-----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, FrfYVWMSPCnZ9z/6ShuBdGkUFsZ0Wu4fk5UcT6J0mbSRY0prAsrQhGNeXLZlX8DS JmNzLjeYzBpxh8MHx76Uxg== 0000854395-97-000021.txt : 19971113 0000854395-97-000021.hdr.sgml : 19971113 ACCESSION NUMBER: 0000854395-97-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 000-18832 FILM NUMBER: 97715433 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 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, 1997 ------------------ 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 October 31, 1997 ----------- ------------------------------------ Common Stock 4,146,105 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, 1997 (Unaudited) and June 30, 1997. 3 Consolidated Statements of Income for the Three Months Ended September 30, 1997 and 1996 (Unaudited). 4 Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1997 and 1996 (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
ASSETS -------- September 30, June 30, 1997 1997 ------------- ------------ (unaudited) Cash $ 8,770,119 $ 8,694,283 Interest bearing deposits 3,799,854 481,430 Securities: Securities held-to-maturity 16,469,318 17,484,427 Securities available-for-sale 1,756,294 5,192,323 (Total securities fair value: $18,258,965 at September 30, 1997; $22,992,346 at June 30, 1997) Loans receivable, net 333,932,279 327,791,495 Real estate owned: Acquired through foreclosure 300,776 183,569 Held for development 687,261 687,261 Investment in Federal Home Loan Bank stock 2,827,900 2,777,200 Premises and equipment 10,534,828 10,221,228 Other assets 541,971 842,656 Excess of cost over net assets of affiliate purchased 2,964,463 3,024,481 ------------ ------------ Total Assets $382,585,063 $377,380,353 ============ ============ LIABILITIES & STOCKHOLDERS' EQUITY - ---------------------------------- Liabilities: Savings deposits $284,953,288 $281,342,174 Advances from Federal Home Loan Bank 41,487,90 41,514,194 Accrued interest payable 402,672 202,982 Accounts payable and other liabilities 1,353,088 706,892 Deferred income taxes 1,967,245 1,949,361 ------------- ------------- Total Liabilities 330,164,193 325,715,603 ------------ ------------ 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 4,159,196 shares on September 30, 1997 and 4,170,003 shares on June 30, 1997 4,159,196 4,170,003 Additional paid-in capital 4,071,355 4,330,548 Retained earnings - substantially restricted 43,215,090 42,193,609 Net unrealized holding gain on securities available-for-sale, net of tax 975,229 970,590 ------------- ------------ Total Stockholders' Equity 52,420,870 51,664,750 ------------- ------------ Total Liabilities & Stockholders' Equity $382,585,063 $377,380,353 ============ ============
See notes to consolidated financial statements. 3 FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended September 30, 1997 1996 --------- ---------- Interest income: Interest on loans $7,089,484 $6,508,349 Interest and dividends on investments and deposits 432,242 444,401 ---------- ---------- Total interest income 7,521,726 6,952,750 ---------- ---------- Interest expense: Savings deposits 3,247,563 2,973,028 Federal Home Loan Bank advances 580,991 510,564 ---------- ---------- Total interest expense 3,828,554 3,483,592 ---------- ---------- Net interest income 3,693,172 3,469,158 Provision for loan losses 60,000 200,000 ---------- ---------- Net interest income after provision for loan losses 3,633,172 3,269,158 ---------- ---------- Other income: Customer service fees on deposit accounts 313,244 320,905 Other income 309,936 223,067 Gain on sale of investment 116,945 322,927 ---------- ---------- Total other income 740,125 866,899 ---------- ---------- Other expense: Employee compensation and benefits 888,135 886,513 Office occupancy and equipment expense 237,533 230,559 Federal insurance premiums (Note 2) 44,226 1,808,839 Marketing and advertising 86,395 98,311 Outside services and data processing 151,927 154,901 State franchise tax 74,039 70,794 Other expense 428,014 443,379 ---------- ---------- Total other expense 1,910,269 3,693,296 ---------- ---------- Income before taxes 2,463,028 442,761 Income taxes 859,260 155,650 ---------- ---------- Net income $1,603,768 $ 287,111 ========== ========== Net income per share of common stock $0.38 $ 0.07 ===== ====== Dividends per share of common stock $0.14 $ 0.12 ===== ======
See notes to consolidated financial statements. 4 FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Three Months Ended September 30, ----------------------- 1997 1996 Operating Activities: ---------- ---------- Net income $1,603,768 $ 287,111 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses and real estate owned 60,000 200,000 Provision for depreciation 140,278 113,950 Net change in deferred loan fees and costs 46,987 41,801 Federal Home Loan Bank stock dividends (50,700) (45,500) Amortization of discounts on securities held-to- maturity (32,322) (32,376) Amortization of acquired intangible assets 60,018 60,018 Net gain on sale of investments available-for-sale (116,945) (322,927) Increase in interest payable 199,690 53,868 Decrease (increase) in other assets 300,685 (169,140) Increase in accounts payable and other liabilities 664,080 1,147,313 --------- --------- Net cash provided by operating activities 2,875,539 1,334,118 --------- --------- Investing Activities: Sale of securities available-for-sale 3,479,138 335,111 Purchases of securities available-for-sale (38,332) (17,463) Purchases of securities held-to-maturity (5,000,000) (6,000,000) Principal collections on securities held-to- maturity 6,047,431 197,261 Net increase in loans to customers (6,394,242) (7,925,086) Purchases of premises and equipment (453,878) (277,509) Sales of real estate acquired in settlement of loans 129,000 134,938 --------- ---------- Net cash used in investing activities (2,230,883) (13,552,748) --------- ---------- Financing Activities: Advances from (repayments to) Federal Home Loan Bank (26,294) 4,795,779 Net (decrease) increase in customer savings deposits 3,611,114 (748,220) Dividends paid (582,287) (503,588) Proceeds from stock options exercised 2,386 60,543 Common stock repurchased (270,000) (444,151) Collection on advance to ESOP 14,685 -- ---------- ---------- Net cash provided by financing activities 2,749,604 3,160,363 ---------- ---------- (Decrease) increase in cash and cash equivalents 3,394,260 (9,058,267) Cash and cash equivalents, beginning of year 9,175,713 16,160,272 ---------- ---------- Cash and cash equivalents, end of period $12,569,973 $ 7,102,005 =========== ===========
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, 1997 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, 1997 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 1997 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 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: 4,167,600 shares and 4,206,130 shares issued and outstanding for the three month periods ended September 30, 1997 and 1996, respectively. Common stock equivalents have not been used in computing net income per share because their effect is not material. 4. Recent Accounting Pronouncements The Financial Accounting Standards Board has issued Statement Nos. 128 and 130 that the Bank will be required to adopt in future periods. See "New Accounting Pronouncements" for further discussion. 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, 1997 and any material changes in the results of operations for the three month period ending, September 30, 1997. This discussion and analysis should be read in conjunction with "Managements Discussion and Analysis of Financial Condition and Results of Operations" included in the 1997 Annual Report to Shareholders. Results of Operations Net income was $1.6 million or $.38 per share for the three months ended September 30, 1997, as compared to net income of $1.4 million or $.33 per share for the same period in 1996. During the quarter ended September 30, 1996, net income was affected by a one-time special assessment of $1.7 million ($1.1 million, net of tax) paid to the FDIC. Due to this payment, actual net income was $287,000 or $.07 per share during the 1996 quarter. See further discussion under "Regulatory Matters". In addition to the higher net income the 15% increase in net income per share was also attributable to the Corporation's stock repurchase plans which have reduced the weighted average number of shares outstanding form 4,206,130 for the 1996 period to 4,167,600 for 1997. The following discussion outlines the material differences in income and expenses for the three month period ended September 30, 1997, as compared to 1996. Net interest income increased by $224,014 in 1997 as compared to 1996. This increase was due to the strong growth of the Bank's loan portfolio and a 7 basis point improvement in the net interest margin. The Bank's net interest margin for the 1997 period increased to 4.13% as compared to 4.06% for the 1996 quarter. The Corporation's cost of funds increased by 13 basis points in 1997 compared to 1996, due to higher rates paid on short-term customer deposits and Federal Home Loan Bank advances. Average interest-earning assets increased by $20 million from $335 million for the 1996 period to $355 million for the 1997 period. Average loans were $23 million higher and averaged $331 million during 1997, while the average yield on loans increased by 10 basis points to 8.49% during 1997 compared to 8.39% during the 1996 period. Average interest-bearing liabilities increased by $20 million to an average balance of $322 million for the 1997 period. Customer deposits averaged $283 million during 1997, an increase of $19 million compared to the 1996 quarter. The remaining $1 million increase in interest-bearing liabilities was due to borrowings from the Federal Home Loan Bank to help finance the Bank's loan growth. 7 Total other income was $740,125 for the three months ended September 30, 1997, as compared to $866,899 for the 1996 period, a decrease of $126,774. The decrease in income is due to reduced sales of available-for-sale securities. For the 1997 quarter, the Bank reported gains from investment sales of $116,945 as compared to $322,927 in 1996, a decrease of $205,982. Other sources of non-interest income, such as brokerage commissions, checking account fees, and other customer transaction fees increased by $79,209, or 15% in 1997 versus 1996. Total other expense was $1,910,269 for the three month period ended September 30, 1997, as compared to $3,693,296 for the 1996 period. The decrease in expense is due to the resolution of the FDIC insurance fund disparity on September 30, 1996, resulting in a $1,685,000 charge against earnings during the 1996 quarter. Federal insurance premium expense decreased $79,613 during the 1997 period, reflecting lower assessment rates while other expenses remained relatively constant. 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, 1997, management chose to add $60,000 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, 1997. Three Months Ended September 30, ------------------ 1997 1996 ---- ---- (Dollars in Thousands) Allowance for loan losses: Balance, July 1 $ 1,715 $ 1,613 Provision for loan losses 60 200 Charge-offs (15) (28) Recoveries 6 0 ------- ------- Balance, end of period $ 1,766 $ 1,785 ======= ======= Net loans outstanding at quarter end $333,932 $310,097 Non-performing loans at quarter end: Collaterized by one-to-four family homes 1,247 1,101 Other non-performing loans 361 358 Ratios: Non performing loans to total loans .48% .47% Allowance for loan losses to non-performing loans 110% 122% Allowance for loan losses to net loans .53% .58% Non-performing assets to total assets .50% .48% 8 Liquidity & Capital Resources Loan demand continued to be strong during the quarter ended September 30, 1997, as net loans grew by $6.1 million to $334 million, a 7.5% annualized growth rate. In spite of strong competition from new financial institutions, mutual funds, and the stock market, customer deposits grew by $3.6 million during the quarter. The loan growth was funded by additional borrowings of $5 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 September 30, 1997, the Bank's liquid assets were 7.01% of its liquidity base. The Bank intends to continue to fund loan growth (outstanding loan commitments were $6.3 million at September 30, 1997) and any declines in customer deposits through additional advances from the FHLB. At September 30, 1997, the Bank had an unused approved line of credit in the amount of $11 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, 1997. (Dollars in thousands) Tangible Core Risk-weighted -------- ------- ------------- Actual capital $47,378 $47,378 $49,144 Regulatory requirement 5,680 11,359 19,453 ------ ------ ------ Excess $41,698 $36,019 $29,691 ======= ======= ======= 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. On January 1, 1997, the Bank began paying insurance premiums of $.064 per $100 of deposits as compared to a previous premium of $.23 per $100 of deposits. New Accounting Pronouncements Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share," was issued in February 1997 and is effective for both interim and annual fiscal periods ending after December 15, 1997. Early adoption is not permitted. SFAS 128 establishes new standards for computing and presenting earnings per share ("EPS"). Specifically, SFAS 128 replaces the presentation of primary EPS with a presentation of basic EPS, requires dual presentation of basic and 9 diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Management has determined that the adoption of SFAS 128 will not have a material effect on the consolidated financial statements. Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Comprehensive Income," was issued in June 1997 and becomes effective for fiscal periods beginning after December 15, 1997. SFAS 130 requires reclassification of earlier financial statements for comparative purposes. SFAS No. 130 requires that changes in the amounts of certain items, including foreign currency translation adjustments and gains and losses on certain securities be shown in the financial statements. SFAS No. 130 does not require a specific format for the financial statement in which comprehensive income is reported, but does require that an amount representing total comprehensive income be reported in that statement. Management has determined that the adoption of SFAS 130 will not have a material effect on the consolidated financial statements. 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: The Corporation filed Form 8-K on September 18, 1997 to report the establishment of a stock repurchase program to acquire up to 5% of the Corporation's currently outstanding shares of common stock. 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, 1997 BY: (S) B. Keith Johnson ------------------------------------------ B. Keith Johnson President and Chief Executive Officer DATE: November 12, 1997 BY: (S) Richard L. Muse ----------------------------------- Richard L. Muse Vice President and Comptroller 12 EX-27 2 FDS FOR FIRST FEDERAL FINANCIAL CORPORATION
9 (This schedule contains summary financial information extracted from the registrant's unaudited consolidated financial statements for the three months ended September 30, 1997 and is qualified in its entirety by reference to such financial statements.) 0000854395 First Federal Financial Corp of Kentucky 1,000 U.S. DOLLARS 3-MOS JUN-30-1998 JUL-01-1997 SEP-30-1997 1.000 8,770,119 3,799,854 0 0 1,756,294 16,469,318 18,258,965 335,698,477 1,766,198 382,585,063 284,953,288 41,487,900 3,723,005 0 0 0 4,159,196 48,261,674 382,585,063 7,089,484 432,242 0 7,521,726 3,247,563 3,828,554 3,633,172 60,000 116,945 1,910,269 2,463,028 2,463,028 0 0 1,603,768 0.38 0.38 8.41 0 1,608,000 0 1,868,000 1,715,000 15,000 6,000 1,766,000 0 0 1,766,000
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