<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, 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 March 31, 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
March 31, 1998 and September 30, 1996 3
Consolidated Statements of Earnings for
the Three Months and Six Months Ended
March 31, 1998 and 1997 5
Consolidated Statement of Stockholders'
Equity for the Six Months Ended
March 31, 1998 6
Consolidated Statements of Cash Flows for
the Six Months Ended March 31, 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>
March 31 September 30
1998 1997
---------- ------------
ASSETS
<S> <C> <C>
Cash $ 1,602,035 $ 1,623,991
Interest-bearing deposits with banks 3,160,258 2,975,412
------------ ------------
Cash and cash equivalents 4,762,293 4,599,403
Securities available for sale:
Mortgage-backed and related securities
(amortized cost of $19,277,740 and
$18,826,523) 19,339,790 18,834,293
Other securities (amortized cost of
$18,843,187 and $28,789,361) 18,857,691 28,756,991
------------ ------------
Total securities available for sale 38,197,481 47,591,284
------------ ------------
Securities held to maturity:
Mortgage-backed and related securities
(estimated market value of $473,087
and $535,513) 470,671 529,964
Other securities (estimated market
value of $10,471,480 and $0 10,497,849 0
------------ ------------
Total securities held to maturity 10,968,520 529,964
------------ ------------
Loans receivable, net 53,653,381 53,588,542
Federal Home Loan Bank stock, at cost 851,100 700,500
Foreclosed real estate, net 643 263,186
Accrued interest receivable 833,528 886,263
Premises and equipment, net 1,873,505 1,894,958
Other assets 2,019,027 1,437,938
------------ ------------
Total assets $113,159,478 $111,492,038
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 83,035,031 $ 83,003,312
Repurchase Agreements 2,385,029 4,696,904
Federal Home Loan Bank Advances 12,996,890 9,534,298
Advance payments by borrowers for
taxes and insurance 152,981 163,876
Accrued interest payable 590,293 594,920
Accrued expenses and other liabilities 1,669,193 1,557,702
------------ ------------
Total liabilities 100,829,417 99,551,012
</TABLE>
(continued)
3<PAGE>
<PAGE>
<TABLE>
<CAPTION>
March 31 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 6,074,582 6,109,390
Retained earnings, subject to certain
restrictions 8,294,324 8,015,142
Unrealized gain (loss) on securities
available for sale, net of tax effect 45,167 (14,515)
Unearned employee stock ownership plan
shares (448,500) (483,000)
Unearned shares management recognition
plan (236,109) (283,331)
Treasury stock, at cost, 129,117
shares (1,409,386) (1,409,386)
------------ ------------
Total stockholders' equity 12,330,061 11,941,026
------------ ------------
Total liabilities and stock-
holders' equity $113,159,478 $111,492,038
============ ============
</TABLE>
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,
--------------------- --------------------
1998 1997 1998 1997
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $1,208,727 $1,153,057 $2,456,047 $2,315,023
Mortgage-backed and related
securities 297,339 318,075 603,183 650,834
Other securities 578,904 443,078 1,103,325 884,854
Interest-bearing deposits with banks 20,785 18,152 22,794 24,017
Other 13,641 12,090 26,560 24,416
---------- ---------- ---------- ----------
2,119,396 1,944,452 4,211,909 3,899,144
---------- ---------- ---------- ----------
Interest expense:
Deposits 933,366 914,534 1,900,138 1,850,963
Borrowings 263,899 172,536 497,619 327,324
---------- ---------- ---------- ----------
1,197,265 1,087,070 2,397,757 2,178,287
---------- ---------- ---------- ----------
Net interest income 922,131 857,382 1,814,152 1,720,857
Provision for loan losses 30,500 0 60,500 0
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 891,631 857,382 1,753,652 1,720,857
---------- ---------- ---------- ----------
Noninterest income:
Fees and service charges 139,736 108,507 303,914 225,858
Gain on sales of securities 0 17,337 0 33,660
(Loss) gain on sales of foreclosed
real estate 508 779 (34,605) 1,460
Other 9,189 20,477 30,296 32,804
---------- ---------- ---------- ----------
Total noninterest income 149,433 147,100 299,605 293,782
---------- ---------- ---------- ----------
Noninterest expense:
Compensation and employee benefits 432,117 408,502 817,018 784,255
Occupancy 123,659 128,258 258,793 254,269
Federal deposit insurance premiums 13,098 13,359 26,141 58,919
Data processing 20,616 17,301 39,685 36,364
Advertising 28,224 47,170 48,890 78,177
Other 157,942 162,957 254,940 251,459
---------- ---------- ---------- ----------
Total noninterest expense 775,656 777,547 1,445,467 1,463,443
---------- ---------- ---------- ----------
Earnings before income tax
expense 265,408 226,935 607,790 551,196
Income tax expense 97,190 92,997 225,824 225,857
---------- ---------- ---------- ----------
Net earnings $ 168,218 $ 133,938 $ 381,966 $ 325,339
========== ========== ========== ==========
Earnings per share:
Basic $ 0.22 $ 0.16 $ 0.50 $ 0.39
---------- ---------- ---------- ----------
Diluted $ 0.20 $ 0.16 $ 0.46 $ 0.37
---------- ---------- ---------- ----------
</TABLE>
5<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Gain (loss) on
Additional 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 381,966
Change in unrealized gain (loss)
on securities available for
sale, net of tax effect 59,682
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 39,567
------ ---------- ---------- ---------
March 31, 1998 $9,983 6,074,582 8,294,324 45,167
====== ========== ========== =========
<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 381,966
Change in unrealized gain (loss)
on securities available for
sale, net of tax effect 59,682
Stock split (837)
Purchase and retirement of
common stock (173,065)
Earned management recognition
plan shares 47,222 47,222
Earned employee stock ownership
plan shares 34,500 74,067
--------- --------- ----------- -----------
March 31, 1998 $(448,500) (236,109) (1,409,386) 12,330,061
========= ========= =========== ===========
</TABLE>
6<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended March 31,
----------------------------
1998 1997
---------- -----------
<S> <C> <C>
Operating activities:
Net earnings $ 381,966 $ 325,339
Adjustments to reconcile net earnings to net
cash provided (used) by operations:
Provision for loan losses 60,500 0
Depreciation 164,509 132,232
Amortization of premium and discount, net (52,130) (2,880)
Decrease (increase) in accrued interest
receivable 52,735 (34,144)
Increase (decrease) in accrued interest payable (4,627) (14,386)
Gain on sale of securities 0 (33,660)
Loss (gain) on sale of foreclosed real estate 34,605 (1,460)
Earned ESOP shares priced above original cost 39,567 27,240
Decrease in Unearned ESOP Shares 34,500 34,500
Decrease in Unamortized Restricted Stock 47,222 47,222
(Increase) decrease in other assets (622,561) 393,550
Increase (decrease) in accrued expenses
and other liabilities 111,491 (681,038)
----------- -----------
Net cash provided (used) by operating
activities 247,777 192,515
----------- -----------
Investing activities:
Net increase in loans receivable (125,339) (373,427)
Purchases of:
Other securities - available for sale (4,761,685) (7,748,892)
Other securities - held to maturity (14,997,813) 0
Mortgage-backed & related securities -
available for sale (3,296,117) (1,337,759)
FHLB stock (150,600) 0
Premises and equipment (143,056) (52,512)
Proceeds from sales of:
Other securities - available for sale 0 235,163
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 14,717,664 5,810,991
Other securities - held to maturity 4,500,000 0
Principal payments on:
Mortgage-backed & related securities
- available for sale 2,887,703 1,982,447
Mortgage-backed & related securities
- held to maturity 58,779 60,296
Net decrease (increase) in foreclosed real
estate 227,938 (30,239)
----------- -----------
Net cash used by investing activities (1,082,526) (1,083,086)
----------- -----------
</TABLE>
7<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended March 31,
----------------------------
1998 1997
---------- -----------
<S> <C> <C>
Financing activities:
Net increase in deposits $ 31,719 $ 620,235
Purchase of Treasury Stock, net 0 (689,920)
Purchase and retirement of common stock (173,065) 0
Purchase of fractional shares on stock split (837) 0
(Decrease) increase in advance payments by
borrowers for taxes and insurance (10,895) 26,970
Net increase in Federal Home Loan Bank advances 3,462,592 992,160
Decrease in Repurchase Agreements (2,311,875) (127,131)
----------- -----------
Net cash provided by financing activities 997,639 752,314
----------- -----------
Increase (decrease) in cash and cash
equivalents 162,890 (138,257)
Cash and cash equivalents, beginning of period 4,599,403 4,685,836
----------- -----------
Cash and cash equivalents, end of period $ 4,762,293 $ 4,547,579
========== ===========
Supplemental cash flow disclosures:
Cash paid for interest $ 2,402,384 $ 2,192,673
Cash paid for income taxes 427,000 85,000
Supplemental noncash flow disclosures:
Transfer of loans to real estate $ 0 $ 43,700
</TABLE>
8<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 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 six month period ended March
31, 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 March
31, 1998 and 1997:
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1998 March 31, 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 $168,218 769,568 $0.22 $133,938 825,361 $0.16
===== =====
Effect of dilutive securities:
MRP shares 16,856 10,536
Stock options 54,101 24,626
-------- ------- -------- -------
Diluted earnings per share,
income available to common
stockholders $168,218 840,525 $0.20 $133,938 860,523 $0.16
-------- ------- ----- -------- ------- -----
</TABLE>
9<PAGE>
<PAGE>
Following is information about the computation of the
earnings per share data for the six months ended March
31, 1998 and 1997:
<TABLE>
<CAPTION>
Six months ended Six months ended
March 31, 1998 March 31, 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 $381,966 770,002 $0.50 $325,339 840,552 $0.39
===== =====
Effect of dilutive securities:
MRP shares 16,064 9,056
Stock options 51,309 20,045
-------- ------- -------- -------
Diluted earnings per share,
income available to common
stockholders $381,966 837,375 $0.46 $325,339 869,653 $0.37
-------- ------- ----- -------- ------- -----
</TABLE>
(4) Regulatory Capital Requirements
At March 31, 1998, the Bank met each of the current minimum
regulatory capital requirements. The following table summarizes
the Bank's regulatory capital position at March 31, 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 9.93% $11,166
Tangible capital,
and ratio to adjusted total assets 9.90% $11,130 2.00% $2,248
Tier 1 (core) capital,
and ratio to adjusted total assets 9.90% $11,130 4.00% $4,495 5.00% $5,619
Tier 1 capital,
and ratio to risk-weighted assets 18.92% $11,130 4.00% $2,353 6.00% $3,529
Total risk-based capital,
and ratio to risk-weighted assets 19.67% $11,567 8.00% $4,706 10.00% $5,882
Total assets $112,437
Adjusted total assets $112,377
Risk-weighted assets $ 58,819
</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 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 $1.67 million, or 1.50%, from
$111.49 million at September 30, 1997, to $113.16 million at
March 31, 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,
and other assets, partially offset by a decrease in foreclosed
real estate. Cash and cash equivalents totaled $4.76 million at
March 31, 1998, an increase of $163,000, or 3.54%, from
September 30, 1997. The Company's securities portfolio
increased $1.05 million, or 2.17%, from $48.12 million at
September 30, 1997, to $49.17 million at March 31, 1998.
Securities held-to-maturity increased to $10.97 million at March
31, 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 $580,000, or 40.41% from
$1.44 million at September 30, 1997 to $2.02 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.
Deposits remained relatively unchanged from $83.00 million
at September 30, 1997, to $83.04 million at March 31, 1998.
11<PAGE>
<PAGE>
Borrowings increased $1.15 million, or 8.09%, from $14.23
million at September 30, 1997, to $15.38 million at March 31,
1998. Federal Home Loan Bank advances increased $3.46 million
during the six month period ended March 31, 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 $2.31 million during the same
six month period.
Stockholders' equity increased during the six months ended
March 31, 1998 by $390,000, or 3.26%, from $11.94 million at
September 30, 1997, to $12.33 million at March 31, 1998. The
increase was primarily a result of net earnings of $382,000, a
$60,000 increase in the unrealized gain, net of taxes, on the
available for sale securities and an increase of $121,000 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 March 31, 1998,
increased $34,000, or 25.59%, from the three months ended March
31, 1997, from $134,000 to $168,000, respectively. This
increase was primarily the result of an increase in net interest
income, partially offset by an increase in the provision for
loan loss during the period. Net earnings for the six months
ended March 31, 1998, increased $57,000, or 17.41%, compared to
the six months ended March 31, 1997, from $325,000 to $382,000,
respectively. This increase was primarily due to an increase in
net interest income, and 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 $65,000, or 7.55%, for
the three months ended March 31, 1998, compared to the three
months ended March 31, 1997. The Company increased its average
interest earning assets by $7.01 million, or 6.81%, due
primarily to the increase in leveraged borrowings, while the net
interest margin increased from 3.33% for the three months ended
March 31, 1997, to 3.40% for the three months ended March 31,
1998. Net interest income increased by $93,000, or 5.42%, for
the six months ended March 31, 1998, compared to the six months
ended March 31, 1997. This increase was primarily due to an
increase of $6.64 million in average interest earning assets
partially offset by a decrease in net interest margin from 3.36%
for the six months ended March 31, 1997, to 3.34% for the six
months ended March 31, 1998.
Interest Income:
Interest income increased by $175,000, or 9.00%, from
$1.94 million for the three months ended March 31, 1997, to
$2.12 million for the three months ended March 31, 1998. The
increase in interest income is primarily a result of a $7.01
million increase in average interest earning assets, along with
an increase in the average yield on interest earning assets from
7.55% for the three months ended March 31, 1997, to 7.82% for
the three months ended March 31, 1998. Interest income
increased by $313,000, or 8.02%, from $3.90 million for the six
months ended March 31, 1997, to $4.21 million for the six months
ended March 31, 1998. This increase in interest income is
primarily a result of a $6.64 million increase in average
interest earning assets, along with an increase in the average
yield on interest earning assets from 7.62% for the six months
ended March 31, 1997, to 7.75% for the six months ended March
31, 1998.
12<PAGE>
<PAGE>
Interest Expense:
Interest expense increased by $110,000, or 10.14%, from
$1.09 million for the three months ended March 31, 1997, to
$1.20 million for the three months ended March 31, 1998. The
increase in interest expense is primarily a result of a $6.94
million increase in average interest bearing liabilities along
with an increase in the average cost of interest bearing
liabilities from 4.60% for the three months ended March 31,
1997, to 4.79% for the three months ended March 31, 1998.
Interest expense increase by $219,000, or 10.08%, from $2.18
million for the six months ended March 31, 1997, to $2.40
million for the six months ended March 31, 1998. This increase
in interest expense is primarily a result of a $6.82 million
increase in average interest bearing liabilities along with an
increase in the average cost of interest bearing liabilities
from 4.65% for the six months ended March 31, 1997 to 4.78% for
the six months ended March 31, 1998.
Provision for Loan Losses:
The Bank's provision for loan losses increased $31,000 for
the three months ended March 31, 1998 from $0 for the three
months ended March 31, 1997. The Bank's provision for loan
losses increased $61,000 for the six months ended March 31, 1998
from $0 for the six months ended March 31, 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 $2,000, or 1.59%,
from $147,000 for the three months ended March 31, 1997, to
$149,000 for the three months ended March 31, 1998. This
increase was primarily due to a $9,000 increase in loan related
processing fees, a $10,000 increase in deposit account related
fees and service charges and a $12,000 increase in other service
related fees, primarily ATM access fees. These increases were
offset by a $17,300 decrease in the gains on the sales of
securities and an $11,000 decrease in other non-interest income,
primarily due to a $11,000 nonrecurring item received in the
three months ended March 31, 1997. Total non-interest income
increased by $6,000, or 1.98%, from $294,000 for the six months
ended March 31, 1997, to $300,000 for the six months ended March
31, 1998. This increase was primarily due to a $15,000 increase
in loan related service fees, a $37,000 increase in deposit
account related services fees and charges, a $26,000 increase in
other service related fees, primarily ATM access fees and a
$16,000 decrease in real estate owned maintenance expense.
These items, resulting in an increase in non-interest income,
were offset by a $34,000 decrease in gains on the sales of
securities, a $36,000 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 six months ended March 31, 1997.
Non-Interest Expense:
Total non-interest expense decreased by $2,000, or 0.24%,
from $778,000 for the three months ended March 31, 1997, to
$776,000 for the three months ended March 31, 1998. This
decrease was primarily for the following reasons: (i) a $19,000
decrease in advertising expenses, (ii) a $5,000 decrease in
occupancy expense and (iii) a $9,000 net decrease in other non-
interest expenses. These decreases were offset by (i) a $24,000
increase in compensation and employee benefits, mainly due to an
increase in earned employee stock ownership plan shares priced
above original cost; (ii) a $3,000 increase in data processing
expenses and (iii) a $4,000 increase in professional fees. Total
non-interest expense decreased by $18,000, or 1.23%, from $1.46
million for the six months ended March 31, 1997, to $1.45
million for the six months ended March 31, 1998. This decrease
was primarily for the following reasons: (i) a $33,000 decrease
in federal deposit insurance premiums and (ii) a $29,000
decrease in advertising expenses. These decreases were offset
by (i) a $33,000 increase in compensation and employee
13<PAGE>
<PAGE>
benefits, mainly due to an increase in earned employee stock
ownership plan shares priced above original cost, (ii) a $5,000
increase in occupancy expense, (iii) a $3,000 increase in data
processing expenses, and (iv) a $3,000 net increase in other
non-interest expenses.
Income Tax Expense:
Income tax expense increased by $4,000, or 4.58%, from
$93,000 for the three months ended March 31, 1997, to $97,000
for the three months ended March 31, 1998. Income tax expense
remained relatively unchanged for the six months ended March 31,
1997 and March 31, 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 March 31, 1998, the Bank's loan originations and
purchases totaled $3.34 million. The Company purchased
investment securities and mortgage-backed and related securities
during the three months ended March 31, 1998 of $10.52 million.
Other securities held-to-maturity increased to $10.97 million at
March 31, 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 six
months ended March 31, 1998, the Bank experienced a net increase
in deposits of $32,000.
The Bank has utilized retail repurchase agreements as a
source of funding. At March 31, 1998, repurchase agreements
totaled $2.39 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
March 31, 1998, the Bank had an undrawn borrowing capacity with
the FHLB for $6.89 million. At March 31, 1998, the Bank had
borrowings outstanding from the FHLB of Des Moines for $13.00
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. The required minimum liquidity ratio is
currently 4.00%. The Bank's average daily liquidity ratio for
the month of March 31, 1998 was 29.29%.
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, 1998, cash and
cash equivalents totaled $4.76 million.
14<PAGE>
<PAGE>
The Bank anticipates that it will have sufficient funds
available to meet its current commitments. At March 31, 1998,
the Bank had commitments to originate or purchase loans of $2.53
million. Certificates of deposits which are scheduled to mature
in one year or less at March 31, 1998, totaled $32.33 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.
On January 20, 1998, the Annual Meeting of the
Stockholders was held for the election of two
directors of the Company. There were outstanding and
entitled to vote 665,538 shares of the common stock of
the Company.
There were represented at the Annual Meeting in
person or by proxy the holders of 585,483 shares of
the Company's common stock, representing 87.97% 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:
Vote
-------------------------------
Against or
For withheld Abstain
--- ---------- -------
Election of directors:
William R. Belford 584,939 544 N/A
Ralph T. Smith 584,914 569 N/A
ITEM 5: Other Information.
ITEM 6: Exhibits and Reports on Form 8-K.
Exhibit 27.1 - Financial Data Schedule
Exhibit 27.2 - Restated Financial Data Schedule
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: May __, 1998 /s/ William R. Belford
----------------- ----------------------
William R. Belford, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: May __, 1998 /s/ Dennis M. Vorgert
---------------- ----------------------
Dennis M. Vorgert, Vice President
17
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,602,035
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<INVESTMENTS-MARKET> 10,944,567
<LOANS> 54,090,024
<ALLOWANCE> 436,643
<TOTAL-ASSETS> 113,159,478
<DEPOSITS> 83,035,031
<SHORT-TERM> 15,381,919
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0
9,983
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<INTEREST-DEPOSIT> 1,900,138
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<LOAN-LOSSES> 60,500
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<EXPENSE-OTHER> 1,445,467
<INCOME-PRETAX> 607,790
<INCOME-PRE-EXTRAORDINARY> 607,790
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 381,966
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.46
<YIELD-ACTUAL> 1.70
<LOANS-NON> 194,213
<LOANS-PAST> 72,215
<LOANS-TROUBLED> 3,256
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<ALLOWANCE-OPEN> 427,256
<CHARGE-OFFS> 58,295
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<ALLOWANCE-CLOSE> 436,644
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<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<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
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<DEPOSITS> 31,666,754
<SHORT-TERM> 12,692,907
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<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
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<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
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<LOANS-NON> 5,910
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