-----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, FQejrRo2V/uNyLJZfi6u5yPfDIMauWJRHL8ArMfBIWdYtP5grBzAQY/+QnuqV7hU y3nTBYf1WJoeJO8QHv97NQ== 0000854395-97-000007.txt : 19970311 0000854395-97-000007.hdr.sgml : 19970311 ACCESSION NUMBER: 0000854395-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970310 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: 97553895 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: December 31, 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 (Registrants'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 January 31, 1996 ----------- ------------------------------------ Common Stock 4,171,971 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 December 31, 1996 (Unaudited) and June 30, 1996. 3 Consolidated Statements of Income for the Three Months and Six Months Ended December 31, 1996 and 1995 (Unaudited). 4 Consolidated Statements of Cash Flows for the Six Months Ended December 31, 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 December 31, June 30, ASSETS 1996 1996 ------ -------------------- (unaudited) Cash $ 8,544,498 8,407,735 Interest bearing deposits -- 7,752,537 Securities: Securities held-to-maturity 17,790,077 11,993,796 Securities available-for-sale 4,840,356 4,748,417 (Total securities fair value $23,103,148 at December 31, 1996; $17,086,603 at June 30, 1996) Loans receivable, net 318,284,338 302,363,297 Real estate owned: Acquired through foreclosure 378,340 375,392 Held for development 687,261 505,261 Investment in Federal Home Loan Bank stock 2,681,700 2,589,900 Premises and equipment 9,984,986 9,684,167 Other assets 731,241 986,260 Excess of cost over net assets of affiliate purchased 3,144,517 3,264,553 ----------- ---------- Total Assets $ 367,067,314 $ 352,671,315 ============= ============= LIABILITIES & STOCKHOLDERS' EQUITY Liabilities: Savings deposits $ 266,991,907 $ 264,945,744 Advances from Federal Home Loan Bank 45,724,944 34,979,079 Accrued interest payable 310,308 218,284 Accounts payable and other liabilities 3,107,886 1,099,293 Deferred income taxes 945,557 1,482,470 -------------- ------------ Total Liabilities 317,080,602 302,724,870 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 4,182,018 shares on December 31, 1996 and 4,208,490 shares on June 30, 1996 4,182,018 4,208,490 Additional paid-in capital 4,823,304 5,466,700 Retained earnings - substantially restricted 40,227,345 39,509,189 Net unrealized holding gain on securities available-for-sale, net of tax 754,045 762,066 -------------- ------------ Total Stockholders' Equity 49,986,712 49,946,445 -------------- ------------ Total Liabilities & Stockholders' Equity $ 367,067,314 $ 352,671,315 ============= ============= See notes to consolidated financial statements.
3
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended December 31, December 31, 1996 1995 1996 1995 Interest income: Interest on loans $6,683,488 $6,277,273 $13,191,837 $12,361,494 Interest and dividends on investments and deposits 449,395 438,235 893,716 892,420 ---------- ---------- ----------- ---------- Total interest income 7,132,883 6,715,508 14,085,553 13,253,914 ---------- ---------- ----------- ---------- Interest expense: Savings deposits 2,990,636 3,019,260 5,963,664 5,991,457 Federal Home Loan Bank advances 591,268 460,079 1,101,833 821,670 ---------- ---------- ----------- ---------- Total interest expense 3,581,904 3,479,339 7,065,497 6,813,127 ---------- ---------- ----------- ---------- Net interest income 3,550,979 3,236,169 7,020,056 6,440,787 Provision for loan losses -- -- 200,000 -- ---------- ---------- ----------- ---------- Net interest income after provision for loan losses 3,550,979 3,236,169 6,820,056 6,440,787 ---------- ---------- ----------- ---------- Other income: Customer service fees on deposit accounts 290,171 287,403 611,076 518,055 Other income 207,097 219,785 430,164 428,727 Gain on sale of investment (6,000) 231,956 316,927 543,054 ---------- ---------- ----------- ---------- Total other income 491,268 739,144 1,358,167 1,489,836 ---------- --------- ----------- ---------- Other expense: Employee compensation and benefits 857,613 813,608 1,744,126 1,584,393 Office occupancy and equipment expense 211,725 171,727 442,285 359,007 Federal insurance premiums (Note 2) 118,589 147,861 1,927,428 292,981 Marketing and advertising 103,393 100,181 201,704 171,403 Outside services and data processing 148,049 160,187 302,949 289,235 State franchise tax 73,994 69,786 144,788 138,326 Other expense 434,561 409,711 877,939 841,635 ---------- ---------- ----------- ---------- Total other expense 1,947,924 1,873,061 5,641,219 3,676,980 ---------- ---------- ----------- ---------- Income before taxes 2,094,323 2,102,252 2,537,004 4,253,643 Income taxes 707,668 724,249 865,118 1,442,339 ---------- ---------- ----------- ---------- Net Income $1,386,655 $1,378,003 $ 1,671,886 $2,811,304 ========== ========== =========== ========== Net income per share of common stock $0.33 $0.33 $0.40 $0.66 ===== ===== ===== ===== Dividends per share of common stock $0.12 $0.11 $0.24 $0.22 ===== ===== ===== =====
See notes to consolidated financial statements. 4
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) Six Months Ended December 31, 1996 1995 Operating Activities: Net income $ 1,671,886 $ 2,811,304 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 200,000 -- Provision for depreciation 257,431 228,910 Net change in deferred loan fees and costs 83,830 79,526 Federal Home Loan Bank stock dividends (91,800) (85,900) Amortization of discounts on securities held-to-maturity (71,091) (62,526) Amortization of acquired intangible assets 120,036 120,036 Gain on sale of investments available-for-sale (316,927) (543,054) Increase (Decrease) in interest payable 92,024 (52,734) Decrease in other assets 255,019 517,985 Increase in accounts payable and other liabilities 1,471,680 432,754 ------------ ------------ Net cash provided by operating activities 3,672,088 3,446,301 ------------ ------------ Investing Activities: Sale of securities available-for-sale 335,111 571,965 Purchases of securities available-for-sale (100,215) (99,118) Purchases of securities held-to-maturity (6,000,000) -- Maturity of securities held-to-maturity -- 1,000,000 Principal collections on securities held-to-maturity 274,811 244,368 Net increase in loans to customers (16,573,888) (11,427,422) Purchases of premises and equipment (558,250) (115,480) Sales of real estate acquired in settlement of loans 399,839 23,000 Increase in real estate held for development (182,000) (2,907) ------------ ------------ Net cash used in investing activities (22,404,592) (9,805,594) ------------ ------------ Financing Activities: Advances from Federal Home Loan Bank 10,745,865 10,821,731 Net Increase (Decrease) in customer savings deposits 2,046,163 (2,343,006) Dividends paid (1,005,430) (933,139) Proceeds from stock options exercised 60,543 60,551 Common stock repurchased (730,411) (415,280) Repayment of advance to ESOP -- 126,537 ------------ ------------ Net cash provided by financing activities 11,116,730 7,317,394 ------------ ------------ Increase (Decrease) in cash and cash equivalents (7,615,774) 958,101 Cash and cash equivalents, beginning of year 16,160,272 13,864,501 ------------ ------------ Cash and cash equivalents, end of period $ 8,544,498 $14,822,602 ============ =========== 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 December 31, 1996 and the results of its operations and its cash flows for the three month and six month periods then ended. All such adjustments were of a normal recurring nature. The results of operations for the three month and six month periods ended December 31, 1996 and 1995 are not necessarily indicative of the results for the full years. 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 were 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: 4,186,608 shares and 4,233,176 shares issued and outstanding for the three month periods ended December 31, 1996 and 1995 respectively, and 4,196,340 shares 4,235,209 shares issued and outstanding for the six month periods ended December 31, 1996 and 1995 respectively. Common stock equivalents have not been used in computing net income per share because their effect share 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 and six month periods ending, December 31, 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 Three Month Period Ended December 31, 1996 vs. 1995 - Net income was $1,386,655 or $0.33 per share for the three month period ended December 31, 1996, as compared to $1,378,003 or $0.33 per share for the same period in 1995. The following discussion outlines the material differences in income and expenses for the three month period ended December 31, 1996, as compared to 1995. Net interest income increased by $314,810 in 1996 as compared to 1995. This increase was due to the strong growth of the Bank's loan portfolio and a 11 basis point improvement in the net interest margin. The Bank's net interest margin for the 1996 period increased to 4.08% as compared to 3.97% for the 1995 quarter. The Corporation's cost of funds decreased by 19 basis points in 1996 compared to 1995, due to customer's transferring deposits from long-term maturities to short-term. Average interest-earning assets increased by $18 million from $324 million for the 1995 period to $342 million for the 1996 period. Average loans were $23 million higher and averaged $316 million during 1996, while the average yield on loans decreased by 10 basis points to 8.39%. Average interest-bearing liabilities increased by $21 million to an average balance of $310 million for the 1996 period. Customer deposits averaged $267 million during 1996, an increase of $11 million compared to the 1995 quarter. The remaining $10 million increase in interest-bearing liabilities was due to borrowings from Federal Home Loan Bank to help finance the Bank's loan growth. Total other income was $491,268 for the three months ended December 31, 1996, as compared to $739,144 for the 1995 period, a decrease of $247,876. The decrease in income is primarily attributable to the fact that no sales of available-for-sale securities took place during the 1996 period compared to the 1995 period. Other sources of miscellaneous income, such as government loan income decreased due to the lower loan volume generated by the Bank's government lending team. Total other expense was $1,947,924 for the three month period ended December 31, 1996, as compared to $1,873,061 for the 1995 period. This 4% increase of $74,863 was primarily due to the Bank's opening of a new branch office in the Elizabethtown Wal-Mart Supercenter which became operational in July 1996, resulting in an increase of $58,000 in operating expenses for the 1996 quarter. The rest of the increase was attributable to expanded services and products offered to customers. FDIC premiums were $29,272 lower this quarter versus the 1995 quarter due to the SAIF special assessment reducing the normal prepaid quarterly premium. 7 Six Month Period Ended December 31, 1996 vs. 1995 - Net income was $1,671,886 or $0.40 per share for the six month period ended December 31, 1996, as compared to $2,811,304 or $0.66 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 $579,269 in 1996 as compared to 1995 due to the Bank's strong loan growth and a 7 basis point improvement in the net interest margin. Average interest-earning assets increased by $19 million during the six months ended December 31, 1996 compared to the 1995 period as average loans grew by $22 million. Average interest-bearing liabilities increased by $20 million to an average balance of $306 million for the 1996 period, while the average cost of funds decreased by 15 basis points during the comparative periods due to lower rates paid on short-term customer deposits. Total other income was $1,358,167 for the six months ended December 31, 1996, as compared to $1,489,836 for the 1995 period, a decrease of $131,669. The decrease was due to the fact that no gains were recorded on sales of investments during the second quarter of 1996. Customer service fees on deposit accounts increased by $93,000 during the 1996 period due to a growth in customer checking accounts and an increase in customer service fees. Total other expense was $5,641,219 for the six months ended December 31, 1996, as compared to $3,676,980 for the 1995 period, an increase of $1,964,239. The increase is a result of the SAIF special assessment recorded in the first quarter of 1996. Costs attributable to the new branch in the Elizabethtown Wal-Mart Supercenter were approximately $120,000 during the six month period ended December 31, 1996. All other expenses increased by approximately 10% for the 1996 period as compared to the same period in 1995, primarily from expanded services and products offered to customers and to accommodate loan growth. 8 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 six month period ended December 31, 1996, management chose to add $200,000 to the reserve for loan loss. 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 57% of the Bank's delinquent loans are secured by one-to-four-family residences at December 31, 1996. Three Months Ended Six Months Ended December 31, December31, 1996 1995 1996 1995 ---- ---- ---- ----- (Dollars in thousands) Allowance for loan losses: Balance, beginning of period $ 1,785 $ 1,656 $ 1,613 $ 1,662 Provision for loan losses -- -- 200 -- Charge-offs (33) (14) (60) (20) Recoveries 20 -- 19 -- ------- ------- ------- ------- Balance, end of period $ 1,772 $ 1,642 $ 1,772 $ 1,642 ======= ======= ======= ======= Net loans outstanding at quarter end $318,284 $294,215 Non-performing loans at quarter end: Collaterized by one-to-four family homes $971 $658 Other non-performing loans $343 $467 Ratios: Non-performing loans to total loans .41% .38% Allowance for loan losses to non- performing loans 135% 146% Allowance for loan losses to net loans .57% .56% Non-performing assets to total assets .46% .43% 9 Liquidity & Capital Resources Loan demand continued to be strong during the six months ended December 31, 1996, as net loans grew by $15.9 million to $318.3 million, a 10% annualized growth. Deposits increased by $2.0 million during the six month period, primarily in customer accounts with maturity terms under one year. The loan growth was funded by additional borrowings of $10.7 million from the Federal Home Loan Bank. 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 December 31, 1996, the Bank's liquid assets were 6.84% of its liquidity base. The Bank intends to continue to fund loan growth (outstanding loan commitments were $4.4 million at December 31, 1996) and any declines in customer deposits through additional advances from the FHLB. At December 31, 1996, the Bank has an unused approved line of credit in the amount of $6.5 million, and the potential to significantly increase its indebtedness with the FHLB, if necessary, due to the Bank's strong financial condition. The Office of Thrift Supervision's capital regulations require the Bank to meet three capital standards. As indicated below, the Bank substantially exceeded the regulatory requirements for each category at December 31, 1996. (Dollars in thousands) Tangible Core Risk-Weighted Actual capital $ 44,753 $ 44,753 $ 46,500 Regulatory requirement 5,403 10,806 18,874 ------- ------- ------- Excess $ 39,350 $ 33,947 $ 27,626 ========= ========= ========= 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 were 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. 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 The Corporation's Board of Directors authorized a six month extension of its stock repurchase program which expired on January 18, 1997. 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: February 11, 1997 BY: (S) B. Keith Johnson ---------------------- B. Keith Johnson Executive Vice President DATE: February 11, 1997 BY: (S) M. Dennis Young --------------------- M. Dennis Young Senior Vice President, Chief Financial Officer & Comptroller 12 EX-27 2 FDS -- SIX MONTH 10-Q
9 9-MOS JUN-30-1997 JUL-01-1997 JUN-30-1997 8,544,498 0 0 0 4,840,356 17,790,077 23,103,148 318,284,338 1,772,000 367,067,314 266,991,907 45,724,944 3,107,886 0 0 0 4,182,018 45,804,694 367,067,314 13,191,837 893,716 0 14,085,553 5,963,664 7,065,497 7,020,056 200,000 316,927 5,641,219 2,537,004 2,537,004 0 0 1,671,886 0.40 0.40 8.23 0 1,314,000 0 2,197,000 1,613,000 60,000 19,000 1,772,000 0 0 1,772,000
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