-----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, UKS+TPAha3rKtCJabBg3EMQaOtraRH6hCiMHaRapOpM3dmzAqKv5x90MRhlxOmbw BkqNnSvXmAi6LHTlMz/+dA== 0000928385-97-001790.txt : 19971111 0000928385-97-001790.hdr.sgml : 19971111 ACCESSION NUMBER: 0000928385-97-001790 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971110 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTFED BANCORP INC CENTRAL INDEX KEY: 0000876947 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 631048648 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19609 FILM NUMBER: 97711565 BUSINESS ADDRESS: STREET 1: 1630 4TH AVE N CITY: BESSEMER STATE: AL ZIP: 35020 BUSINESS PHONE: 2054288472 10-Q 1 FORM 10-Q FOR 9/30/97 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 ---------------------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1997 Commission File Number: 0-19609 -------- FirstFed Bancorp, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 63-1048648 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1630 Fourth Avenue North Bessemer, Alabama 35020 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (205) 428-8472 -------------- 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 October 23, 1997 ---------------------------- ------------------------------- Common Stock, $.01 par value 1,150,998 shares FIRSTFED BANCORP, INC. ---------------------- PART I FINANCIAL INFORMATION --------------------- Page ---- ITEM 1. FINANCIAL STATEMENTS: CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AS OF SEPTEMBER 30, 1997 AND MARCH 31, 1997......................... 2 CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, l997 AND 1996 AND THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996............................ 3 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996........................ 4 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS................ 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................... 7 PART II OTHER INFORMATION ----------------- ITEM 1. LEGAL PROCEEDINGS........................................... 12 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS................... 12 ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................. 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 13 ITEM 5. OTHER INFORMATION........................................... 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 13 SIGNATURES........................................................... 14 THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FURNISHED HAVE NOT BEEN AUDITED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN THE OPINION OF MANAGEMENT, ALL ADJUSTMENTS NECESSARY FOR A FAIR PRESENTATION OF FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS FOR THE PERIODS PRESENTED. 1 PART I. FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS FIRSTFED BANCORP, INC. ---------------------- CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION -------------------------------------------------------- (Dollar amounts in thousands)
September 30, 1997 March 31, 1997 ------------------ -------------- ASSETS Cash and Cash Equivalents: (Unaudited) Cash on hand and in banks $ 6,986 $ 5,411 Interest-bearing deposits in other banks 1,488 4,354 Federal funds sold 10,175 4,200 ----------- ----------- 18,649 13,965 ----------- ----------- Securities available for sale, at fair value 10,996 10,330 Assets held for sale, at lower of cost or market 1,378 331 Securities, at amortized cost, fair value of $4,410 and $6,395, respectively 4,371 6,373 Mortgage-backed securities, at amortized cost, fair value of $11,910 and $13,382, respectively 11,843 13,329 Loans receivable, net 121,412 126,849 Land, buildings and equipment, net 2,949 2,642 Goodwill 1,443 1,487 Real estate owned 833 131 Real estate held for investment 931 931 Accrued interest receivable 1,363 1,450 Other assets 296 306 ----------- ----------- $ 176,464 $ 178,124 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 157,432 $ 157,970 Borrowed funds 1,000 1,000 Accrued interest payable 168 156 Income taxes payable 274 318 Dividends payable 144 123 Other liabilities 450 634 159,468 160,201 ----------- ----------- Stockholders' Equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued and outstanding Common stock, $.01 par value, 3,000,000 shares authorized, 1,484,880 shares issued and 1,150,998 shares outstanding and 1,477,530 issued and 1,231,582 shares outstanding, respectively 15 14 Paid-in capital 6,658 6,601 Retained earnings 14,699 14,256 Treasury stock, at cost (333,882 and 245,948), respectively (4,320) (2,781) Unearned compensation (56) (95) Unrealized loss on securities available for sale, net - (72) ----------- ----------- 16,996 17,923 ----------- ----------- $ 176,464 $ 178,124 =========== ===========
See accompanying notes to condensed consolidated financial statements. 2 FIRSTFED BANCORP, INC. ---------------------- CONDENSED CONSOLIDATED STATEMENTS OF INCOME ------------------------------------------- (Dollar amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended September 30, September 30, -------------------------- ------------------------- 1997 1996 1997 1996 ---------- ----------- ---------- ---------- INTEREST INCOME: (Unaudited) Interest and fees on loans $ 2,796 $ 2,835 $ 5,648 $ 5,609 Interest on mortgage-backed securities 196 142 403 226 Interest and dividends on securities 225 282 486 502 Other interest income 154 113 248 218 ---------- ---------- ---------- ---------- Total interest income 3,371 3,372 6,785 6,555 ---------- ---------- ---------- ---------- INTEREST EXPENSE: Interest on deposits 1,792 1,847 3,598 3,540 Interest on other borrowings 19 29 37 60 ---------- ---------- ---------- ---------- Total interest expense 1,811 1,876 3,635 3,600 ---------- ---------- ---------- ---------- Net interest income 1,560 1,496 3,150 2,955 Provision for loan losses 51 55 102 85 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 1,509 1,441 3,048 2,870 ---------- ---------- ---------- ---------- NONINTEREST INCOME: Fees for customer service 170 147 349 289 Miscellaneous operating and non-operating income, net 40 57 90 109 ---------- ---------- ---------- ---------- Total noninterest income 210 204 439 398 ---------- ---------- ---------- ---------- NONINTEREST EXPENSES: Salaries and employee benefits 573 544 1,171 1,077 Office building and equipment expenses 139 128 273 258 Deposit insurance expense 23 79 46 159 Loss on real estate owned 2 2 2 2 Amortization of goodwill 27 28 54 56 Other operating expenses 317 310 642 607 Deposit insurance special assessment - 725 - 725 Litigation expense - 325 - 325 ---------- ---------- ---------- ---------- Total noninterest expenses 1,081 2,141 2,188 3,209 ---------- ---------- ---------- ---------- Income (loss) before income taxes 638 (496) 1,299 59 PROVISION (CREDIT) FOR INCOME TAXES 218 (171) 445 24 ---------- ---------- ---------- ---------- Net income (loss) $ 420 $ (325) $ 854 $ 35 ========== ========== ========== ========== EARNINGS (LOSS) PER SHARE (Note 2) $ .35 $ (.26) $ .69 $ .03 ========== ========== ========== ========== AVERAGE NUMBER OF SHARES OUTSTANDING 1,199,624 1,248,004 1,244,497 1,246,378 ========== ========== ========== ========== DIVIDENDS DECLARED PER SHARE (Note 2) $ .125 $ .10 $ .35 $ .28 ========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements. 3 FIRSTFED BANCORP, INC. ---------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (Dollar amounts in thousands) (Unaudited)
Six Months Ended September 30, ------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 ----------- ----------- Net income $ 854 $ 35 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 139 132 Amortization of unearned compensation 39 77 Amortization of premiums, net 39 43 Accretion of deferred income (expense), net 15 (16) Loan fees (cost) deferred, net (38) (91) Loss on sale of real estate owned, net 2 - Provision for loan losses 102 85 Net loans originated for sale (1,047) (138) Amortization of goodwill 54 56 Change in assets and liabilities: (Increase)decrease in accrued interest receivable 87 (88) (Increase) decrease in other assets 10 (113) Increase (decrease) in accrued interest payable 12 (9) Increase (decrease) in income taxes payable (101) (213) Increase (decrease)in other liabilities (184) 1,085 ----------- ----------- Net cash provided by (used in) operating activities (17) 845 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of securities available for sale 950 850 Purchase of securities available for sale (1,499) (1,838) Proceeds from maturities of securities 2,002 1,061 Purchase of securities - (3,992) Principal payments received on mortgage-backed securities 1,449 816 Purchase of mortgage-backed securities - (5,873) Proceeds from sale of real estate owned 54 5 Net loan originations (repayments) 4,672 (1,252) Capital expenditures (518) (52) ----------- ----------- Net cash provided by (used in) investing activities 7,110 (10,275) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in deposits, net (538) 11,268 Payment of FHLB advances - (352) Proceeds from exercise of stock options 58 39 Purchase of treasury stock (1,539) - Dividends paid (390) (318) ----------- ----------- Net cash provided by financing activities (2,409) 10,637 ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 4,684 1,207 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,965 12,114 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,649 $ 13,321 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for- Income taxes $ 536 $ 42 =========== =========== Interest $ 3,623 $ 3,609 =========== =========== Noncash transactions- Transfers of loans receivable to real estate owned $ 686 $ 92 Declaration of cash dividends $ 144 $ 122 (Decrease) increase in unrealized loss on securities available for sale, net of deferred tax $ 72 $ 22 =========== ===========
See accompanying notes to condensed consolidated financial statements. 4 FIRSTFED BANCORP, INC. ---------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- (Dollar amounts in thousands, except per share amounts) 1. BASIS OF PRESENTATION: ---------------------- FirstFed Bancorp, Inc. (the "Company") is the holding company and sole shareholder of First Federal Savings Bank ("First Federal") and of First State Corporation ("FSC"), which in turn is the sole shareholder of First State Bank of Bibb County ("First State"). First Federal and First State are referred to herein collectively as the "Banks". The accompanying condensed consolidated financial statements as of September 30, 1997 (unaudited) and March 31, 1997, and for the three and six months ended September 30, 1997 and 1996 (unaudited), include the accounts of the Company, FSC and the Banks. All significant intercompany transactions and accounts have been eliminated in consolidation. In the opinion of management, all adjustments necessary for a fair presentation of the results of such interim periods have been included. The results of operations for the three and six months ended September 30, 1997, are not necessarily indicative of the results of operations which may be expected for the entire year. These unaudited condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended March 31, 1997. The accounting policies followed by the Company are set forth in the summary of Significant Accounting Policies in the footnotes to the Company's March 31, 1997, Consolidated Financial Statements. 2. EARNINGS AND DIVIDENDS PER SHARE: --------------------------------- In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." This Statement establishes standards for computing and presenting earnings per share ("EPS"). This Statement will simplify the standards for computing EPS previously found in APB Opinion No. 15, "Earnings per Share," and will make them comparable to international EPS standards. It will replace the presentation of primary EPS with a presentation of basic EPS and will require dual presentation of basic and diluted EPS on the face of the income statement. Also, disclosure will be made of a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods, and requires restatement of all prior-period EPS data presented. The Company will adopt the Statement at fiscal year-end 1998. Had the Company implemented SFAS No. 128 on April 1, 1996, the pro forma EPS results would have been as follows: 5
Six Months Six Months Ended September 30, 1997 Ended Septemer 30, 1996 ------------------------------------ ------------------------------------ Dilutive Dilutive Effect of Effect of Options Options Basic Issued Diluted Basic Issued Diluted ---------- ---------- ---------- ---------- ---------- ---------- Net Income $ 854,000 --- $ 854,000 $ 35,000 --- $ 35,000 Shares available to common shareholders 1,194,144 50,354 1,199,498 1,218,690 27,688 1,246,378 ---------- ---------- ---------- ---------- ---------- ---------- Earnings per share $ 0.71 $ 0.02 $ 0.69 $ 0.03 --- $ 0.03 ========== ========== ========== ========== ========== ==========
Dividends declared for the quarter ended September 30, 1997, consisted of a $.125 per share quarterly dividend. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparison of Financial Condition as of September 30, 1997, and March 31, 1997 - ------------------------------------------------------------------------------- All dollar amounts, except per share amounts, included hereafter in Management's Discussion and Analysis of Financial Condition and Results of Operations are in thousands. Fed funds increased $5,975, or 142.26%, to $10,175 at September 30, 1997. This increase is primarily the result of funds received from the repayments of loans receivable. Securities available for sale and held to maturity decreased $1,336, or 8.0%, to $15,367 at September 30, 1997. This decrease reflects the purchase of $1,499 of government securities and government agency notes, offset by the effect of securities totaling $2,952 maturing or being called prior to maturity. Mortgage-backed securities decreased $1,486, or 11.15%, to $11,843 at September 30, 1997, from $13,329 at March 31, 1997. This decrease is primarily the result of principal repayments and prepayments. Loans receivable, net, at September 30, 1997, were $121,412, a decrease of $5,437, or 4.3%, from $126,849 at March 31, 1997. The decrease in loans receivable, net, is primarily the result of repayments and the origination of loans for sale in the secondary market rather than for retention in the Banks' portfolios. The Company's consolidated allowances for loan losses increased to $784 at September 30, 1997, from $733 at March 31, 1997. This increase is primarily due to a provision of $102 offset by the net of charge-offs over recoveries of $51. Non-performing loans at September 30, 1997, were $1,569 or 1.3% of loans receivable, a decrease from the March 31, 1997, level of $1,900 or 1.5% of loans receivable. At September 30, 1997, there were no loans not included in nonperforming 6 loans which represented material credits about which management was aware of any information which caused management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms. Real estate owned was $833 at September 30, 1997, an increase of $702 from March 31, 1997, primarily as a result of foreclosures on loans that had been nonperforming at March 31, 1997. Three real estate properties have been foreclosed since March 31, 1997. Based on the evaluations of the current values of such properties, management does not believe that the Company will suffer any loss upon their disposition. Deposits decreased $538, or 0.3%, to $157,432 at September 30, 1997, from $157,970 at March 31, 1997. The decrease is primarily related to a relatively small portion of previously issued certificates of deposit that matured and were not renewed. The deposits were part of a special offer related to First Federal's 60th Anniversary. The Company had stockholders' equity of $16,997 as of September 30, 1997, a decrease of $926, or 5.2%, from $17,923 as of March 31, 1997. The net decrease is primarily attributable to the purchase of treasury stock totaling $1,539, and dividends declared of $411, or $.35 per share, slightly offset by net income for the six months ended September 30, 1997 of $854. Included in such dividends was a special dividend of $.10 per share which was paid in the quarter ended June 30, 1997. Liquidity and Capital Resources - ------------------------------- Traditionally, the Company's principal sources of funds have been deposits, principal and interest payments on loans, and proceeds from maturities of mortgage-backed securities and other securities. In addition, First Federal has borrowing ability from the Federal Home Loan Bank of Atlanta if the need for additional funds arises. At September 30, 1997, the Banks had commitments to originate and fund loans of $5,897. The Company anticipates that sufficient funds will be available to meet these current loan commitments. First Federal is required by regulation to maintain minimum levels of liquid assets. The liquidity of First Federal at September 30, 1997, was 14.0%, which exceeded the applicable 5.0% regulatory requirement. Under applicable regulations, First Federal, First State and the Company are each required to maintain minimum capital ratios. Set forth below are their actual capital ratios and the minimum regulatory capital requirements as of September 30, 1997. 7
First Federal First State The Company ------------------- ------------------- ------------------- RISK-BASED CAPITAL RATIOS Tier 1 Capital Stockholders' Equity less goodwill $ 10,945 7.91% $ 2,922 7.94% $ 16,995 9.69% Minimum Required 5,537 4.00% 1,472 4.00% 6,991 4.00% -------- -------- -------- -------- -------- -------- Excess $ 5,408 3.91% $ 1,450 3.94% $ 10,004 5.67% ======== ======== ======== ======== ======== ======== Total Capital Tier 1 Capital plus allowances for loan losses $ 11,413 13.73% $ 3,181 15.40% $ 17,722 17.08% Minimum Required 6,646 8.00% 1,653 8.00% 8,300 8.00% -------- -------- -------- -------- -------- -------- Excess $ 4,767 5.73% $ 1,528 7.40% $ 9,422 9.08% ======== ======== ======== ======== ======== ======== Total Risk-weighted assets $ 83,094 $ 20,657 $103,751 ======== ======== ======== LEVERAGE RATIOS Tier 1 Capital $ 10,945 7.91% $ 2,922 7.94% $ 16,995 9.69% Minimum Leverage Requirement 4,153 3.00% 1,104 3.00% 5,257 3.00% -------- -------- -------- -------- -------- -------- Excess $ 6,792 4.91% $ 1,818 4.94% $ 11,738 6.69% ======== ======== ======== ======== ======== ======== TANGIBLE CAPITAL RATIO Tangible Capital $ 10,945 7.91% Tangible Capital Requirement 2,070 1.50% -------- -------- Excess $ 8,875 6.41% ======== ========
General Results of Operations - Comparison of the Three Months Ended September - ------------------------------------------------------------------------------ 30, 1997 and 1996 - ----------------- For the three months ended September 30, 1997, the Company recorded a net income of $420, compared to a net loss of ($325) for the three months ended September 30, 1996. The increase is primarily the result of two nonrecurring items recorded in the prior year: the accrual of the Savings Association Insurance Fund ("SAIF") special assessment of approximately $725 and the accrual of a lawsuit judgment of $325. Excluding the effect of these two nonrecurring items recorded by the Company, net income for the three months ended September 30, 1996, would have been $365. The increase in net income for the three months ended September 30, 1997, compared to the same period a year ago, without considering the nonrecurring items, is primarily the result of an increase in net interest income and noninterest income. Interest Income - --------------- Total interest income decreased $1, to $3,371 for the three months ended September 30, 1997. This generally constant level of interest income is the result of a decrease in the average balance of interest earning assets during the three months ended September 30, 1997, as compared to the three months ended September 30, 1996. This decrease was partially offset by an increase in the average yield on interest earning assets to 8.3% during the three months ended September 30, 1997, from 8.1% for the corresponding quarter of the previous year. 8 Interest income and fees on loans decreased $39, or 1.4%, to $2,796 during the three months ended September 30, 1997, from $2,835 for the three months ended September 30, 1996. The decrease in interest income on loans is attributable to a 1.8% decrease in the average balance of loans during the second quarter of fiscal 1998 as compared to the second quarter of fiscal 1997. The decrease was partially offset by an increase in the average yield on loans to 8.9% for three months ended September 30, 1997, compared to 8.8% for the corresponding quarter of the previous year. Interest earned on mortgage-backed securities increased $54, or 38.0%, to $196 for the three months ended September 30, 1997, from $142 for the corresponding three months ended September 30, 1996. The increase is primarily attributable to a 36.6% increase in the average balance of mortgage-backed securities during the quarter ended September 30, 1997, as compared to the quarter ended September 30, 1996. The increase in the average balance of mortgage-backed securities is primarily the result of the purchase of mortgage-backed securities during the latter part of fiscal 1997, net of principal repayments and prepayments. Interest and dividends on the securities portfolio decreased $57, or 20.2%, during the second quarter of fiscal 1998 from the second quarter of fiscal 1997. This decrease reflects a 22.1% decrease in the average balance of securities from the corresponding quarter of the previous year. The decrease in the average balance was partially offset by a slight increase in the average yield. Interest Expense - ---------------- Interest expense for the quarter ended September 30, 1997, decreased $65, or 3.5%, to $1,811, from $1,876 during the quarter ended September 30, 1996. This decrease is primarily attributable to a decrease in the average balance of deposits of 0.3% and a decrease in the average rate paid on deposits to 4.6% during the quarter ended September 30, 1997, from 4.7% for the quarter ended September 30, 1996. Net Interest Income - ------------------- Net interest income for the quarter ended September 30, 1997, increased $64, or 4.3%, to $1,560 from $1,496 for the quarter ended September 30, 1997. The increase is due in part to an increase in the average net interest spread to 3.6% in the second quarter of fiscal 1998 from 3.3% in the second quarter of fiscal 1997. The increase was partially offset by a decrease in the average balance of interest-earning assets and interest-bearing liabilities. The net interest margin was 3.8% in the second quarter of fiscal 1998 as compared to 3.6% in the second quarter of fiscal 1997. Provision for Loan Losses - ------------------------- Management increased the Company's consolidated allowances for loan losses by a provision of $51 during the quarter ended September 30, 1997. This provision was recorded to maintain the allowances for loan losses at adequate levels. 9 The allowances for loan losses are based on management's evaluation of possible losses inherent in the loan portfolios. Among other factors, management considers historical loss experience, current economic conditions, distribution of the loan portfolio by risk class and the estimated value of the underlying collateral. Noninterest Income - ------------------ Noninterest income for the quarter ended September 30, 1997, totaled $210 as compared to $204 for the quarter ended September 30, 1996. The increase is primarily the result of the fee income from various deposit services. Noninterest Expenses - -------------------- Noninterest expenses during the quarter ended September 30, 1997, decreased $1,060 to $1,081 from the fiscal 1997 second quarter level of $2,141. The decrease in noninterest expense reflects the one-time accrual of the SAIF special assessment of approximately $725 and the accrual of a lawsuit judgment of $325 recorded in the prior year. Income Taxes - ------------ The provision for income taxes increased $389 to $218 for the quarter ended September 30, 1997, as compared to a credit of ($171) for the corresponding quarter of the prior year. The tax credit is the result of the net operating loss for the quarter ended September 30, 1996 primarily as a result of the nonrecurring noninterest expense items recorded during the period. General Results of Operations - Comparison of the Six Months Ended September 30, - -------------------------------------------------------------------------------- 1997 and 1996 - ------------- Net income for the six months ended September 30, 1997, was $854, an increase of $819, from net income of $35 for the six months ended September 30, 1996. The increase is primarily attributable to two nonrecurring items recorded in the prior year: the accrual of the SAIF special assessment of approximately $725 and the accrual of a lawsuit judgment in the amount of $325. Excluding the effect of these two nonrecurring items, net income for the six months ended September 30, 1996 would have been $725. Interest Income - --------------- Total interest income increased $230, or 3.5%, to $6,785 for the six months ended September 30, 1997. This increase is primarily the result of an increase in the average yield on the interest-earning assets to 8.3% during the six months ended September 30, 1997, from 8.0% during the six months ended September 30, 1996. This increase was partially offset by a decrease in the average balance of interest earning assets during the six months ended September 30, 1997, as compared to the six months ended September 30, 1996. 10 Interest and fees on loans increased $39, or 0.7%, to $5,648 during the six months ended September 30, 1997, from $5,609 for the six months ended September 30, 1996. The increase is primarily the result of an increase in the average yield on loans to 9.0% for the six months ended September 30, 1997, from 8.7% at September 30, 1996. This increase was partially offset by a slight decrease in the average balance of loans during the second quarter of fiscal 1998 as compared to the same period of fiscal 1997. Interest earned on mortgage-backed securities increased $177, or 78.3%, to $403 for the six months ended September 30, 1997, from $226 for the corresponding six months ended September 30, 1996. The increase reflects a 84.1% increase in the average balance of mortgage-backed securities during the six months ended September 30, 1997, as compared to the six months ended September 30, 1996. The increase in the average balance of mortgage-backed securities was the result of the purchase of mortgage-backed securities during the latter part of fiscal 1997, net of principal repayments and prepayments. Interest and dividends on the securities portfolio decreased $16, or 3.2%, for the six months ended September 30, 1997, compared to the six months ended September 30, 1996, reflecting a decrease in the average balance of investment securities. Interest Expense - ---------------- Interest expense for the six months ended September 30, 1997, increased $35, or 1.0%, to $3,635, from $3,600 during the six months ended September 30, 1996. This increase was attributable to an increase in the average level of deposits of 2.8% for the six months ended September 30, 1997. The increase was also the result of a 1% decrease in the average rate paid on deposits for the six month periods ended September 30,1997, compared to the same period a year ago. Net Interest Income - ------------------- Net interest income for the six months ended September 30, 1997, increased $195, or 6.6%, to $3,150, from $2,955 for the six months ended September 30, 1996. This increase was due primarily to an increase in the average net interest spread to 3.7% for the six months ended September 30, 1997, from 3.3% for the six months ended September 30, 1996. The net interest margin increased to 3.9% in the six months ended September 30, 1997, from 3.6% in the six months ended September 30, 1996. Provisions for Loan Losses - -------------------------- The Company's consolidated allowances for loan losses are based on management's evaluation of possible losses inherent in the loan portfolios. Among other factors, management considers historical loss experience, current economic conditions, distribution of the loan portfolios by risk class and the estimated value of the underlying collateral. The allowances for loan losses were increased by provisions of $102 for the six months ended September 30, 1997. These provisions were recorded to maintain the allowances for loan losses at adequate levels. 11 Noninterest Income - ------------------ Noninterest income for the six months ended September 30, 1997, totaled $439 as compared to $398 for the six months ended September 30, 1996. The increase is primarily the result of an increase in various deposit related services. Noninterest Expenses - -------------------- Noninterest expenses during the six months ended September 30, 1997, decreased $1,021 to $2,188 from the fiscal 1997 level of $3,209. The decrease in noninterest expense is primarily the result of the accrual of the SAIF special assessment of approximately $725 and the accrual of a lawsuit judgment of $325, both of which were recorded in the prior year. Income Taxes - ------------ The provision for income taxes increased $421, to $445 for the six months ended September 30, 1997, as compared to the corresponding period of the prior year. The increased tax expense was due to the increase in pretax income. PART II. OTHER INFORMATION --------------------------- ITEM 1. LEGAL PROCEEDINGS From time to time, the Company and the Banks are parties to routine legal proceedings occurring in the ordinary course of business. At September 30, 1997, there were no legal proceedings to which the Company or the Banks were a party or parties, or to which any of their property was subject, which were expected by management to result in a material loss to the Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On July 29, 1997, the Company held the 1997 Annual Meeting of Stockholders. The election of Fred T. Blair, Malcolm E. Lewis, and G. Larry Russell as directors was submitted to a vote of the stockholders. The following is the result of the vote:
For Withheld --------- -------- Fred T. Blair 1,091,973 4,738 Malcolm E. Lewis 1,091,188 5,523 G. Larry Russell 1,091,973 4,738
There were no broker non-votes in the above matter. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. (i) Exhibit 27 (SEC use only) (b) Reports on Form 8-K None. 13 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 there unto duly authorized. FIRSTFED BANCORP, INC. Date: November 5, 1997 /s/ B.K. Goodwin, III ------------------------- B. K. Goodwin, III Chairman of the Board, Chief Executive Officer and President (Duly Authorized Officer) Date: November 5, 1997 /s/ Lynn J. Joyce ------------------------- Lynn J. Joyce Vice President, Secretary and Treasurer (Principal Financial and Accounting Officer) 14 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 6-MOS MAR-31-1998 APR-01-1997 SEP-30-1997 6,986 1,488 10,175 0 12,374 16,214 16,320 121,412 784 176,464 157,432 1,000 1,036 0 0 0 15 16,981 176,464 5,648 889 248 6,785 3,598 3,635 3,150 102 0 2,188 1,299 1,299 0 0 854 0.71 0.69 8.3 796 588 0 0 733 97 46 784 0 0 784
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