<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-25704
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 offices) (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 December 31, 1999
- ---------------------------- --------------------------------
Common Stock, $.01 par value 1,423,269
<PAGE>
<PAGE>
FIRST FEDERAL BANCORPORATION
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements Page
----
Consolidated Balance Sheets at
December 31, 1999 and September 30,
1999 3
Consolidated Statements of Earnings for
the Three Months Ended December
31, 1999 and 1998 5
Consolidated Statement of Stockholders'
Equity for the Three Months Ended
December 31, 1999 6
Consolidated Statements of Cash Flows for
the Three Months Ended December 31,
1999 and 1998 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>
December 31 September 30
1999 1999
---------- ------------
Assets
<S> <C> <C>
Cash $ 2,911,196 $ 2,194,436
Interest-bearing deposits with banks 5,954,319 2,344,936
------------ ------------
Cash and cash equivalents 8,865,515 4,539,372
Securities available for sale:
Mortgage-backed and related
securities (amortized cost of
$14,509,705 and $15,485,677) 14,088,901 15,201,045
Other securities (amortized cost of
$14,568,273 and $16,438,806) 14,138,782 16,071,076
------------ ------------
Total securities available for sale 28,227,683 31,272,121
------------ ------------
Securities held to maturity:
Mortgage-backed and related
securities (estimated market value
of $193,817 and $232,128) 196,719 234,297
Other securities (estimated market
value of $31,241,523 and
$31,940,310) 33,574,760 33,574,335
------------ ------------
Total securities held to maturity 33,771,479 33,808,632
------------ ------------
Loans receivable, net 57,950,950 47,256,941
Federal Home Loan Bank stock, at cost 1,371,700 1,248,000
Foreclosed real estate, net 102,548 188,300
Accrued interest receivable 1,177,854 1,075,399
Premises and equipment, net 2,105,544 2,123,863
Other assets 1,027,017 777,687
------------ ------------
Total assets $134,600,290 $132,290,315
============ ============
Liabilities and Stockholders' Equity
Deposits $ 86,650,388 $ 88,110,758
Repurchase Agreements 5,810,741 4,701,492
Federal Home Loan Bank Advances 27,431,558 24,956,845
Advance payments by borrowers for
taxes and insurance 110,444 186,123
Accrued interest payable 679,218 577,585
Accrued expenses and other liabilities 752,574 696,151
------------ ------------
Total liabilities 121,434,923 119,228,954
</TABLE>
(continued)
3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
December 31, September 30
1999 1999
---------- ------------
<S> <C> <C>
Stockholders' Equity:
Common stock ($.01 par value):
authorized 4,000,000 shares;
issued 1,423,269 and 1,431,069
shares 14,233 14,311
Additional paid-in-capital 5,944,352 5,971,251
Retained earnings, subject to certain
restrictions 9,516,424 9,260,477
Accumulated other comprehensive income,
unrealized loss on securities
available for sale, net of tax effect (501,673) (335,848)
Unearned employee stock ownership plan
shares (327,750) (345,000)
Unearned shares management recognition
plan (70,833) (94,444)
Treasury stock, at cost, 289,956 and
289,605 shares (1,997,209) (1,989,226)
Deferred compensation payable in
common stock 587,823 579,840
------------ ------------
Total stockholders' equity 13,165,367 13,061,361
------------ ------------
Total liabilities and
stockholders' equity $134,600,290 $132,290,315
============ ============
</TABLE>
4
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<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
-----------------
1999 1998
----------------------
<S> <C> <C>
Interest income:
Loans receivable $1,214,312 $1,203,906
Mortgage-backed and related
securities 231,547 265,459
Other securities 794,941 677,504
Interest-bearing deposits with banks 28,695 12,752
Other 20,740 19,278
-----------------------
2,290,235 2,178,899
-----------------------
Interest expense:
Deposits 910,867 971,878
Borrowings 431,496 322,827
-----------------------
1,342,363 1,294,705
-----------------------
Net interest income 947,872 884,194
Provision for (recovery of) loan losses 2,835 (41,292)
-----------------------
Net interest income after
provision for (recovery of) loan
losses 945,037 925,486
-----------------------
Noninterest income:
Fees and service charges 158,763 145,128
Gain on sales of foreclosed real estate 38,435 132
Other 26,910 8,149
-----------------------
Total noninterest income 224,108 153,409
-----------------------
Noninterest expense:
Compensation and employee benefits 402,832 395,610
Occupancy 131,348 122,044
Federal deposit insurance premiums 12,981 12,524
Data processing 19,465 23,195
Advertising 33,536 22,773
Other 117,940 111,152
-----------------------
Total noninterest expense 718,102 687,298
-----------------------
Earnings before income tax
expense 451,043 391,597
Income tax expense 173,178 158,766
-----------------------
Net earnings $ 277,865 $ 232,831
========== ==========
Earnings per share:
Basic $ 0.24 $ 0.20
---------- ----------
Diluted $ 0.24 $ 0.19
---------- ----------
Comprehensive income $ 112,040 $ 79,325
========== ==========
</TABLE>
5
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<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Comprehensive Common Paid-in Retained Comprehensive
Income Stock Capital earnings Income (Loss)
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, September 30,
1999 $14,311 5,971,251 9,260,477 (335,848)
Comprehensive income:
Net income $ 277,865 277,865
Change in net
unrealized gain (loss)
on securities
available for sale,
net of tax effect (165,825) (165,825)
---------
Comprehensive Income $ 112,040
=========
Increase in deferred
compensation payable
in common stock
Purchase and
retirement of
common stock (78) (34,554) (21,918)
Amortization of
management
recognition plan
shares
Earned employee
stock ownership
plan shares 7,655
----------------------------------------
Balance, December
31, 1999 $14,233 5,944,352 9,516,424 (501,673)
========================================
<PAGE>
<CAPTION>
Unearned Deferred
Employee Unearned Comp
Stock Management Payable in Total
Ownership Recognition Treasury Common Stockholders'
Plan Shares Plan Shares Stock Stock Equity
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1999 (345,000) (94,444) (1,989,226) 579,840 13,061,361
Comprehensive income:
Net income 277,865
Change in
unrealized gain (loss)
on securities
available for sale,
net of tax effect (165,825)
Comprehensive Income
Increase in deferred
compensation payable
in common stock (7,983) 7,983 0
Purchase and
retirement of
common stock (56,550)
Amortization of
management
recognition plan
shares 23,611 23,611
Earned employee
stock ownership
plan shares 17,250 24,905
--------------------------------------------------------------
Balance, December
31, 1999 $(327,750) (70,883) (1,997,209) 587,823 13,165,367
==============================================================
</TABLE>
6
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FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
-------------------
1999 1998
------------ ------------
<S> <C> <C>
Operating activities:
Net earnings $ 277,865 $ 232,831
Adjustments to reconcile net earnings to net
cash provided by operations:
Provision for (recovery of) loan losses 2,835 (41,292)
Depreciation 68,233 66,205
Amortization of premium and discount, net (25,295) (8,730)
Increase in accrued interest receivable (102,455) (73,028)
Increase in accrued interest payable 101,633 23,373
Gain on sales of foreclosed real estate (38,435) (129)
Earned ESOP shares priced above original cost 7,655 19,406
Decrease in Unearned ESOP Shares 17,250 17,250
Decrease in Unamortized Restricted Stock 23,611 23,611
Increase in Deferred Comp Payable in Common Stock 7,983 9,034
(Increase) decrease in other assets (134,095) 39,765
Increase (decrease) in accrued expenses and
other liabilities 56,423 (6,301)
----------- -----------
Net cash provided by operating activities 264,208 301,995
----------- -----------
Investing activities:
Net (increase) decrease in loans receivable (696,844) 1,076,914
Purchases of:
Other securities - available for sale (4,176,688) (1,993,875)
Other securities - held to maturity 0 (14,084,531)
Mortgage-backed & related securities -
available for sale 0 (2,255,555)
FHLB stock (123,700) (71,300)
Premises and equipment (50,914) (114,022)
Proceeds from maturities or calls of:
Other securities - available for sale 5,988,301 4,385,398
Other securities - held to maturity 0 9,000,000
Principal payments on:
Mortgage-backed & related securities
- available for sale 976,525 2,332,207
Mortgage-backed & related securities
- held to maturity 37,688 10,603
Net decrease (increase) in foreclosed real
estate 124,187 (146,758)
----------- -----------
Net cash provided by (used in)
investing activities 2,078,555 (1,860,919)
----------- -----------
</TABLE>
(continued)
7
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended December 31,
------------------
1999 1998
------------ ------------
<S> <C> <C>
Financing activities:
Net (decrease) increase in deposits $(1,460,370) $ 2,240,057
Purchase and retirement of common stock (56,550) 0
Purchase of treasury stock (7,983) (9,034)
Decrease in advance payments by borrowers
for taxes and insurance (75,679) (67,320)
Federal Home Loan Bank advances 52,900,000 11,906,614
Repayment of FHLB advances (50,425,287) (9,982,581)
Increase (decrease) in other borrowed money 1,109,249 (28,259)
----------- -----------
Net cash provided by financing activities 1,983,380 4,059,477
----------- -----------
Increase in cash and cash equivalents 4,326,143 2,500,553
Cash and cash equivalents, beginning of period 4,539,372 4,290,188
----------- -----------
Cash and cash equivalents, end of period $ 8,865,515 $ 6,790,741
=========== ===========
Supplemental cash flow disclosures:
Cash paid for interest on deposits $ 891,345 $ 957,805
Cash paid for interest on borrowings 349,385 322,827
Cash paid for income taxes 110,000 209,000
Supplemental noncash flow disclosures:
Transfer of loans to real estate $ 0 $ 153,648
Loans receivable on other real estate sold $ 46,500 $ 0
</TABLE>
8
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<PAGE>
FIRST FEDERAL BANCORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
December 31, 1999
(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, 1999 of First Federal
Bancorporation (the "Company"), as filed with the
Securities and Exchange Commission. The September 30,
1999 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
statement of income for the three month period ended
December 31, 1999 is not necessarily indicative of the
results which may be expected for the entire year.
(3) Earnings Per Common Share and Common Share Equivalents
Following is information about the computation of the
earnings per share data for the three months ended
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three months ended Three months ended
December 31, 1999 December 31, 1998
-------------------------------- --------------------------------
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 $277,865 1,138,780 $0.24 $232,831 1,174,034 $0.20
===== =====
Effect of dilutive securities:
MRP shares 1,722 11,305
Stock options 14,330 52,262
------------------- --------------------
Diluted earnings per share,
income available to common
stockholders $277,865 1,154,832 $0.24 $232,831 1,237,601 $0.19
============================= =============================
</TABLE>
(4) Regulatory Capital Requirements
At December 31, 1999, the Bank met each of the current
minimum regulatory capital requirements. The following table
summarizes the Bank's regulatory capital position at December
31, 1999:
9
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<PAGE>
<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 7.98% $10,539
Tangible capital,
and ratio to adjusted total assets 8.31% $11,048 2.00% $2,659
Tier 1 (core) capital,
and ratio to adjusted total assets 8.31% $11,048 4.00% $5,317 5.00% $6,647
Tier 1 capital,
and ratio to risk-weighted assets 17.31% $11,048 4.00% $2,554 6.00% $3,830
Total risk-based capital,
and ratio to risk-weighted assets 18.04% $11,518 8.00% $5,107 10.00% $6,384
Total assets $132,074
Adjusted total assets $132,937
Risk-weighted assets $ 63,838
</TABLE>
(5) Stockholders' Equity
During the three months ended December 31, 1999, the
Company repurchased 7,800 shares under the Company's repurchase
program which was approved on September 3, 1998. The
repurchased shares were retired by the Company.
During the three months ended December 31, 1999, the
Company approved a stock repurchase program to acquire up to
142,326 shares of the Company's common stock which represented
10.0% of the outstanding common stock.
(6) Comprehensive Income
Financial Accounting Standards Board Statement No. 130
requires that all items that are components of comprehensive
income be reported in a financial statement that is displayed
with the same prominence as other financial statements.
Comprehensive income is defined as the change in equity (net
assets) of a business enterprise during a period from
transactions and other events and circumstances from nonowner
sources. It includes all changes in equity during a period
except those resulting from investments by owners and
distributions to owners.
10
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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 Readiness Disclosure:
The Year 2000 ("Y2K") issue is the result of computer
programs using a two-digit format, as opposed to four digits, to
indicate the year. It was anticipated that such computer
systems would be unable to intrepret dates beyond the year 1999,
which could cause a system failure or other computer errors,
leading to disruptions in operations. The Company and its
subsidiary, First Federal Bank (the 'Bank') has not experienced
any problems as a result of the date change to the year 2000.
The Bank continues to monitor the status of its commercial
customers to determine the potential for loss in relation to
these customers as the result of year 2000 problems.
Financial Condition:
Total assets increased by $2.31 million, or 1.75%, from
$132.29 million at September 30, 1999, to $134.60 million at
December 31, 1999. The increase was primarily due to an
increase in cash and cash equivalents, loans receivable, and
other assets, partially offset by a decrease in the securities
portfolio of the Bank, including mortgage-backed and related
securities. Cash and cash equivalents totaled $8.87 million at
December 31, 1999, an increase of $4.33 million, or 95.30%, from
September 30, 1999. This increase was primarily due to an
increase in short-term time certificates and an increase in cash
to accomodate customer needs during the rollover to the year
2000. Due to an increase in loan demand, loans receivable, net,
increased $694,000, or 1.21%, from $57.26 million at September
30, 1999 to $57.95 million at December 31, 1999. Other assets
increased by $371,000, or 6.86% from $5.41 million at September
30, 1999 to $5.78 million at December 31, 1999. The Company's
securities portfolio decreased $3.08 million, or 4.74%, from
$65.08 million at September 30, 1999, to $62.00 million at
December 31, 1999. Securities available-for-sale decreased
$3.04 million, or 9.74%, from $31.27 million at September 30,
1998, to $28.23 million at December 31, 1999.
Deposits decreased by $1.46 million, or 1.66%, from $88.11
million at September 30, 1999, to $86.65 million at December 31,
1999.
11
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<PAGE>
Borrowings increased $3.58 million, or 12.08%, from $29.66
million at September 30, 1999, to $33.24 million at December 31,
1999. Federal Home Loan Bank advances increased $2.47 million,
or 9.92%, from $24.96 million at September 30, 1999, to $27.43
million at December 31, 1999. The Company continues to use
leveraged borrowings to generate additional income from the
spread between the borrowing rate and the rate on the
investments purchased with the borrowed funds. Borrowings in
the form of repurchase agreements increased $1.11 million, or
23.59%, from $4.70 million at September 30, 1999 to $5.81
million at December 31, 1999. Repurchase agreements are
primarily issued to local government units.
Stockholders' equity increased during the three months
ended December 31, 1999 by $104,000, or 0.80%, from $13.06
million at September 30, 1999, to $13.17 million at December 31,
1999. The increase was primarily a result of net income of
$278,000 and an increase of $49,000 in the earned management
recognition plan shares and the employee stock ownership plan
shares. This increase was partially offset by a $166,000
decrease in the net unrealized loss on securities
available-for-sale, net of tax effect, and $57,000 in the
purchase and retirement of common stock.
Net Income:
Net income for the three months ended December 31, 1999,
increased $45,000, or 19.34%, from the three months ended
December 31, 1999, from $233,000 to $278,000, respectively.
This increase was primarily the result of an increase in net
interest income and noninterest income, partially offset by an
increase in noninterest expenses and the change in the provision
for (recovery of) loan losses between periods.
Net Interest Income:
Net interest income increased by $64,000, or 7.20%, for
the three months ended December 31, 1999, compared to the three
months ended December 31, 1998. The Company increased its
average interest earning assets by $7.65 million, or 6.39%,
while the net interest margin increased from 2.93% for the three
months ended December 31, 1998, to 2.95% for the three months
ended December 31, 1999. The primary reason for this increase
in net interest income during the periods was a 19 basis point
decrease in the average cost of interest bearing liabilities,
which was partially offset by a 9 basis point decrease in the
average yield on interest earning assets.
Interest Income:
Interest income increased by $111,000, or 5.11%, from
$2.18 million for the three months ended December 31, 1998, to
$2.29 million for the three months ended December 31, 1999. The
increase in interest income is primarily a result of a $7.65
million increase in average interest earning assets, partially
offset by a decrease in the average yield on interest earning
assets from 7.22% for the three months ended December 31, 1998,
to 7.13% for the three months ended December 31, 1999. The
primary reason for the decrease in the average yield on interest
earning assets was a 13 basis point decrease in the average
yield on loans.
Interest Expense:
Interest expense increased by $48,000, or 3.68%, from
$1.29 million for the three months ended December 31, 1998, to
$1.34 million for the three months ended December 31, 1999. The
increase in interest expense is primarily a result of an $8.78
million increase in average interest bearing liabilities,
partially offset by a decrease in the average cost of interest
bearing liabilities from 4.64% for the three months ended
December 31, 1998, to 4.45% for the three months ended December
31, 1999. The relatively low rate environment has resulted in a
32
12
<PAGE>
<PAGE>
basis point decrease in the average cost of deposits, while the
average cost of other borrowings increased 9 basis points.
Provision for Loan Losses:
The Bank's provision for loan losses was $3,000 for the
three months ended December 31, 1999, compared to a recovery of
$41,000 for the three months ended December 31, 1998.
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 $71,000, or 46.09%,
from $153,000 for the three months ended December 31, 1998, to
$224,000 for the three months ended December 31, 1999. This
increase was primarily due to a $38,000 increase in the gain on
sales of foreclosed real estate; a $14,000 increase in fees and
service charges, primarily due to a $22,000 increase in deposit
related fees, partially offset by a $8,000 decrease in loan
related fees, and a $19,000 increase in other noninterest
income, primarily due to an increase in credit life and
disability insurance commissions and commissions on the sales of
non-deposit related products.
Non-Interest Expense:
Total non-interest expense increased by $31,000, or 4.48%,
from $687,000 for the three months ended December 31, 1998, to
$718,000 for the three months ended December 31, 1999. This
increase was primarily for the following reasons: (i) a $7,000
increase in compensation and employee benefits; (ii) a $9,000
increase in occupancy expense; (iii) an $11,000 increase in
advertising; and (iv) a $7,000 increase in other non-interest
expenses. These increases were partially offset by a $4,000
decrease in data processing expenses.
Income Tax Expense:
Income tax expense increased by $14,000, or 9.08%, from
$159,000 for the three months ended December 31, 1998, to
$173,000 for the three months ended December 31, 1999. The
increases in income tax expense were due to an increase in net
income before income tax expense for each period in comparison
to the same period in the prior year.
Asset and Liability Management:
The Bank seeks to maximize its net interest margin within
an acceptable level of interest rate risk. Interest rate risk
can be defined as the change in the Bank's net portfolio value
resulting from favorable or unfavorable movements in interest
rates. Interest rate risk, or sensitivity, arises when the
maturity or repricing characteristics of assets differ
significantly from the maturity or repricing characteristics of
liabilities.
In the banking industry, a traditional measurement of
interest rate sensitivity is known as "gap" analysis, which
measures the cumulative differences between the amounts of
assets and liabilities maturing or repricing at various time
intervals. The following table sets forth the Bank's interest
rate repricing gaps for selected maturity periods at December
31, 1999 (in thousands):
13
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Rate Sensitive Period
-----------------------------------------------
1-180 181-365 1-2 Over 2
Days Days Years Years Total
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Earning assets:
Loans
Fixed-rate 1,976 2,129 3,784 14,557 22,446
Variable-rate 18,313 10,206 852 6,069 35,440
Securities
Fixed-rate (1) 2,937 627 955 14,221 18,740
Variable-rate 45,472 300 1,000 46,772
------------------------------------------------
68,698 13,262 6,591 34,847 123,398
------------------------------------------------
Interest-bearing liabilities:
Time deposits 22,088 11,965 10,564 8,889 53,506
NOW and money market deposits (2) 2,314 2,347 20,365 25,026
Savings deposits (2) 552 552 7,037 8,141
Borrowings 32,543 668 32 33,243
------------------------------------------------
Total interest-bearing liabilities 57,497 15,532 10,596 36,291 119,916
------------------------------------------------
Incremental asset (liability) gap 11,201 (2,270) (4,005) (1,444) 3,482
------------------------------------------------
Cumulative asset (liability) gap 11,201 8,931 4,926 3,482 3,482
------------------------------------------------
<FN>
(1) Maturity of mortgage-backed and asset-backed securities are
presented based on the current estimated cash flows.
(2) Historically the Bank's NOW accounts and savings deposits have
been relatively insensitive to interest rate changes. However,
the Bank considers a portion of savings deposits to be rate
sensitive based on historical growth trends and management's
expectations.
</FN>
</TABLE>
While the gap analysis provides an indication of interest
rate sensitivity, experience has shown that it does not fully
capture the true dynamics of interest rate changes.
Essentially, the analysis presents only a static measurement of
asset and liability volumes based on contractual maturity, cash
flow estimates or repricing opportunity. It fails to reflect
the differences in the timing and degree of repricing of assets
and liabilities due to interest rate changes. In analyzing
interest rate sensitivity, management considers these
differences and incorporates other assumptions and factors, such
as balance sheet growth and prepayments, to better measure
interest rate risk.
A principal objective of the Bank's asset/liability
management effort is to balance the various factors that
generate interest rate risk, thereby maintaining the interest
rate sensitivity of the Bank within acceptable risk levels. To
manage interest rate risk, the Bank assesses its current risk
position in light of interest rate forecasts and develops and
implements specific lending, funding and investment strategies.
The Bank may also use derivative financial instruments,
including interest rate swaps, caps, floors, futures and
options, to manage interest rate risk. To date such instruments
have not been utilized.
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.
14
<PAGE>
<PAGE>
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 December 31, 1999, the Bank's loan originations and
purchases totaled $6.04 million. The Company purchased
investment securities and mortgage-backed and related securities
during the three months ended December 31, 1999 of $4.18
million. Securities held-to-maturity decreased to $33.77
million at December 31, 1999 from $33.81 million at September
30, 1999.
The primary financing activity of the Bank is the
attraction of deposits and secured borrowings. During the three
months ended December 31,1999, deposits at the Bank decreased
$1.46 million, or 1.66%, from $88.11 million at September 30,
1999 to $86.65 million at December 31, 1999.
The Bank has utilized retail repurchase agreements as a
source of funding. At December 31, 1999, repurchase agreements
totaled $5.81 million compared to $4.70 million at September 30,
1999.
At December 31, 1999, the FHLB advances are secured by the
FHLB stock and a blanket pledge of residential loans, and
governmental agency securities. Under the agreement, the Bank
must maintain eligible collateral in amounts exceeding 125
percent of the outstanding advances. At December 31, 1999, the
Bank had $27.43 million in advances outstanding with the FHLB
compared to $24.96 million at September 30, 1999.
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 ended December 31, 1999 was 33.69%.
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 December 31, 1999, cash
and cash equivalents totaled $8.87 million compared to $4.54
million at September 30, 1999. This increase was primarily due
to an increase in short-term time certificates and an increase
in cash to accomodate customer needs during the rollover to the
year 2000.
The Bank anticipates that it will have sufficient funds
available to meet its current commitments. At December 31,
1999, the Bank had commitments to originate or purchase loans of
$1.00 million. Certificates of deposits which are scheduled to
mature in one year or less at December 31, 1999, totaled $34.05
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) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On October 26, 1999, the Registrant filed a
Current Report on Form 8-K announcing the adoption
of a stock repurchase program to repurchase up to
10% of the Registrant's outstanding shares of
common stock, or approximately 142,326 shares,
over a twelve month period.
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: February 11, 2000 /s/ William R. Belford
_______________________________________
William R. Belford, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: February 11, 2000 /s/ Dennis M. Vorgert
_______________________________________
Dennis M. Vorgert, Vice President
(Principal Financial Officer)
17
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 2,911,196
<INT-BEARING-DEPOSITS> 5,954,319
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 28,227,683
<INVESTMENTS-CARRYING> 33,771,479
<INVESTMENTS-MARKET> 31,435,340
<LOANS> 58,420,841
<ALLOWANCE> 469,891
<TOTAL-ASSETS> 134,600,290
<DEPOSITS> 86,650,388
<SHORT-TERM> 33,242,299
<LIABILITIES-OTHER> 1,542,236
<LONG-TERM> 0
<COMMON> 14,233
0
0
<OTHER-SE> 13,151,134
<TOTAL-LIABILITIES-AND-EQUITY> 134,600,290
<INTEREST-LOAN> 1,214,312
<INTEREST-INVEST> 1,026,488
<INTEREST-OTHER> 49,435
<INTEREST-TOTAL> 2,290,235
<INTEREST-DEPOSIT> 910,867
<INTEREST-EXPENSE> 1,342,363
<INTEREST-INCOME-NET> 947,872
<LOAN-LOSSES> 2,835
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 718,102
<INCOME-PRETAX> 451,043
<INCOME-PRE-EXTRAORDINARY> 451,043
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 277,865
<EPS-BASIC> 0.24
<EPS-DILUTED> 0.24
<YIELD-ACTUAL> 0.74
<LOANS-NON> 361,189
<LOANS-PAST> 160,511
<LOANS-TROUBLED> 102,548
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 511,888
<CHARGE-OFFS> 45,624
<RECOVERIES> 792
<ALLOWANCE-CLOSE> 469,891
<ALLOWANCE-DOMESTIC> 469,891
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
