<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 June 30, 1998
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 June 30, 1998
- ----- ----------------------------
Common Stock, $.01 par value 998,275<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
----
Consolidated Balance Sheets at
June 30, 1998 and September 30, 1997 3
Consolidated Statements of Earnings for
the Three Months and Nine Months Ended
June 30, 1998 and 1997 5
Consolidated Statement of Stockholders'
Equity for the Nine Months Ended
June 30, 1998 6
Consolidated Statements of Cash Flows for
the Nine Months Ended June 30, 1998 and
1997 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 16
Item 2: Changes in Securities 16
Item 3: Defaults Upon Senior Securities 16
Item 4: Submission of Matters to a Vote of
Security Holders 16
Item 5: Other Materially Important Events 16
Item 6: Exhibits and Reports on Form 8-K 16
Signatures 17
2<PAGE>
<PAGE>
PART 1 - FINANCIAL STATEMENTS
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30 September 30
1998 1997
---------- ------------
ASSETS
<S> <C> <C>
Cash $ 1,742,769 $ 1,623,991
Interest-bearing deposits with banks 4,340,168 2,975,412
------------ ------------
Cash and cash equivalents 6,082,937 4,599,403
Securities available for sale:
Mortgage-backed and related
securities (amortized cost of
$17,800,915 and $18,826,523) 17,891,906 18,834,293
Other securities (amortized cost of
$22,808,470 and $28,789,361) 22,824,902 28,756,991
------------ ------------
Total securities available for sale 40,716,808 47,591,284
------------ ------------
Securities held to maturity:
Mortgage-backed and related
securities (estimated market value
of $356,847 and $535,513) 355,898 529,964
Other securities (estimated market
value of $12,483,730 and $0 12,498,165 0
------------ ------------
Total securities held to maturity 12,854,063 529,964
------------ ------------
Loans receivable, net 55,999,086 53,588,542
Federal Home Loan Bank stock, at cost 898,800 700,500
Foreclosed real estate, net 142,866 263,186
Accrued interest receivable 981,213 886,263
Premises and equipment, net 1,924,834 1,894,958
Other assets 1,714,508 1,437,938
------------ ------------
Total assets $121,315,115 $111,492,038
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 84,852,654 $ 83,003,312
Repurchase Agreements 3,492,959 4,696,904
Federal Home Loan Bank Advances 17,974,075 9,534,298
Advance payments by borrowers for
taxes and insurance 114,549 163,876
Accrued interest payable 559,718 594,920
Accrued expenses and other liabilities 1,640,411 1,557,702
------------ ------------
Total liabilities 108,634,366 99,551,012
</TABLE>
(continued)
3<PAGE>
<PAGE>
<TABLE>
<CAPTION>
June 30 September 30
1998 1997
---------- ------------
<S> <C> <C>
Stockholders' Equity:
Common stock ($.01 par value):
authorized 4,000,000 shares;
issued 998,275 and 1,008,849 shares $ 9,983 $ 6,726
Additional paid-in-capital 6,133,305 6,109,390
Retained earnings, subject to certain
restrictions 8,527,215 8,015,142
Unrealized gain (loss) on securities
available for sale, net of tax effect 63,380 (14,515)
Unearned employee stock ownership plan
shares (431,250) (483,000)
Unearned shares management recognition
plan (212,498) (283,331)
Treasury stock, at cost, 129,117
shares (1,409,386) (1,409,386)
------------ ------------
Total stockholders' equity 12,680,749 11,941,026
------------ ------------
Total liabilities and
stockholders' equity $121,315,115 $111,492,038
============ ============
</TABLE>
4<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNING
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $1,225,252 $1,159,908 $3,681,299 $3,474,931
Mortgage-backed and related
securities 301,326 317,896 904,509 968,730
Other securities 529,070 482,444 1,632,395 1,367,298
Interest-bearing deposits with banks 19,394 11,672 42,188 35,689
Other 13,095 12,225 39,655 36,641
---------- ---------- ---------- ----------
2,088,137 1,984,145 6,300,046 5,883,289
---------- ---------- ---------- ----------
Interest expense:
Deposits 960,521 927,597 2,860,659 2,778,560
Borrowings 234,441 207,557 732,060 534,881
---------- ---------- ---------- ----------
1,194,962 1,135,154 3,592,719 3,313,441
---------- ---------- ---------- ----------
Net interest income 893,175 848,991 2,707,327 2,569,848
Provision for loan losses 35,000 0 95,500 0
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 858,175 848,991 2,611,827 2,569,848
---------- ---------- ---------- ----------
Noninterest income:
Fees and service charges 155,797 119,761 459,711 345,619
Gain on sales of securities 0 2,215 0 35,875
(Loss) gain on sales of foreclosed
real estate 518 7,129 (34,087) 8,589
Other 19,849 11,616 50,145 44,420
---------- ---------- ---------- ----------
Total noninterest income 176,164 140,721 475,769 434,503
---------- ---------- ---------- ----------
Noninterest expense:
Compensation and employee benefits 374,999 377,068 1,192,017 1,161,323
Occupancy 112,864 129,419 371,657 383,688
Federal deposit insurance premiums 13,289 13,476 39,430 72,395
Data processing 17,088 17,822 56,773 54,186
Advertising 38,280 35,005 87,170 113,182
Other 103,002 98,015 357,942 349,474
---------- ---------- ---------- ----------
Total noninterest expense 659,522 670,805 2,104,989 2,134,248
---------- ---------- ---------- ----------
Earnings before income tax
expense 374,817 318,907 982,607 870,103
Income tax expense 141,926 129,970 367,750 355,827
---------- ---------- ---------- ----------
Net earnings $ 232,891 $ 188,937 $ 614,857 $ 514,276
========== ========== ========== ==========
Earnings per share:
Basic $ 0.30 $ 0.24 $ 0.80 $ 0.62
---------- ---------- ---------- ----------
Diluted $ 0.28 $ 0.23 $ 0.73 $ 0.60
---------- ---------- ---------- ----------
</TABLE>
5<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Gain (loss)
Additional on Securities
Common Paid-in Retained Available for
Stock Capital Earnings sale, net
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
September 30, 1997 $6,726 6,109,390 8,015,142 (14,515)
Net earnings 614,857
Change in unrealized gain (loss)
on securities available for
sale, net of tax effect 77,895
Stock split 3,328 (4,165)
Purchase and retirement of
common stock (71) (70,210) (102,784)
Earned management recognition
plan shares
Earned employee stock ownership
plan shares 98,290
------ ---------- ---------- ---------
June 30, 1998 $9,983 6,133,305 8,527,215 63,380
====== ========== ========== =========
<CAPTION>
Unearned
Shares Unearned
Employee Shares
Stock Management Total
Ownership Recognition Treasury Stockholders'
Plan Plan Stock Equity
--------- ----------- --------- -------------
<S> <C> <C> <C> <C>
September 30, 1997 $(483,000) (283,331) (1,409,386) 11,941,026
Net earnings 614,857
Change in unrealized gain (loss)
on securities available for
sale, net of tax effect 77,895
Stock split (837)
Purchase and retirement of
common stock (173,065)
Earned management recognition
plan shares 70,833 70,833
Earned employee stock ownership
plan shares 51,750 150,040
---------- --------- ----------- -----------
June 30, 1998 $ (431,250) (212,498) (1,409,386) 12,680,749
========== ========= =========== ===========
</TABLE>
6<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended June 30,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Operating activities:
Net earnings $ 614,857 $ 514,276
Adjustments to reconcile net earnings to net
cash provided (used) by operations:
Provision for loan losses 95,500 0
Depreciation 217,466 198,170
Amortization of premium and discount, net (65,856) (6,819)
Increase in accrued interest receivable (94,950) (19,499)
(Decrease) increase in accrued interest payable (35,202) 4,042
Gain on sale of securities 0 (35,875)
Loss (gain) on sale of foreclosed real estate 34,087 (8,589)
Earned ESOP shares priced above original cost 98,290 42,765
Decrease in Unearned ESOP Shares 51,750 51,750
Decrease in Unamortized Restricted Stock 70,833 70,833
(Increase) decrease in other assets (330,699) 310,543
Increase (decrease) in accrued expenses
and other liabilities 82,709 (511,688)
----------- -----------
Net cash provided by operating activities 738,785 609,909
----------- -----------
Investing activities:
Net increase in loans receivable (2,506,044) (1,875,276)
Purchases of:
Other securities - available for sale (10,507,620) (10,752,822)
Other securities - held to maturity (22,497,188) 0
Mortgage-backed & related securities -
available for sale (3,774,158) (1,887,486)
FHLB stock (198,300) 0
Premises and equipment (247,342) (119,031)
Proceeds from sales of:
Other securities - available for sale 0 483,700
Mortgage-backed & related securities -
available for sale 0 160,979
Mortgage-backed & related securities -
held to maturity 0 209,867
Proceeds from maturities or calls of:
Other securities - available for sale 16,500,028 9,040,466
Other securities - held to maturity 10,000,000 0
Principal payments on:
Mortgage-backed & related securities
- available for sale 4,853,108 2,852,953
Mortgage-backed & related securities
- held to maturity 174,087 83,927
Net decrease (increase) in foreclosed real
estate 86,233 (52,736)
----------- -----------
Net cash used by investing activities (8,117,196) (1,855,459)
----------- -----------
</TABLE>
7<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Ended June 30,
----------------------------
1998 1997
---------- -----------
<S> <C> <C>
Financing activities:
Net increase in deposits $ 1,849,342 $ 1,300,291
Purchase of Treasury Stock, net 0 (874,975)
Purchase and retirement of common stock (173,065) (326,875)
Purchase of fractional shares on stock split (837) 0
Decrease in advance payments by borrowers
for taxes and insurance (49,327) (50,308)
Net increase in Federal Home Loan Bank advances 8,439,777 3,314,635
Decrease in Repurchase Agreements (1,203,945) (420,091)
----------- -----------
Net cash provided by financing activities 8,861,945 2,942,677
----------- -----------
Increase in cash and cash equivalents 1,483,534 1,697,127
Cash and cash equivalents, beginning of period 4,599,403 4,685,836
----------- -----------
Cash and cash equivalents, end of period $ 6,082,937 $ 6,382,963
=========== ===========
Supplemental cash flow disclosures:
Cash paid for interest $ 3,627,919 $ 3,309,399
Cash paid for income taxes 432,000 107,000
Supplemental noncash flow disclosures:
Transfer of loans to real estate $ 140,869 $ 120,514
Loans receivable on other real estate sold 131,250 0
</TABLE>
8<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1998
(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, 1997 of First Federal Bancorporation (the "Company"), as
filed with the Securities and Exchange Commission. The September 30,
1997 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
nine month period ended June 30, 1998 are not necessarily indicative
of the results which may be expected for the entire year.
(3) Earnings Per Common Share and Common Share Equivalents
The FASB has issued Statement No 128, Earnings per Share, which
supersedes APB Opinion No. 15. Statement No. 128 requires the
presentation of earnings per share by all entities that have common
stock or potential common stock, such as options, warrants and
convertible securities, outstanding that trade in a public market.
Those entities that have only common stock outstanding are required to
present basic earnings per-share amounts. All other entities are
required to present basic and diluted per-share amounts. Diluted
per-share amounts assume the conversion, exercise or issuance of all
potential common stock instruments unless the effect is to reduce the
loss or increase the income per common share from continuing
operations.
The Company initially applied Statement No. 128 for the three months
ended December 31, 1997 and (as required by the Statement) has
restated all per share information for the prior years to conform to
the Statement.
Following is information about the computation of the earnings per
share data for the three months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1998 June 30, 1997
-------------------------------- --------------------------------
Per Share Per Share
Numerator Denominator Amount Numerator Denominator Amount
---------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share, income
available to common stockholders $232,891 772,160 $0.30 $188,937 792,961 $0.24
===== =====
Effect of dilutive securities:
MRP shares 16,228 10,853
Stock options 51,855 23,216
-------- ------- -------- -------
Diluted earnings per share,
income available to common
stockholders $232,891 840,243 $0.28 $188,937 827,030 $0.23
-------- ------- ----- -------- ------- -----
</TABLE>
9<PAGE>
<PAGE>
Following is information about the computation of the
earnings per share data for the nine months ended June 30, 1998
and 1997:
<TABLE>
<CAPTION>
Nine months ended Nine months ended
June 30, 1998 June 30, 1997
-------------------------------- --------------------------------
Per Share Per Share
Numerator Denominator Amount Numerator Denominator Amount
---------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share, income
available to common stockholders $614,857 770,721 $0.80 $514,276 824,597 $0.62
===== =====
Effect of dilutive securities:
MRP shares 16,119 9,655
Stock options 51,491 21,442
-------- ------- -------- -------
Diluted earnings per share,
income available to common
stockholders $614,857 838,331 $0.73 $514,276 855,694 $0.60
-------- ------- ----- -------- ------- -----
</TABLE>
(4) Regulatory Capital Requirements
At June 30, 1998, the Bank met each of the current minimum
regulatory capital requirements. The following table summarizes
the Bank's regulatory capital position at June 30, 1998:
<TABLE>
<CAPTION>
Minimum for Capital Minimum to be
Actual Adequacy Purposes Well Capitalized
---------------- -------------------- ----------------
Ratio Amount Ratio Amount Ratio Amount
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity
and ratio to total assets 9.05% $10,908
Tangible capital,
and ratio to adjusted total assets 9.02% $10,857 2.00% $2,408
Tier 1 (core) capital,
and ratio to adjusted total assets 9.02% $10,857 4.00% $4,817 5.00% $6,021
Tier 1 capital,
and ratio to risk-weighted assets 17.47% $10,857 4.00% $2,486 6.00% $3,730
Total risk-based capital,
and ratio to risk-weighted assets 18.17% $11,296 8.00% $4,973 10.00% $6,216
Total assets $120,508
Adjusted total assets $120,422
Risk-weighted assets $ 62,162
</TABLE>
(5) Stockholders' Equity
During the three months ended December 31, 1997, the
Company repurchased 7,028 shares under the Company's repurchase
program which was approved on May 12, 1997. This purchase
completed that repurchase program. The repurchased shares were
retired by the Company.
On December 18, 1997, the Company paid a three for two
stock split in the form of a 50% stock dividend to stockholders
of record as of December 5, 1997. Share and per share amounts
have been adjusted to give affect to the three for two stock
split as of October 1, 1996.
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.
Year 2000 Issues:
The Company's Year 2000 Action Plan was presented to the
Board of Directors on September 24, 1997. The Year 2000 Plan
includes the following phases: awareness, assessment, upgrading,
implementation and testing. The Year 2000 Project Team has
determined that the main operating system and the teller system
must be upgraded or replaced. The Year 2000 Team has evaluated
new systems which are Year 2000 compliant. Based upon current
findings, the Company has estimated $300,000 for capital
expenditures in Fiscal 1998 relating to Year 2000 software and
hardware issues. The Year 2000 Project Team is currently
upgrading the operating system and the teller system. The
upgrading of the operating system and the teller system is
scheduled to be completed in August. The Year 2000 Plan is
scheduled for completion by December 31, 1998 with progress
reported to the Board of Directors.
Financial Condition:
Total assets increased by $9.82 million, or 8.81%, from
$111.49 million at September 30, 1997, to $121.31 million at
June 30, 1998. The increase was primarily due to an increase in
cash and cash equivalents, the securities portfolio of the Bank,
including mortgaged-backed and related securities, loans
receivable and other assets, partially offset by a decrease in
foreclosed real estate. Cash and cash equivalents totaled $6.08
million at June 30, 1998, an increase of $1.48 million, or
32.25%, from September 30, 1997. The Company's securities
portfolio increased $5.45 million, or 11.23%, from $48.12
million at September 30, 1997, to $53.57 million at June 30,
1998. Securities held-to-maturity increased to $12.85 million
at June 30, 1998. The Bank purchased callable fixed rate agency
bonds with maturity dates of up to 10 years with proceeds of
Federal Home Loan Bank advances. The maturity dates on the
advances coincide with the call dates of the bonds. The Bank
has the ability and the intent to hold these bonds to maturity,
accordingly, the Bank has classified these bonds as
'Held-to-Maturity.' Other assets increased by $277,000, or
19.23% from $1.44 million at September 30, 1997 to $1.71 million
at March 31, 1998. The increase was primarily due to an
increase in assets held in trust to settle obligations under
various compensation arrangements and prepaid expenses.
11<PAGE>
<PAGE>
Deposits increased $1.85 million, or 1.39%, from $83.00
million at September 30, 1997, to $84.85 million at June 30,
1998.
Borrowings increased $7.24 million, or 50.84%, from $14.23
million at September 30, 1997, to $21.47 million at June 30,
1998. Federal Home Loan Bank advances increased $8.44 million
during the nine month period ended June 30, 1998. The increase
in Federal Home Loan Bank advances was primarily used for the
purchase of callable fixed rate agency bonds accounted for as
'Held-to-Maturity' securities. Borrowings in the form of
repurchase agreements decreased $1.20 million during the same
nine month period.
Stockholders' equity increased during the nine months ended
June 30, 1998 by $740,000, or 6.19%, from $11.94 million at
September 30, 1997, to $12.68 million at June 30, 1998. The
increase was primarily a result of net earnings of $615,000, a
$78,000 increase in the unrealized gain, net of taxes, on the
available for sale securities and an increase of $220,000 in the
earned management recognition plan shares and the employee stock
ownership plan shares. This increase was offset by a $173,000
repurchase and retirement of the Company's common stock.
Net Earnings:
Net earnings for the three months ended June 30, 1998,
increased $44,000, or 23.26%, from the three months ended June
30, 1997, from $189,000 to $233,000, respectively. This
increase was primarily the result of an increase in net interest
income and an increase in noninterest income, partially offset
by an increase in the provision for loan loss during the period.
Net earnings for the nine months ended June 30, 1998, increased
$101,000, or 19.56%, compared to the nine months ended June 30,
1997, from $514,000 to $615,000, respectively. This increase
was primarily due to an increase in net interest income, an
increase in noninterest income along with a decrease in
noninterest expense for the period. This increase was partially
offset by an increase in the provision for loan loss during the
period.
Net Interest Income:
Net interest income increased by $44,000, or 5.20%, for the
three months ended June 30, 1998, compared to the three months
ended June 30, 1997. The Company increased its average interest
earning assets by $6.03 million, or 5.77%, due primarily to the
increase in leveraged borrowings, while the net interest margin
decreased from 3.25% for the three months ended June 30, 1997,
to 3.24% for the three months ended June 30, 1998. Net interest
income increased by $137,000, or 5.35%, for the nine months
ended June 30, 1998, compared to the nine months ended June 30,
1997. This increase was primarily due to an increase of $6.44
million in average interest earning assets partially offset by a
decrease in net interest margin from 3.33% for the nine months
ended June 30, 1997, to 3.31% for the nine months ended June 30,
1998.
Interest Income:
Interest income increased by $104,000, or 5.24%, from $1.98
million for the three months ended June 30, 1997, to $2.09
million for the three months ended June 30, 1998. The increase
in interest income is primarily a result of a $6.03 million
increase in average interest earning assets, partially offset by
a decrease in the average yield on interest earning assets from
7.60% for the three months ended June 30, 1997, to 7.59% for the
three months ended June 30, 1998. Interest income increased by
$417,000, or 7.08%, from $5.88 million for the nine months ended
June 30, 1997, to $6.30 million for the nine months ended June
30, 1998. This increase in interest income is primarily a
result of a $6.44 million increase in average interest earning
assets, along with an increase in the average yield on interest
earning assets from 7.62% for the nine months ended June 30,
1997, to 7.70% for the nine months ended June 30, 1998.
12<PAGE>
<PAGE>
Interest Expense:
Interest expense increased by $60,000, or 5.27%, from $1.14
million for the three months ended June 30, 1997, to $1.20
million for the three months ended June 30, 1998. The increase
in interest expense is primarily a result of a $5.18 million
increase in average interest bearing liabilities along with an
increase in the average cost of interest bearing liabilities
from 4.70% for the three months ended June 30, 1997, to 4.71%
for the three months ended June 30, 1998. Interest expense
increased by $279,000, or 8.43%, from $3.31 million for the nine
months ended June 30, 1997, to $3.59 million for the nine months
ended June 30, 1998. This increase in interest expense is
primarily a result of a $6.27 million increase in average
interest bearing liabilities along with an increase in the
average cost of interest bearing liabilities from 4.66% for the
nine months ended June 30, 1997 to 4.76% for the nine months
ended June 30, 1998.
Provision for Loan Losses:
The Bank's provision for loan losses increased $35,000 for
the three months ended June 30, 1998 from $0 for the three
months ended June 30, 1997. The Bank's provision for loan
losses increased $95,500 for the nine months ended June 30, 1998
from $0 for the nine months ended June 30, 1997. Adjustments to
the Bank's provision for loan losses is a result of management's
ongoing evaluation of the loan portfolio.
Non-Interest Income:
Total non-interest income increased by $35,000, or 25.19%,
from $141,000 for the three months ended June 30, 1997, to
$176,000 for the three months ended June 30, 1998. This increase
was primarily due to a $21,000 increase in loan related
processing fees, a $3,000 increase in deposit account related
fees and service charges, a $12,000 increase in other service
related fees, primarily ATM access fees and an $8,000 increase
in other noninterest income, primarily commissions on the sale
of credit life and disability insurance. These increases were
partially offset by a $2,000 decrease in the gains on the sales
of securities and a $7,000 decrease in the gains on the sale of
foreclosed real estate. Total non-interest income increased by
$41,000, or 9.50%, from $435,000 for the nine months ended June
30, 1997, to $476,000 for the nine months ended June 30, 1998.
This increase was primarily due to a $36,000 increase in loan
related service fees, a $40,000 increase in deposit account
related services fees and charges, a $38,000 increase in other
service related fees, primarily ATM access fees, a $4,000
increase in commissions on the sale of credit life and
disability insurance and a $20,000 decrease in real estate owned
maintenance expense. These items, resulting in an increase in
non-interest income, were partially offset by a $36,000 decrease
in gains on the sales of securities, a $43,000 decrease in the
gains on the sales of foreclosed real estate and an $18,000
decrease in other non-interest income, primarily due to a
$11,000 nonrecurring item received in the nine months ended June
30, 1997.
Non-Interest Expense:
Total non-interest expense decreased by $11,000, or 1.68%,
from $671,000 for the three months ended June 30, 1997, to
$660,000 for the three months ended June 30, 1998. This
decrease was primarily for the following reasons: (i) a $17,000
decrease in occupancy expenses, primarily a $13,000 decrease in
depreciation on fixed assets; (ii) a $13,000 decrease in
professional fees, and (iii) a $2,000 decrease in compensation
and employee benefits. These decreases were partially offset by
(i) a $3,000 increase in advertising expense; and, (ii) an
$18,000 increase in other noninterest expenses, primarily a
$7,000 increase in office supplies, postage and telephone
expenses and a $3,000 increase in repossession expenses. Total
non-interest expense decreased by $29,000, or 1.37%, from $2.13
million for the nine months
13<PAGE>
<PAGE>
ended June 30, 1997, to $2.10 million for the nine months ended
June 30, 1998. This decrease was primarily for the following
reasons: (i) a $33,000 decrease in federal deposit insurance
premiums; (ii) a $26,000 decrease in advertising expenses;
(iii) $17,000 decrease in professional fees; and, (iv) a $12,000
decrease in occupancy expense. These decreases were partially
offset by (i) a $30,000 increase in compensation and employee
benefits, mainly due to an increase in earned employee stock
ownership plan shares priced above original cost, (ii) a $14,000
increase in office supplies, postage and telephone expense;
(iii) a $3,000 increase in repossession expenses; (iv) a $3,000
increase in data processing expenses, and (iv) a $9,000 net
increase in other non-interest expenses.
Income Tax Expense:
Income tax expense increased by $12,000, or 9.20%, from
$130,000 for the three months ended June 30, 1997, to $142,000
for the three months ended June 30, 1998. Income tax expense
increased by $12,000, or 3.35%, from $356,000 for the nine
months ended June 30, 1997 to $368,000 for the nine months ended
June 30, 1998.
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 June 31, 1998, the Bank's loan originations and
purchases totaled $7.68 million. The Company purchased
investment securities and mortgage-backed and related securities
during the three months ended June 30, 1998 of $13.72 million.
Other securities held-to-maturity increased to $12.85 million at
June 30, 1998. The Bank purchased callable fixed rate agency
bonds with maturity dates of up to 10 years with proceeds of
Federal Home Loan Bank advances. The maturity dates on the
advances coincide with the call dates of the bonds. The Bank
has the ability and the intent to hold these bonds to maturity,
accordingly, the Bank has classified these bonds as
'Held-to-Maturity.
The primary financing activity of the Bank is the
attraction of deposits and secured borrowings. During the nine
months ended June 30, 1998, the Bank experienced a net increase
in deposits of $1.85 million, or 2.23%, from $83.00 million at
September 30, 1997 to $84.85 million at June 30, 1998.
The Bank has utilized retail repurchase agreements as a
source of funding. At June 30, 1998, repurchase agreements
totaled $3.49 million compared to $4.70 million at September 30,
1997.
The Bank has the ability to borrow additional funds from
the FHLB of Des Moines by pledging additional securities. At
June 30, 1998, the Bank had an undrawn borrowing capacity with
the FHLB for $3.92 million. At June 30, 1998, the Bank had
borrowings outstanding from the FHLB of Des Moines for $17.97
million. The increase in Federal Home Loan Bank advances was
primarily used for the purchase of callable fixed rate agency
bonds accounted for as 'Held-to-Maturity' securities. 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.
14<PAGE>
<PAGE>
The required minimum liquidity ratio is currently 4.00%.
The Bank's average daily liquidity ratio for the month of June
30, 1998 was 32.34%.
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 June 30, 1998, cash and
cash equivalents totaled $6.08 million.
The Bank anticipates that it will have sufficient funds
available to meet its current commitments. At June 30, 1998,
the Bank had commitments to originate or purchase loans of $2.18
million. Certificates of deposits which are scheduled to mature
in one year or less at June 30, 1998, totaled $33.34 million.
Management believes that a significant portion of such deposits
will remain with the Bank.
15<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.
None.
ITEM 5: Other Information.
ITEM 6: Exhibits and Reports on Form 8-K.
(a) The following exhibits are being filed herewith:
Exhibit 27.1 Financial Data Schedule for the
Nine Months Ended June 30, 1998
Exhibit 27.2 Restated Financial Data Schedule
for the Nine Months Ended June 30,
1997
(b) Form 8-K
None.
16<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: August 11, 1998 /s/ William R. Belford
--------------- ----------------------
William R. Belford, President
and Chief Executive Officer
(Duly Authorized Officer)
Date: August 11, 1998 /s/ Dennis M. Vorgert
--------------- ----------------------
Dennis M. Vorgert, Vice President
(Principal Financial Officer)
17
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<PERIOD-END> JUN-30-1998
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<INCOME-PRETAX> 982,607
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<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,949,617
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0
6,826
<OTHER-SE> 12,012,378
<TOTAL-LIABILITIES-AND-EQUITY> 110,589,488
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<INTEREST-DEPOSIT> 2,778,560
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<INTEREST-INCOME-NET> 2,569,848
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<INCOME-PRETAX> 870,103
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