
Cumulative effect of change in accounting principle
- - - 0.10
---------------------------------------------------------------------
Net income $ 0.21 $ 0.14 $ 0.44 $ 0.55
=====================================================================
</TABLE>
Earnings per share of common stock for the three months and nine months ended
June 30, 1996, and 1995, have been determined by dividing the income before
cumulative effect of change in accounting principle and net income by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period. Stock options are regarded as common stock
equivalents computed using the treasury stock method. Shares acquired by the
employee stock benefit plans are not considered in the weighted average shares
outstanding until shares are committed to be released to an employee's
individual account or have been earned. The difference between primary and fully
diluted earnings per shares in not material.
17
EXHIBIT 99.1
FSF Financial Corp. Contact: Donald A. Glas, Chief Executive Officer
Hutchinson, Minnesota (612) 234-4500
George B. Loban, President
(612) 234-4500
Richard H. Burgart, Chief Financial Officer
(612) 234-4500
For Immediate Release
May 7, 1996
FSF FINANCIAL CORP. ANNOUNCES
Regulatory Approval for Stock Repurchase
Hutchinson, Minnesota - May 7, 1996 -- (NASDAQ:FFHH) Donald A. Glas,
Chief Executive Officer of FSF Financial Corp., Hutchinson, Minnesota, the
holding company of First Federal fsb, announced today that it had received the
necessary approvals from the Office of Thrift Supervision ("OTS") necessary to
repurchase up to 10% or 385,996 shares of the Corporation's Common Stock. It is
anticipated that such shares of Common Stock will be purchased in open market
transactions from time to time during the next six months.
First Federal fsb is a federally-chartered stock savings bank
headquartered in Hutchinson, Minnesota. The Bank has eleven offices located in
Hutchinson (2), Hastings, Apple Valley, Buffalo, Glencoe, Inver Grove Heights,
Litchfield, Waconia, Waite Park and Winthrop, Minnesota. The deposits are
federally-insured by the Federal Deposit Insurance Corporation. The Bank is a
community-oriented, full service retail savings bank offering traditional
mortgage loan products. The Corporation's common stock is traded in the
over-the-counter market on the Nasdaq National Market under the symbol "FFHH."
18
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,858
<INT-BEARING-DEPOSITS> 2,806
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,333
<INVESTMENTS-CARRYING> 82,913
<INVESTMENTS-MARKET> 77,879
<LOANS> 204,472
<ALLOWANCE> 762
<TOTAL-ASSETS> 331,395
<DEPOSITS> 188,386
<SHORT-TERM> 93,769
<LIABILITIES-OTHER> 1,616
<LONG-TERM> 0
0
0
<COMMON> 450
<OTHER-SE> 47,174
<TOTAL-LIABILITIES-AND-EQUITY> 331,395
<INTEREST-LOAN> 11,663
<INTEREST-INVEST> 5,336
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 16,969
<INTEREST-DEPOSIT> 6,184
<INTEREST-EXPENSE> 3,797
<INTEREST-INCOME-NET> 6,988
<LOAN-LOSSES> 27
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,374
<INCOME-PRETAX> 2,603
<INCOME-PRE-EXTRAORDINARY> 2,603
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,565
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
<YIELD-ACTUAL> 3.05
<LOANS-NON> 81
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 764
<CHARGE-OFFS> 30
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 762
<ALLOWANCE-DOMESTIC> 762
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
