-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QAnN00jOwkSnghOatL3y7kqJUBTs9opzOzQepMmYbTdAgaRAKbsA1DiW+CBelXhY ehXEiNBbCZsTp94McsnhnQ== 0000854395-96-000003.txt : 19961113 0000854395-96-000003.hdr.sgml : 19961113 ACCESSION NUMBER: 0000854395-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY CENTRAL INDEX KEY: 0000854395 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 611168311 STATE OF INCORPORATION: KY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18832 FILM NUMBER: 96659150 BUSINESS ADDRESS: STREET 1: 2323 RING ROAD CITY: ELIZABETHTOWN STATE: KY ZIP: 42701 BUSINESS PHONE: 5027652131 MAIL ADDRESS: STREET 1: 2323 RING ROAD CITY: ELIZABETHTOWN STATE: KY ZIP: 42701 10-Q 1 FORM 10-Q FOR FIRST FEDERAL FINANCIAL CORP OF KY FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended: September 30, 1996 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number 0-18832 First Federal Financial Corporation of Kentucky ----------------------------------------------- (Exact Name of Registrant as specified in its charter) Kentucky 61-1168311 --------- ---------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 2323 Ring Road Elizabethtown, Kentucky 42701 ----------------------------- (Address of principal executive offices) (Zip Code) (502)765-2131 ------------- (Registrant's telephone number, including area code) 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 APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of October 31, 1996 ----------- ------------------------------------ Common Stock 4,185,826 shares This document is comprised of 12 pages. FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY INDEX PART I - Financial Information Page Number Item 1 - Financial Statements Consolidated Statements of Financial Condition as of September 30, 1996 (Unaudited) and June 30, 1996. 3 Consolidated Statements of Income for the Three Months Ended September 30, 1996 and 1995 (Unaudited). 4 Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1996 and 1995 (Unaudited). 5 Notes to Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of the Consolidated Statements of Financial Condition and Results of Operations 7 PART II - Other Information 11 SIGNATURES 12
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September 30, June 30, ASSETS 1996 1996 -------- --------------- ---------- (unaudited) Cash $ 5,638,065 $ 8,407,735 Interest bearing deposits 1,463,940 7,752,537 Securities: Securities held-to-maturity 17,828,911 11,993,796 Securities available-for-sale 4,664,119 4,748,417 (Total securities fair value: $22,881,544 at September 30, 1996; $17,086,603 at June 30, 1996) Loans receivable, net 310,096,728 302,363,297 Real estate owned: Acquired through foreclosure 240,549 375,392 Held for development 505,261 505,261 Investment in Federal Home Loan Bank stock 2,635,400 2,589,900 Premises and equipment 9,847,726 9,684,167 Other assets 1,155,400 986,260 Excess of cost over net assets of affiliate purchased 3,204,535 3,264,553 --------- --------- Total Assets $ 352,671,315 $ 357,280,634 ============= ============= LIABILITIES & STOCKHOLDERS' EQUITY Liabilities: Savings deposits $ 264,197,524 $ 264,945,744 Advances from Federal Home Loan Bank 39,774,858 34,979,079 Accrued interest payable 272,152 218,284 Accounts payable and other liabilities 2,911,738 1,099,293 Deferred income taxes 817,338 1,482,470 ------- --------- Total Liabilities 307,973,610 302,724,870 Stockholders' Equity: Serial preferred stock 5,000,000 shares authorized --- --- and unissued Common stock, $1 par value per share; authorized 10,000,000 shares; issued and outstanding 4,196,569 shares on September 30, 1996 and 4,208,490 shares on June 30, 1996 4,196,569 4,208,490 Additional paid-in capital 5,095,013 5,466,700 Retained earnings - substantially restricted 39,344,332 39,509,189 Net unrealized holding gain on securities available-for-sale, net of tax 671,110 762,066 ------- ------- Total Stockholders' Equity 49,307,024 49,946,445 ---------- ---------- Total Liabilities & Stockholders' Equity $ 357,280,634 $ 352,671,315 ============= ============== See notes to consolidated financial statements
3
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended September 30, 1996 1995 ---- ---- Interest income: Interest on loans $6,508,349 $ 6,084,222 Interest and dividends on investments and deposits 444,401 454,185 ------- ------- Total interest income 6,952,750 6,538,407 --------- --------- Interest expense: Savings deposits 2,973,028 2,972,198 Federal Home Loan Bank advances 510,564 361,591 ------- ------- Total interest expense 3,483,592 3,333,789 --------- --------- Net interest income 3,469,158 3,204,618 Provision for loan losses 200,000 0 ------- - Net interest income after provision for loan losses 3,269,158 3,204,618 --------- --------- Other income: Customer service fees on deposit accounts 320,905 230,654 Other income 223,067 208,942 Gain on sale of investment 322,927 311,097 ------- ------- Total other income 866,899 750,693 ------- ------- Other expense: Employee compensation and benefits 886,513 770,785 Office occupancy and equipment expense 230,559 212,621 Federal insurance premiums (Note 2) 1,808,839 145,120 Marketing and advertising 98,311 71,221 Outside services and data processing 154,901 156,070 State franchise tax 70,794 68,540 Other expense 443,379 379,562 ------- ------- Total other expense 3,693,296 1,803,919 --------- --------- Income before taxes 442,761 2,151,392 Income taxes 155,650 718,090 ----------- ----------- Net income $ 287,111 $ 1,433,302 =========== ============ Net income per share of common stock $ 0.07 $ 0.34 ======= ======= Dividends per share of common stock $ 0.12 $ 0.11 ======= =======
See notes to consolidated financial statements. 4
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) Three Months Ended September 30, 1996 1995 ---- ---- Operating Activities: Net income $ 287,111 $ 1,433,302 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses and real estate owned 200,000 0 Provision for depreciation 113,950 113,424 Net change in deferred loan fees and costs 41,801 38,653 Federal Home Loan Bank stock dividends (45,500) (42,600) Amortization of discounts on securities held-to- maturity (32,376) (35,871) Amortization of acquired intangible assets 60,018 60,018 Gain on sale of investments available-for-sale (322,927) (311,097) Increase in interest payable 53,868 61,189 Increase in other assets (169,140) (502,371) Increase in accounts payable and other liabilities 1,147,313 1,147,895 --------- --------- Net cash provided by operating activities 1,334,118 1,962,542 ----------- ---------- Investing Activities: Sale of securities available-for-sale 335,111 328,160 Purchases of securities available-for-sale (17,463) (49,727) Purchases of securities held-to-maturity (6,000,000) 0 Principal collections on securities held-to- maturity 197,261 47,081 Net increase in loans to customers (7,925,086) (6,366,071) Purchases of premises and equipment (277,509) (59,564) Sales of real estate acquired in settlement of loans 134,938 0 ------------ ----------- Net cash used in investing activities (13,552,748) (6,100,121) ------------- ----------- Financing Activities: Advances from Federal Home Loan Bank 4,795,779 5,971,598 Net decrease in customer savings deposits (748,220) (2,712,416) Dividends paid (503,588) (465,704) Proceeds from stock options exercised 60,543 12,749 Common stock repurchased (444,151) (58,500) Advances to ESOP 0 (148,492) ----------- ----------- Net cash provided by financing activities 3,160,363 2,599,235 ----------- ----------- Decrease in cash and cash equivalents (9,058,267) (1,538,344) Cash and cash equivalents, beginning of year 16,160,272 13,864,501 ---------- ---------- Cash and cash equivalents, end of period $ 7,102,005 $ 12,326,157 ============= ============= See notes to consolidated financial statements.
5 FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY Notes to Consolidated Financial Statements 1. Interim Financial Statements First Federal Financial Corporation of Kentucky ("Corporation") is the parent to its wholly owned subsidiary, First Federal Savings Bank of Elizabethtown ("Bank"). The Corporation has no material income, other than that generated by the Bank. In the opinion of management , these unaudited consolidated financial statements include all adjustments necessary for a fair presentation of its financial position as of September 30, 1996 and the results of its operations and its cash flows for the three month period then ended. All such adjustments were of a normal recurring nature. The results of operations for the three month period ended September 30, 1996 are not necessarily indicative of the results for the full year. It is suggested that these financial statements be read in conjunction with the financial statements, accounting policies and financial notes thereto included in the Appendix to the Company's 1996 Proxy Statement which has been previously filed with the Commission. 2. Federal Deposit Insurance Corporation (FDIC) legislation was signed into law on September 30, 1996, to recapitalize the Savings Association Insurance Fund (SAIF). All SAIF-insured savings institutions will be required to pay a one-time special assessment of $.657 for every $100 of customer deposits. This has resulted in a charge to earnings of $1,658,000 ($1,094,000, net of tax) during the Bank's first quarter ended September 30, 1996. 3. Net income per share of common stock is computed by dividing net income by the weighted average number of shares on common stock issued and outstanding: 4,206,130 shares and 4,238,160 shares issued and outstanding for the three month periods ended September 30, 1996 and 1995, respectively. Common stock equivalents have not been used in computing net income per share because their effect is not material. Net income and dividends paid per share reflect a 2-for-1 common stock split in the form of a 100% stock dividend distributed on June 10, 1996. 6 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS First Federal Financial Corporation of Kentucky ("Corporation") is the parent to its wholly owned subsidiary, First Federal Savings Bank of Elizabethtown ("Bank"). The Bank has operations in the central Kentucky communities of Elizabethtown, Radcliff, Bardstown, Munfordville, Shepherdsville, and Mt. Washington. The following discussion and analysis covers any material changes in the financial condition since June 30, 1996 and any material changes in the results of operations for the three month period ending, September 30, 1996. This discussion and analysis should be read in conjunction with "Managements Discussion and Analysis of Financial Condition and Results of Operations" included in the 1996 Annual Report to Shareholders. Results of Operations Net income was $287,111 or $.07 per share for the three months ended September 30, 1996, as compared to $1,433,302 or $.34 per share for the same period in 1995. The decrease in earnings is primarily attributable to the one-time special assessment of $1.7 million ($1.1 million, net of tax) to recapitalize the Savings Association Insurance Fund (" SAIF"). Beginning January 1, 1997 the Bank will benefit from reduced premiums to the FDIC of approximately $430,000, annually ($285,000, net of tax). See further discussion under "Regulatory Matters". Net interest income increased by $264,540 in 1996 as compared to 1995. This increase was due to the strong growth of the Bank's loan portfolio and a 3 basis point improvement in the net interest margin. The Bank's net interest margin for the 1996 period increased to 4.06% as compared to 4.03% for the 1995 quarter. The Corporation's cost of funds decreased by 10 basis points in 1996 compared to 1995, due to lower rates paid on short-term customer deposits. Average interest-earning assets increased by $20 million from $315 million for the 1995 period to $335 million for the 1996 period. Average loans were $21 million higher and averaged $308 million during 1996, while the average yield on loans stayed the same at 8.39%. Average interest-bearing liabilities increased by $20 million to an average balance of $302 million for the 1996 period. Customer deposits averaged $264 million during 1996, an increase of $7 million compared to the 1995 quarter. The remaining $13 million increase in interest-bearing liabilities was due to borrowings from the Federal Home Loan Bank to help finance the Bank's loan growth. Total other income was $866,899 for the three months ended September 30, 1996, as compared to $750,693 for the 1995 period, an increase of $116,206. Customer service fees charged on deposit accounts increased by $90,251 during 1996 due to a growth in customer checking accounts and an increase in customer service fees. Gains from the sale of available-for-sale securities were $322,927 in 1996 versus $311,097 in 1995, an increase of $11,830. Other sources of miscellaneous income, such as safety deposit box rental, loan fees, and other customer transaction fees increased by $14,125 due to growth in deposit relationships with existing customers. 7 Total other expense was $3,693,296 for the three month period ended September 30, 1996, as compared to $1,803,919 for the 1995 period. The increase of $1,889,377 was primarily due to the one-time expense of $1.7 million to recapitalize the SAIF. Also, during July, 1996, the Bank opened a new branch in the Elizabethtown Wal-Mart Supercenter, resulting in an increase in operating expenses of $62,000 for the 1996 quarter. The rest of the increase was attributable to expanded services and products offered to customers. Non-Performing Assets Management periodically evaluates the adequacy of the allowance for loan losses based on the Bank's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may effect the borrower's ability to repay and other factors. During the quarter ended September 30, 1996, management chose to add $200,000 to the reserve for loan losses. Although current loan charge-offs and delinquencies are consistent with previous years, the reserve was increased to compensate for the Bank's continued strong loan growth. The Bank experienced an insignificant amount of uncollectible loans during the periods indicated in the table below. Approximately 65% of the Bank's non-performing assets are collateralized by one-to-four family residences at September 30, 1996. Three Months Ended September 30, ------------- 1996 1995 ---- ---- (Dollars in thousands) Allowance for loan losses: Balance, July 1 $ 1,613 $ 1,662 Provision for loan losses 200 0 Charge-offs (28) (6) -------- --------- Balance, June 30 $ 1,785 $ 1,556 ========== ========== Net loans outstanding at quarter end $ 310,097 $ 288,672 Non-performing loans at quarter end: Collaterized by one-to-four family homes 1,101 548 Other non-performing loans 358 230 Ratios: Non performing loans to total loans .47% .27% Allowance for loan losses to non-performing loans 122% 200% Allowance for loan losses to net loans .58% .54% Non-performing assets to total assets .48% .29% 8 Liquidity & Capital Resources Loan demand continued to be strong during the quarter ended September 30, 1996, as net loans grew by $7.7 million to $310 million, a 10% annualized growth. Deposits declined by $748,220 during the 1996 quarter, primarily in passbook savings accounts as customers continue to seek alternative investments yielding higher rates of return. The loan growth and decline in deposits was funded by additional borrowings of $5 million from the Federal Home Loan Bank during the 1996 quarter. Current regulations require the Corporation's subsidiary, First Federal Savings Bank, to maintain minimum specific levels of liquid assets, (currently 5%) of cash and eligible investments to the savings deposits and short-term borrowings. At September 30, 1996, the Bank's liquid assets were 7.23% of its liquidity base. The Bank intends to continue to fund loan growth (outstanding loan commitments were $3.9 million at September 30, 1996) and any declines in customer deposits through additional advances from the FHLB. At September 30, 1996, the Bank had an unused approved line of credit in the amount of $6.3 million, and the potential to significantly increase its indebtedness with the FHLB, if necessary, due to its strong financial condition. The Office of Thrift Supervision's capital regulations requires the Bank to meet three capital standards. As indicated below, the Bank substantially exceeded the regulatory requirements for each category at September 30, 1996. (Dollars in thousands) Tangible Core Risk-weighted -------- ---- ------------- Actual capital $ 44,291 $ 44,291 $ 46,060 Regulatory requirement 5,298 10,596 17,322 ---------- --------- --------- Excess $ 38,993 $ 33,695 $ 28,738 ========= ========= ========= Regulatory Matters The Bank insures its customers' deposits through the Savings Association Insurance Fund ("SAIF"). On September 30, 1996, Federal Deposit Insurance Corporation ("FDIC") legislation was signed into law to recapitalize the SAIF. As was anticipated, all SAIF-insured savings institutions will be required to pay a one-time special assessment of $.657 for every $100 of customer deposits. This has resulted in a charge to earnings of $1,095,000, net of tax during the quarter ended September 30, 1996. Future earnings accruing from a reduced rate in the deposit insurance premium should more than offset the special assessment over a period of time. On January 1, 1997, the Bank will begin paying insurance premiums of $.064 per $100 of deposits as compared to a previous premium of $.23 per $100 of deposits. The reduced premium will contribute approximately $285,000, net of tax to future annual earnings. 9 Recent legislation will require the Bank to change its method of computing bad debt deductions for income tax purposes, effective July 1, 1996. Formerly, the Bank was permitted a bad debt deduction in the amount of 8% pre-tax income. The annual deductions created a bad debt reserve for income tax purposes. Conversion from a thrift charter to a commercial bank charter would have triggered the recapture of the reserve, resulting in approximately $4 million of income taxes. The new law has eliminated this income tax cost upon conversion to a commercial bank charter. Although recapture of the post-1987 reserve will occur, the Bank has previously deferred the related tax consequences and therefore will have no material effect on future earnings of the Bank. 10 FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY Part II - Other Information Item 1. Legal Proceedings Not Applicable Item 2. Changes in Securities Not Applicable Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable Item 6. Exhibits: Not Applicable Reports on Form 8-K: Not Applicable 11 FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY Pursuant to the requirements of Section 13 or 15(d) 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. DATE: November 12, 1996 BY: (S) B. Keith Johnson ---------------------- B. Keith Johnson Executive Vice President DATE: November 12, 1996 BY: (S) M. Dennis Young ---------------------- M. Dennis Young Senior Vice President, Chief Financial Officer & Comptroller 12 EX-27 2 FDS -- THREE MONTH 10-Q
9 3-MOS Jun-30-1997 Jul-01-1996 Sep-30-1996 5,638,065 1,463,940 0 0 4,664,119 17,828,911 18,217,425 310,096,728 1,785,000 357,280,634 264,197,524 39,774,858 3,183,890 0 0 0 4,196,569 45,110,455 357,280,634 6,508,349 444,401 0 6,952,750 2,973,028 3,483,592 3,469,158 200,000 322,927 3,693,296 442,761 442,761 0 0 287,111 0.07 0.07 8.23 0 1,459,000 0 2,247,520 1,613,000 28,000 0 1,785,000 0 0 1,785,000
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