<PAGE>
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-QSB
MARK ONE
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from __________ to _____________.
Commission File Number: 033-86964
---------
FIRST FEDERAL BANCORPORATION
- ----------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Minnesota 41-1796238
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
214 5th Street, Bemidji, Minnesota 56601-9983
- -----------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code:(218) 751-5120
--------------
Indicate by check mark 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 ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1997
- ----- -----------------------------
Common Stock, $.01 par value 624,403<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
----
Consolidated Balance Sheets at
March 31, 1997 and September 30, 1996 3
Consolidated Statements of Earnings for
the Three Months Ended and Six Months
Ended March 31, 1997 and 1996 5
Consolidated Statement of Stockholders'
Equity for the Six Months Ended
March 31, 1997 6
Consolidated Statements of Cash Flows for
the Six Months Ended March 31, 1997 and
1996 7
Notes to Consolidated Financial Statements 9
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
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 Materially Important Events 15
Item 6: Exhibits and Reports on Form 8-K 15
Signatures 16
<PAGE>
<PAGE>
PART 1 - FINANCIAL STATEMENTS
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31 September 30
1997 1996
---------- ------------
ASSETS
<S> <C> <C>
Cash $ 1,670,371 $ 1,376,853
Interest-bearing deposits with banks 2,877,208 3,308,983
------------ ------------
Cash and cash equivalents 4,547,579 4,685,836
Securities available for sale:
Mortgage-backed and related securities
(amortized cost of $19,331,257 and
$20,128,368) 19,013,274 19,903,383
Other securities (amortized cost of
$27,890,866 and $26,193,395) 27,900,624 26,162,483
------------ ------------
Total securities available for sale 46,913,898 46,065,866
------------ ------------
Securities held to maturity:
Mortgage-backed and related securities
(estimated market value of $576,180
and $852,113) 575,033 845,605
------------ ------------
Total securities held to maturity 575,033 845,605
------------ ------------
Loans receivable, net 51,376,532 51,003,105
Federal Home Loan Bank stock, at cost 700,500 700,500
Foreclosed real estate, net 224,062 193,823
Accrued interest receivable 896,876 862,732
Premises and equipment, net 1,865,034 1,944,754
Other assets 616,904 953,880
------------ ------------
Total assets $107,716,418 $107,256,101
============ ============
Liabilities and Stockholders' Equity
Deposits $ 81,666,754 $ 81,046,519
Repurchase Agreements 4,827,489 4,954,620
Federal Home Loan Bank Advances 7,865,418 6,943,258
Advance payments by borrowers for
taxes and insurance 183,700 156,730
Accrued interest payable 573,393 587,779
Accrued SAIF assessment 0 588,444
Accrued expenses and other liabilities 563,459 656,053
------------ ------------
Total liabilities 95,680,213 94,933,403
(continued)
4<PAGE>
<PAGE>
Stockholders' Equity:
Common stock ($.01 par value): authorized
4,000,000 shares; issued
700,566 shares $ 7,006 $ 7,006
Additional paid-in capital 6,399,493 6,372,253
Retained earnings, subject to certain
restrictions 7,883,943 7,558,604
Unrealized loss on securities available
for sale, net of tax effect (181,853) (150,979)
Unearned employee stock ownership plan
shares (517,500) (552,000)
Unearned shares management recognition
plan (330,553) (377,775)
Treasury stock, at cost, 76,163 and
36,563 shares in 1997 and 1996 (1,224,331) (534,411)
------------ ------------
Total stockholders' equity 12,036,205 12,322,698
------------ ------------
Total liabilities and stock-
holders' equity $107,716,418 $107,256,101
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNING
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
--------------------- --------------------
1997 1996 1997 1996
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $1,153,057 $1,103,920 $2,315,023 $2,226,142
Mortgage-backed and related
securities 318,075 351,849 650,834 703,213
Other securities 443,078 302,247 884,854 592,153
Interest-bearing deposits with banks 18,152 38,333 24,017 96,343
Other 12,090 11,756 24,416 25,603
---------- ---------- ---------- ----------
1,944,452 1,808,105 3,899,144 3,643,454
---------- ---------- ---------- ----------
Interest expense:
Deposits 914,534 948,068 1,850,963 1,906,823
Borrowings 172,536 19,451 327,324 30,825
---------- ---------- ---------- ----------
1,087,070 967,519 2,178,287 1,937,648
---------- ---------- ---------- ----------
Net interest income 857,382 840,586 1,720,857 1,705,806
Provision for loan losses 0 0 0 0
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 857,382 840,586 1,720,857 1,705,806
---------- ---------- ---------- ----------
Noninterest income:
Fees and service charges 108,507 82,647 225,858 175,163
Gain on sales of securities 17,337 2,670 33,660 2,826
Gain on sales of foreclosed
real estate 779 649 1,460 1,317
Other 20,477 15,154 32,804 32,235
---------- ---------- ---------- ----------
Total noninterest income 147,100 101,120 293,782 211,541
---------- ---------- ---------- ----------
Noninterest expense:
Compensation and employee benefits 408,502 353,652 784,255 685,779
Occupancy 128,258 129,077 254,269 249,357
Federal deposit insurance premiums 13,359 55,340 58,919 109,793
Data processing 17,301 17,848 36,364 35,843
Advertising 47,170 18,755 78,177 40,285
Other 162,957 142,639 251,459 281,381
---------- ---------- ---------- ----------
Total noninterest expense 777,547 717,311 1,463,443 1,402,438
---------- ---------- ---------- ----------
Earnings before income tax
expense 226,935 224,395 551,196 514,909
Income tax expense 92,997 91,907 225,857 208,812
---------- ---------- ---------- ----------
Net earnings $ 133,938 $ 132,488 $ 325,339 $ 306,097
---------- ---------- ---------- ----------
Earnings per common share and
common share equivalents $ 0.22 $ 0.17 $ 0.54 $ 0.39
---------- ---------- ---------- ----------
Weighted average number of common
share equivalents outstanding 600,569 781,425 606,681 787,750
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
5<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Gain (loss)
Additional Securities
Common Paid-in Retained Available for
Stock Capital Earnings sale, net
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
September 30, 1996 $7,006 6,372,253 7,558,604 (150,979)
------ ---------- ---------- ---------
Net earnings 325,339
Change in unrealized gain (loss)
on securities available for
sale, net of tax effect (30,874)
Purchase of treasury stock
Earned management recognition
plan shares
Earned employee stock ownership
plan shares 27,240
------ ---------- ---------- ---------
March 31, 1997 $7,006 6,399,493 7,883,943 (181,853)
====== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Unearned
Shares Unearned
Employee Shares
Stock Management Total
Ownership Recognition Treasury Stockholders'
Plan Plan Stock Equity
--------- ----------- --------- -------------
<S> <C> <C> <C> <C>
September 30, 1996 $(552,000) (377,775) (534,411) 12,322,698
--------- --------- ---------- -----------
Net earnings 325,339
Change in unrealized gain (loss)
on securities available for
sale, net of tax effect (30,874)
Purchase of treasury stock (689,920) (689,920)
Earned management recognition
plan shares 47,222 47,222
Earned employee stock ownership
plan shares 34,500 61,740
--------- --------- ----------- -----------
March 31, 1997 $(517,500) 330,553 (1,224,331) 12,036,205
========= ========= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended March 31,
----------------------------
1997 1996
---------- -----------
<S> <C> <C>
Operating activities:
Net earnings $ 325,339 $ 306,097
Adjustments to reconcile net earnings to net
cash provided (used) by operations:
Provision for loan losses 0 0
Depreciation 132,232 130,139
Amortization of premium and discount, net (2,880) 14,970
Increase in accrued interest receivable (34,144) (69,905)
Decrease in accrued interest payable (14,386) (4,304)
FHLB stock dividend 0 (13,800)
Gain on sale of securities (33,660) (2,826)
Gain on sale of foreclosed real estate (1,460) (1,317)
Earned ESOP shares priced above original cost 27,240 13,799
Decrease in Unearned ESOP Shares 34,500 34,500
Decrease in Unamortized Restricted Stock 47,222 47,222
Decrease in other assets 393,550 9,826
Decrease in accrued expenses and other liabilities (681,038) (109,646)
----------- -----------
Net cash provided by operating activities 192,515 354,755
----------- -----------
Investing activities:
Net increase in loans receivable (373,427) (705,228)
Purchases of:
Other securities - available for sale (7,748,892) (7,991,118)
Mortgage-backed & related securities -
available for sale (1,337,759) (3,159,739)
Premises and equipment (52,512) (30,012)
Proceeds from sales of:
Other securities - available for sale 235,163 500,000
Proceeds from maturities or calls of:
Other securities - available for sale 5,810,991 4,305,518
Proceeds from sales of:
Mortgage-backed & related securities
- available for sale 160,979 959,060
Mortgage-backed & related securities
- held to maturity 209,867 0
Principal payments on:
Mortgage-backed & related securities
- available for sale 1,982,447 1,783,340
Mortgage-backed & related securities
- held to maturity 60,296 133,061
Net increase in foreclosed real estate (30,239) (13,293)
----------- -----------
Net cash used by investing activities (1,083,086) (4,218,411)
----------- -----------
</TABLE>
(continued)
7<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended March 31,
----------------------------
1997 1996
---------- -----------
<S> <C> <C>
Financing activities:
Net increase (decrease) in deposits $ 620,235 $ (5,047)
Purchase of Treasury Stock (689,920) (473,930)
Purchase and retirement of common stock 0 (603,750)
Increase (decrease) in advance payments by
borrowers for taxes and insurance 26,970 (7,656)
Increase in Federal Home Loan Bank advances 922,160 386,000
(Decrease) increase in Repurchase Agreements (127,131) 1,400,000
---------- -----------
Net cash provided by financing activities 752,314 695,617
---------- -----------
Decrease in cash and cash equivalents (138,257) (3,168,039)
Cash and cash equivalents, beginning of period 4,685,836 10,185,818
---------- -----------
Cash and cash equivalents, end of period $4,547,579 $ 7,017,779
========== ===========
Supplemental cash flow disclosures:
Cash paid for interest $2,192,673 $ 1,941,952
Cash paid for income taxes 85,000 330,000
Supplemental noncash flow disclosures:
Transfer of loans to real estate $ 43,700 $ 13,905
</TABLE>
8<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1997
(1) The accompanying unaudited consolidated financial statements,
which are for interim periods, do not include all disclosures
provided in the annual consolidated financial statements. These
unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and the
footnotes thereto contained in the Annual Report on Form 10-KSB
for the year ended September 30, 1996 of First Federal
Bancorporation (the "Company"), as filed with the Securities and
Exchange Commission. The September 30, 1996 balance sheet was
derived from audited consolidated financial statements, but does
not include all disclosures required by generally accepted
accounting principles.
(2) Basis of Preparation
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (which
are of a normal recurring nature) necessary for a fair
presentation of the financial statements. The statements of
earnings for the three and six month periods ended March 31, 1997
are not necessarily indicative of the results which may be
expected for the entire year.
(3) Earnings Per Common Share and Common Share Equivalents
Earnings per share are based upon the weighted average number of
common shares and common share equivalents, if dilutive,
outstanding during the period. The only common stock equivalents
are stock options. The weighted average number of common
stock equivalents is calculated using the treasury stock method.
Net earnings per common share were calculated using 600,569
shares, and 606,681 shares, as the weighted average number of
shares outstanding for the three month period and six
month period, respectively, ended March 31, 1997.
9<PAGE>
<PAGE>
(4) Regulatory Capital Requirements
At March 31, 1997, the Bank met each of the three current minimum
regulatory capital requirements. The following table summarizes
the Bank's regulatory capital position at March 31, 1997:
<TABLE>
<CAPTION>
Amount Percent(1)
------ ----------
(Dollars in Thousands)
<S> <C> <C>
Tangible Capital:
Actual $10,376 9.75%
Required 1,597 1.50
------- -----
Excess $ 8,779 8.25%
Core capital:
Actual $10,376 9.75%
Required 3,194 3.00
------- -----
Excess $ 7,182 6.75%
Risk-Based Capital:
Actual $10,799 19.42%
Required 4,449 8.00
------- -----
Excess $ 6,350 11.42%
<FN>
______________
(1) Tangible and core capital levels are shown as a percentage of
total adjusted assets; risk-based capital levels are shown as a
percentage of risk-weighted assets.
</FN>
</TABLE>
(5) Stockholders' Equity
During the three months ended December 31, 1996, the Company
repurchased 17,000 shares of the Company's outstanding common
stock. Repurchased shares are held as treasury shares and will
be used for the issuance of shares in conjunction with the Stock
Option Plan.
During the three months ended March 31, 1997, the Company
repurchased 22,600 shares of the Company's outstanding common
stock. Repurchased shares are held as treasury shares and will
be used for the issuance of shares in conjunction with the Stock
Option Plan.
10<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND OPERATIONS
General:
The Company's net earnings are dependent primarily on its net
interest income, which is the difference between interest earned
on loans and investments, and the interest paid on interest-
bearing liabilities, primarily deposits. Net interest income is
determined by (i) the difference between the yield earned on
interest earning assets and rates paid on interest-bearing
liabilities ("interest rate spread") and (ii) the relative
amounts of interest earning assets and interest-bearing
liabilities. The Company's interest rate spread is also affected
by regulatory, economic and competitive factors that influence
interest rates, loan demand and deposit flows. The Company's net
earnings are also affected by the generation of non-interest
income, which primarily consists of fees and service charges. In
addition, net earnings are affected by the level of operating
expenses and provisions for loan losses.
The operations of financial institutions, including the Bank,
are significantly affected by prevailing economic conditions,
competition, regulatory policies, and the monetary and fiscal
policies of the U.S. Government and government agencies. Lending
activities are influenced by the demand for, and supply of
housing, competition among lenders, the level of interest rates
and the availability of funds. Deposit flows and costs of funds
are influenced by prevailing market rates of interest primarily
on competing investments, account maturities and the levels of
personal income and savings in the market area of the Bank.
Financial Condition:
Total assets increased by $460,000, or 0.43%, from $107.26
million at September 30, 1996, to $107.72 million at March 31,
1997. The increase was primarily due to an increase in the
investment portfolio of the Bank and loans receivable, net,
offset by a decrease in cash and cash equivalents and a decrease
in the mortgage-backed and related securities portfolio of the
Bank. Cash and cash equivalents totaled $4.55 million at March
31,1997, a decrease of $138,000, or 2.95%, from September 30,
1996. The Company's investment portfolio increased $1.74
million, or 6.64%, from $26.16 million at September 30, 1996, to
$27.90 million at March 31, 1997. The mortgage-backed and
related securities portfolio decreased $1.16 million, or 5.59%,
from $20.75 million at September 30, 1996, to $19.59 million at
March 31, 1997. Loans receivable, net, increased $373,000, or
0.73%, from $51.00 million at September 30, 1996 to $51.38
million at March 31, 1997. This increase was due primarily to an
increase in non-real estate lending activity. Other assets
decreased by $337,000, or 35.33% from $954,000 at September 30,
1996 to $617,000 at March 31, 1997.
Deposits increased by $620,000, or 0.77%, from $81.05
million at September 30, 1996, to $81.67 million at March 31,
1997.
Borrowings increased $795,000, from $11.90 million at
September 30, 1996, to $12.69 million at March 31, 1997. Federal
Home Loan Bank advances increased $922,000 during the six month
period ended March 31, 1997, while borrowings in the form of
Repurchase Agreements decreased $127,000 during the same six
month period.
Stockholders' equity decreased during the six months ended
March 31, 1997 by $286,000, or 2.32%, from $12.32 million at
September 30, 1996, to $12.04 million at March 31, 1997. The
decrease was a result of a $30,000 increase in the unrealized
loss, net of taxes, on the available for sale securities and
$690,000 repurchase of the Company's
11<PAGE>
<PAGE>
common stock to be used for the issuance of shares in conjunction
with the Stock Option Plan. These decreases were offset by an
increase in net earnings of $325,000, and an increase of $109,000
in the earned management recognition plan shares and the employee
stock ownership plan shares.
Net Earnings:
Net earnings for the three months ended March 31, 1997,
remained relatively unchanged from the three months ended March
31, 1996, increasing from $133,000 to $134,000, respectively.
This increase was primarily the result of an increase in
net interest income and non-interest income, offset by an
increase in non-interest expense for the period. Net earnings
for the six months ended March 31, 1997, increased $19,000, or
6.29%, compared to the six months ended March 31, 1996, from
$306,000 to $325,000, respectively. This increase was primarily
the result of an increase in net interest income and non-interest
income, offset by an increase in non-interest expense for the
period.
Net Interest Income:
Net interest income increased by $17,000, or 2.00%, for the
three months ended March 31, 1997, compared to the three months
ended March 31, 1996. The Company increased its average interest
earning assets by $8.26 million, or 8.72%, due primarily to the
increase of leveraged borrowings, while the net interest margin
decreased from 3.55% for the three months ended March 31, 1996,
to 3.33% for the three months ended March 31, 1997. Net interest
income increased by $15,000, or 0.88%, for the six months ended
March 31, 1997, compared to the six months ended March 31, 1996.
This increase was primarily due to an increase of $7.64 million
in average interest earning assets and a decrease in net interest
margin from 3.60% for the six months ended March 31, 1996, to
3.36% for the six months ended March 31, 1997.
Interest Income:
Interest income increased by $136,000, or 7.54%, from $1.81
million for the three months ended March 31, 1996, to $1.94
million for the three months ended March 31, 1997. The increase
in interest income is primarily a result of a $8.26 million
increase in average interest earning assets offset by a decrease
in the average yield on interest earning assets from 7.64% for
the three months ended March 31, 1996, to 7.55% for the three
months ended March 31, 1997. Interest income increased by
$256,000, or 7.02%, from $3.64 million for the six months ended
March 31, 1996, to $3.90 million for the three months ended March
31, 1997. The increase in interest income is primarily a result
of a $7.64 million increase in average interest earning assets
offset by a decrease in the average yield on interest earning
assets from 7.70% for the six months ended March 31, 1996, to
7.62% for the six months ended March 31, 1997.
Interest Expense:
Interest expense increased by $120,000, or 12.36%, from
$967,000 for the three months ended March 31, 1996, to $1.09
million for the three months ended March 31, 1997. The increase
in interest expense is primarily a result of a $10.59 million
increase in average interest bearing liabilities along with a
small decrease in the average cost of interest bearing
liabilities from 4.61% for the three months ended March 31, 1996,
to 4.60% for the three months ended March 31, 1997. Interest
expense increased by $241,000, or 12.42%, from $1.94 million for
the six months ended March 31, 1996, to $2.18 million for the six
months ended March 31, 1997. The increase in interest expense is
primarily a result of a $10.94 million increase in average
interest bearing liabilities along with a
12<PAGE>
<PAGE>
small increase in the average cost of interest bearing
liabilities from 4.64% for the six months ended March 31, 1996,
to 4.65% for the six months ended March 31, 1997.
Provision for Losses on Loans:
The Bank's provision for losses on loans remained unchanged
at $0 for the three months ended March 31, 1996 and the three
months ended March 31, 1997. The Bank's provision for losses on
loans remained unchanged at $0 for the six months ended March 31,
1996 and the six months ended March 31, 1997. Adjustments to the
Bank's provision for losses on loans is a result of management's
evaluation of the loan portfolio.
Non-Interest Income:
Total non-interest income increased by $46,000, or 45.47%,
from $101,000 for the three months ended March 31, 1996, to
$147,000 for the three months ended March 31, 1997. This increase
was primarily for the following reasons: (i) a $26,000 increase
in transaction account service fees; (ii) a $15,000 net increase
in the gain on the sale of securities; and, (iii) a net increase
of $5,000 in other non-interest income accounts. Total non-
interest income increased by $82,000, or 38.88%, from $212,000
for the six months ended March 31, 1996, to $294,000 for the six
months ended March 31, 1997. This increase was primarily for the
following reasons: (i) a $51,000 increase in transaction account
service fees; and (ii) a $31,000 net increase in the gain on the
sale of securities.
Non-Interest Expense:
Total non-interest expense increased by $60,000, or 8.40%,
from $717,000 for the three months ended March 31, 1996, to
$777,000 for the three months ended March 31, 1997. This
increase was primarily for the following reasons: (i)
compensation and employee benefits increased by $55,000 mainly
due to a $15,000 increase in accruals for management bonus plans,
a $7,500 increase in earned employee stock ownership plan shares
priced above original cost, a $17,000 increase in conventions,
meetings and travel expense with the remainder caused by normal
employee pay raises and insurance benefits; (ii) a $42,000
decrease in federal deposit insurance premiums due to the
capitalization of the SAIF fund at September 30, 1996; (iii) a
$28,000 increase in advertising expense; (iv) a $17,000 decrease
in legal and other professional fees; (v) $22,500 increase in the
provision for loss on non-interest earning assets; and (vi) an
increase of $13,500 in various other non-interest expense
categories. Total non-interest expense increased by $61,000, or
4.35%, from $1.40 million for the six months ended March 31,
1996, to $1.46 million for the six months ended March 31, 1997.
This increase was primarily for the following reasons: (1)
compensation and employee benefits increased by $98,500 mainly
due to a $25,000 increase in accruals for management bonus plans,
a $13,000 increase in earned employee stock ownership shares
priced above original cost, a $16,000 increase in conventions,
meetings and travel expense with the remainder caused by normal
employee pay raises and insurance benefits; (ii) a $5,000
increase in occupancy expense; (iii) a $51,000 decrease in
federal deposit insurance premiums due to the capitalization of
the SAIF fund at September 30, 1996; (iv) a $38,000 increase in
advertising expense; (v) a $54,000 decrease in legal and other
professional fees; (vi) $22,500 increase in the provision for
loss on non-interest earning assets; and, (vii) an increase of
$2,000 in various other non-interest expense categories.
Income Tax Expense:
Income tax expense increased by $1,000, or 1.12%, from
$92,000 for the three months ended March 31, 1996, to $93,000 for
the three months ended March 31, 1997. This increase
13<PAGE>
<PAGE>
was primarily the result of increased pre-tax income for the
three months ended March 31, 1997. Income tax expense increased
by $17,000, or 8.16%, from $209,000for the six months ended March
31, 1996, to $226,000 for the six months ended March 31, 1997.
This was primarily the result of increased pre-tax income for the
six months ended March 31, 1997.
Liquidity and Capital Resources:
The Company's primary source of funds for operations are
deposits from its market area; principal and interest payments on
loans, securities available for sale and securities held to
maturity; proceeds from the sale or maturation of securities,
advances from the FHLB of Des Moines, and retail repurchase
agreements. While maturities and scheduled amortization of loans
and securities are predictable sources of funds, deposit flows
and mortgage prepayments are greatly influenced by general
interest rates, economic conditions, and competition.
The primary investing activities of the Company are the
origination and purchase of mortgage loans, the origination of
consumer loans and the purchase of securities. During the three
months ended March 31, 1997, the Bank's loan originations and
purchases totaled $4.08 million. The Company purchased
investment securities and mortgage-backed and related securities
during the three months ended March 31, 1997 of $4.59 million.
During the six months ended March 31, 1997, the Bank's loan
originations and purchases totaled $8.31 million. The Company
purchased investment securities and mortgage-backed and related
securities during the six months ended March 31, 1997 of $9.09
million.
The primary financing activity of the Bank is the attraction
of deposits. During the three months ended March 31, 1997, the
Bank experienced a net decrease in deposits of $2.08 million.
During the six months ended March 31, 1997, the Bank experienced
a net increase in deposits of $620,000.
The Bank has utilized retail repurchase agreements as a
source of funding. At March 31, 1997, repurchase agreements
totaled $4.83 million compared to $4.95 million at September 30,
1996.
The Bank has the ability to borrow additional funds from the
FHLB of Des Moines by pledging additional securities. At March
31, 1997, the Bank had an undrawn borrowing capacity with the
FHLB for $14.33 million. At March 31, 1997, the Bank had
borrowings outstanding from the FHLB of Des Moines for $7.87
million. Other sources of liquidity include the sale of
securities held in the available for sale portfolio.
The Bank is required to maintain minimum levels of liquid
assets as defined by OTS regulations. This requirement, which
may be varied by the OTS depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-
term borrowings. The required minimum liquidity ratio is
currently 5.00% and the short-term liquidity ratio is 1.00%. The
Bank's average daily liquidity ratio for the month of March 1997
was 17.29% and its short-term liquidity for the same month was
10.50%.
The Company's most liquid assets are cash and cash
equivalents, which consist of short-term highly liquid
investments with original maturities of less than three months
that are readily convertible to known amounts of cash and
interest-bearing deposits. The level of these assets is
dependent on the Company's operating, financing and investing
activities during any given period. At March 31, 1997, cash and
cash equivalents totaled $4.55 million.
The Bank anticipates that it will have sufficient funds
available to meet its current commitments. At March 31, 1997,
the Bank had commitments to originate or purchase loans of
$691,500. Certificates of deposits which are scheduled to mature
in one year or less at March 31, 1997, totaled $29.00 million.
Management believes that a significant portion of such deposits
will remain with the Bank.
14<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
None.
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.
On January 21, 1997, the Annual Meeting of the Stockholders was
held for the election of two directors of the Company. There
were outstanding and entitled to vote 700,566 shares of the
common stock of the Company.
There were represented at the Annual Meeting in person or by
proxy the holders of 654,115 shares of the Company's common
stock, representing 93.37% of the total votes eligible to be
cast, constituting more than a majority of the outstanding shares
entitled to vote.
The following is a record of the votes cast:
<TABLE>
<CAPTION>
Vote
-------------------------------
Against or
For withheld Abstain
--- ---------- -------
<S> <C> <C> <C>
Election of directors:
Walter R. Fankhanel 653,865 250 N/A
James R. Sharp 653,865 250 N/A
</TABLE>
ITEM 5: Other Information.
On May 12, 1997 the registrant announced that it is commencing a
stock repurchase program to acquire up to 5% of the Company's
outstanding common stock, or approximately 35,028 shares, over a
twelve month period. The Company's press release is attached
hereto as Exhibit 99.1 and incorporated by reference herein.
ITEM 6: Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 Financial Data Schedule
Exhibit 99.1 Form of Press Release dated May 12, 1997
(b) Form 8-K
On January 21, 1997, the Company filed a Current Report of Form
8-K announcing the change in Registrant's Certifying Accountant.
15<PAGE>
<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.
FIRST FEDERAL BANCORPORATION
Registrant
Date: May 7, 1997 /s/ William R. Belford
----------- ----------------------
William R. Belford, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: May 7, 1997 /s/ Dennis M. Vorgert
----------- ----------------------
Dennis M. Vorgert, Vice President
(Principal Financial Officer)
16
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,670,371
<INT-BEARING-DEPOSITS> 2,877,208
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 46,913,848
<INVESTMENTS-CARRYING> 575,033
<INVESTMENTS-MARKET> 576,180
<LOANS> 51,799,697
<ALLOWANCE> 423,165
<TOTAL-ASSETS> 107,716,418
<DEPOSITS> 31,666,754
<SHORT-TERM> 12,692,907
<LIABILITIES-OTHER> 1,320,552
<LONG-TERM> 0
<COMMON> 0
0
7,006
<OTHER-SE> 12,029,199
<TOTAL-LIABILITIES-AND-EQUITY> 107,716,418
<INTEREST-LOAN> 2,315,023
<INTEREST-INVEST> 1,535,688
<INTEREST-OTHER> 48,433
<INTEREST-TOTAL> 3,899,144
<INTEREST-DEPOSIT> 1,850,963
<INTEREST-EXPENSE> 2,178,287
<INTEREST-INCOME-NET> 1,720,857
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 33,660
<EXPENSE-OTHER> 1,463,443
<INCOME-PRETAX> 551,196
<INCOME-PRE-EXTRAORDINARY> 226,935
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 325,339
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
<YIELD-ACTUAL> 1.68
<LOANS-NON> 5,910
<LOANS-PAST> 100,922
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 453,460
<CHARGE-OFFS> 38,551
<RECOVERIES> 8,256
<ALLOWANCE-CLOSE> 423,165
<ALLOWANCE-DOMESTIC> 393,475
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 29,690
</TABLE>
PRESS RELEASE
-------------
FIRST FEDERAL BANCORPORATION
ANNOUNCES STOCK REPURCHASE PROGRAM
Bemidji, Minnesota ... May 12, 1997; First Federal
Bancorporation announced today that it is commencing a stock
repurchase program to acquire up to approximately 35,028 shares
of the Corporation's common stock, which represents approximately
5% of the outstanding common stock. The program will be
dependent upon market conditions and there is no guarantee as to
the exact number of shares to be repurchased by the Corporation.
William R. Belford, President of the Corporation, stated that the
Board of Directors has authorized the repurchase program, which
is expected to be completed within the next twelve months. Mr.
Belford explained that the Board of Directors considers the
Corporation's common stock to be an attractive investment. It is
expected that a reduction in the amount of the Corporation's
outstanding stock would have the effect of increasing the
Corporation's per share earnings.
According to Mr. Belford, the repurchases generally would be
effected through open market purchases, although he did not rule
out the possibility of unsolicited negotiated transactions or
other types of repurchases.
