-----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, Cx3YrPuSrnitTryI6wErXMAHK7OcTCwkhmswsWZDXvnChWWuNIFfQ0cKasvv6Jrx hxKQajCtdlIkXK/pE4YI1g== 0001025537-99-000085.txt : 19990811 0001025537-99-000085.hdr.sgml : 19990811 ACCESSION NUMBER: 0001025537-99-000085 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990810 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: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-19609 FILM NUMBER: 99682638 BUSINESS ADDRESS: STREET 1: 1630 4TH AVE N CITY: BESSEMER STATE: AL ZIP: 35020 BUSINESS PHONE: 2054288472 10QSB 1 FIRSTFED BANCORP FORM 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 --------------------- FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____ Commission File Number: 0-19609 ------- FirstFed Bancorp, Inc. ---------------------------------------- (Exact name of Small Business Issuer 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) Issuer's telephone number, including area code: (205) 428-8472 -------------- Check whether the issuer (1) 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 ____ State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding at July 16, 1999 ----- ---------------------------- Common Stock, $.01 par value 2,485,422 shares Transitional Small Business Disclosure Format (Check one): YES ___ NO [X] FIRSTFED BANCORP, INC. Page ---- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS: CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION AS OF JUNE 30, 1999 AND DECEMBER 31, 1998................................... 2 CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998......................................... 3 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998..................................... 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998..................................... 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.......................... 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.................................................... 8 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS................................................... 13 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........................... 13 ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................... 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 13 ITEM 5. OTHER INFORMATION................................................... 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................... 14 SIGNATURES................................................................... 15 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. i. PART I - FINANCIAL INFORMATION ITEM. 1. FINANCIAL STATEMENTS FIRSTFED BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollar amounts in thousands)
June 30, December 31, ASSETS 1999 1998 - ------ ---- ---- Cash and Cash Equivalents: Cash on hand and in banks $ 7,181 $ 6,385 Interest-bearing deposits in other banks 5,774 6,025 Federal funds sold 22,500 31,225 ----------- ----------- 35,455 43,635 ----------- ----------- Securities available for sale, at fair value 11,865 6,609 Loans held for sale 769 2,219 ----------- ----------- Securities held to maturity, at amortized cost, fair value of $15,556 and $17,180, respectively 15,545 16,976 Loans receivable, net 111,277 109,209 Land, buildings and equipment, net 3,164 3,065 Goodwill 1,254 1,308 Real estate owned 224 724 Accrued interest receivable 1,450 1,345 Income taxes receivable 252 602 Other assets 646 458 ----------- ----------- $ 181,901 $ 186,150 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 162,903 $ 167,257 Accrued interest payable 139 141 Dividends payable 174 178 Other liabilities 240 371 ----------- ----------- 163,456 167,947 ----------- ----------- Stockholders' Equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none outstanding - - Common stock, $.01 par value, 10,000,000 shares authorized, 3,062,139 shares issued and 2,330,134 shares outstanding at June 30, 1999 and 3,031,646 shares issued and 2,301,713 shares outstanding at December 31, 1998 31 30 Paid-in capital 7,638 7,502 Retained earnings 15,745 15,622 Deferred compensation obligation 1,243 1,199 Deferred compensation treasury stock (152,103 shares at June 30, 1999 and 150,031 shares at December 31, 1998) (1,396) (1,373) Treasury stock, at cost, 579,902 shares at June 30, 1999, and December 31, 1998 (3,752) (3,752) Unearned compensation (989) (1,064) Unrealized (loss) gain on securities available for sale, net (75) 39 ----------- ----------- 18,445 18,203 ----------- ----------- $ 181,901 $ 186,150 =========== ===========
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 June 30, June 30, ------------------- ---------------- 1999 1998 1999 1998 ---- ---- ---- ---- INTEREST INCOME: Interest and fees on loans $ 2,496 $ 2,705 $ 4,976 $ 5,402 Interest and dividends on securities 362 399 661 846 Other interest income 357 279 782 515 ---------- ---------- ---------- ---------- Total interest income 3,215 3,383 6,419 6,763 ---------- ---------- ---------- ---------- INTEREST EXPENSE: Interest on deposits 1,646 1,807 3,425 3,626 ---------- ---------- ---------- ---------- Total interest expense 1,646 1,807 3,425 3,626 ---------- ---------- ---------- ---------- Net interest income 1,569 1,576 2,994 3,137 Provision for loan losses 28 29 57 58 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 1,541 1,547 2,937 3,079 ---------- ---------- ---------- ---------- NONINTEREST INCOME: Fees and other noninterest income 230 204 469 396 ---------- ---------- ---------- ---------- NONINTEREST EXPENSE: Salaries and employee benefits 712 701 1,362 1,359 Office building and equipment expenses 157 141 304 282 Deposit insurance expense 19 22 38 44 Amortization of goodwill 27 27 54 54 Other operating expenses 329 294 633 593 ---------- ---------- ---------- ---------- Total noninterest expenses 1,244 1,185 2,391 2,332 ---------- ---------- ---------- ---------- Income before income taxes 527 566 1,015 1,143 Provision for income taxes 194 190 371 381 ---------- ---------- ---------- ---------- NET INCOME $ 333 $ 376 $ 644 $ 762 ========== ========== ========== ========== AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC 2,400,787 2,321,010 2,393,622 2,228,051 ========== ========== ========== ========== BASIC EARNINGS PER SHARE $ .14 $ .16 $ .27 $ .34 ========== ========== ========== ========== AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED 2,476,106 2,447,685 2,470,880 2,350,262 ========== ========== ========== ========== DILUTED EARNINGS PER SHARE $ .13 $ .15 $ .26 $ .32 ========== ========== ========== ========== DIVIDENDS DECLARED PER SHARE $ .07 $ .1325 $ .21 $ .1925 ========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements. 3 FIRSTFED BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Six Months Ended June 30, 1999 and 1998 (Dollar amounts in thousands, except per share amounts)
Unrealized Deferred Gain (Loss) Deferred Compen- on Securities Compen- sation Unearned Available Compre- Common Paid-In Retained sation Treasury Treasury Compen- for Sale, hensive Stock Capital Earnings Obligation Stock Stock sation Net Income ----- ------- -------- ---------- ----- ----- ------ --- -------- BALANCE, December 31, 1997 $ 14 $ 6,676 $14,968 $ - $ - $(4,320) $ (26) $ 12 Net income - - 762 - - - - - $ 762 Change in unrealized gain (loss) on securities available for sale, net of tax of $3 - - - - - - - 5 5 ------- Comprehensive income - - - - - - - - $ 767 ======= Amortization of unearned compensation - - - - - - 59 - Awards under stock plans 1 206 - - - - (207) - Dividends declared ($.1925 per share) - - (471) - - - - - Exercise of stock options - 45 - - - - - - Stock issued under Dividend Reinvestment Plan 1 71 - - - - - - Issuance of treasury stock to Employee Stock Ownership Plan - 382 - - - 568 (950) - ESOP change in value - 2 - - - - - - Two-for-one stock split 14 (14) - - - - - - ------- ------ -------- ------- ------- ------- ------- ------ BALANCE, June 30, 1998 $ 30 $7,368 $ 15,259 $ - $ - $(3,752) $(1,124) $ 17 ======= ====== ======== ======= ======= ======= ======= ====== BALANCE, December 31, 1998 $ 30 $7,502 $ 15,622 $1,199 $(1,373) $(3,752) $(1,064) $ 39 Net income - - 644 - - - - - $ 644 Change in unrealized gain (loss) on securities available for sale, net of tax of $84 - - - - - - - (114) (114) ------- Comprehensive income - - - - - - - - $ 530 ======= Amortization of unearned compensation - - - - - - 75 - Dividends declared ($.21 per share) - - (521) - - - - - Exercise of stock options - 60 - - - - - - Stock issued under Dividend Reinvestment Plan 1 89 - - - - - - Amortization of Deferred Compensation Plan Obligation - - - 21 - - - - Addition to Deferred Compensation Plan - - - 23 (23) - - - ESOP change in value - (13) - - - - - - ------- ------ -------- ------- ------- ------- ------- ------ BALANCE, June 30, 1999 $ 31 $7,638 $ 15,745 $ 1,243 $(1,396) $(3,752) $ (989) $ (75) ======= ====== ======== ======= ======= ======= ======= ======
See accompanying notes to condensed consolidated financial statements. 4 FIRSTFED BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands)
Six Months Ended June 30, CASH FLOWS FROM OPERATING ACTIVITIES: 1999 1998 ---- ---- Net income $ 644 $ 762 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 130 129 Amortization of unearned compensation and deferred compensation obligation 109 59 Amortization of purchase premiums, net 99 69 Accretion of deferred income (expense), net (139) 3 Provision (credit) for deferred income taxes - (258) Provision for loan losses 57 58 Loan fees (cost) deferred, net 196 13 (Gain) loss on sale of real estate, net (26) 12 Origination of loans held for sale (8,003) (12,613) Proceeds from loans held for sale 9,453 12,017 Amortization of goodwill 54 54 Change in assets and liabilities: (Increase) decrease in accrued interest receivable (105) 123 (Increase) decrease in other assets (188) (185) (Increase) decrease in current income taxes receivable 436 - Increase (decrease) in accrued interest payable (2) (14) Increase (decrease) in current income taxes payable - (23) Increase (decrease) in other liabilities (131) (77) -------- -------- Net cash provided by operating activities 2,584 129 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of securities available for sale 1,800 4,738 Purchase of securities available for sale (7,252) (1,249) Proceeds from maturities and payments received on securities held to maturity 6,330 4,836 Purchase of securities held to maturity (5,000) (552) Proceeds from sale of real estate and repossessed assets 668 162 Net loan repayments (originations) (2,351) 2,918 Capital expenditures (229) (28) -------- -------- Net cash provided by (used in) investing activities (6,034) 10,825 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in deposits, net (4,354) 979 Proceeds from exercise of stock options 60 47 Dividends paid (525) (445) Proceeds from dividend reinvestment 89 69 -------- -------- Net cash provided by (used in) financing activities (4,730) 650 -------- -------- NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (8,180) 11,604 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 43,635 20,080 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 35,455 $ 31,684 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for- Income taxes $ 20 $ 672 Interest 3,427 3,640 Noncash transactions- Transfer of loans receivable to real estate owned 169 386 Declaration of cash dividends 173 170 Recording of deferred compensation 23 - Noncash compensation under stock plans - 207
See accompanying notes to condensed consolidated financial statements. 5 FIRSTFED BANCORP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION: FirstFed Bancorp, Inc. (the "Company") is the holding company and sole shareholder of First Federal Savings Bank ("First Federal") and 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 June 30, 1999 (unaudited), and December 31, 1998, and for the three and six months ended June 30, 1999 and 1998 (unaudited), include the accounts of the Company and the Banks. All significant intercompany transactions and accounts have been eliminated in consolidation. In the opinion of management, all adjustments (none of which are other than normal recurring accruals) 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 June 30, 1999, are not necessarily indicative of the results of operations which may be expected for the entire fiscal 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-KSB for the year ended December 31, 1998. The accounting policies followed by the Company are set forth in the Summary of Significant Accounting Policies in the Company's December 31, 1998, Consolidated Financial Statements. 2. EARNINGS AND DIVIDENDS PER SHARE: Earnings per share for the three and six months ended June 30, 1999 and 1998, respectively, were as follows:
Three Months Three Months Ended June 30, 1999 Ended June 30, 1998 ----------------------------------- --------------------------------- Dilutive Dilutive Effect of Effect of Options Options Basic Issued Diluted Basic Issued Diluted ----- ------ ------- ----- ------ ------- Net income $ 333,000 --- $ 333,000 $ 376,000 --- $ 376,000 Shares available to common shareholders 2,400,787 75,319 2,476,106 2,321,010 126,675 2,447,685 --------- ------ --------- --------- ------- --------- Earnings per share $ 0.14 --- $ 0.13 $ 0.16 --- $ 0.15 ========= ====== ========= ========= ======= =========
6
Six Months Six Months Ended June 30, 1999 Ended June 30, 1998 ----------------------------------- --------------------------------- Dilutive Dilutive Effect of Effect of Options Options Basic Issued Diluted Basic Issued Diluted ----- ------ ------- ----- ------ ------- Net income $ 644,000 --- $ 644,000 $ 762,000 --- $ 762,000 Shares available to common shareholders 2,393,622 77,258 2,470,880 2,228,051 122,211 2,350,262 --------- ------ --------- --------- ------- --------- Earnings per share $ 0.27 --- $ 0.26 $ 0.34 --- $ 0.32 ========= ====== ========= ========= ======= =========
Dividends declared for the quarter ended June 30, 1999, consisted of a $.07 per share quarterly dividend and for the six months ended June 30, 1999, consisted of $.14 per share quarterly dividends and a $.07 per share special dividend. 3. SEGMENT DISCLOSURE: The holding company is considered a separate reportable segment from the banking operations since it does not offer products or services or interact with customers, but does meet the quantitative threshold as outlined in the accounting standards. The Company's segment disclosure is as follows for the three and six months ended June 30, 1999 and 1998.
Three Months Ended June 30, 1999 ------------------------------------------------------ Banking Holding Total Operations Company Eliminations Company ---------- ------- ------------ ------- (In thousands) Net interest income $ 1,546 $ 23 $ - $ 1,569 Provision for loan losses 28 - - 28 Noninterest income 230 - - 230 Noninterest expense 1,116 128 - 1,244 ---------- -------- ---------- ---------- Income before income taxes 632 (105) - 527 Income tax expense 229 (35) - 194 ---------- -------- ---------- ---------- Net income $ 403 $ (70) $ - $ 333 ========== ======== ========== ========== Total assets $ 181,794 $ 18,446 $ (18,339) $ 181,901 ========== ======== ========== ==========
Three Months Ended June 30, 1998 ------------------------------------------------------- Banking Holding Total Operations Company Eliminations Company ---------- ------- ------------ ------- (In thousands) Net interest income $ 1,540 $ 36 $ - $ 1,576 Provision for loan losses 29 - - 29 Noninterest income 204 - - 204 Noninterest expense 1,071 114 - 1,185 ---------- --------- ---------- ---------- Income before income taxes 644 (78) - 566 Income tax expense 216 (26) - 190 ---------- --------- ---------- ---------- Net income $ 428 $ (52) $ - $ 376 ========== ========= ========== ========== Total assets $ 179,662 $ 17,798 $ (17,567) $ 179,893 ========== ========= ========== ==========
7
Six Months Ended June 30, 1998 ------------------------------------------------------- Banking Holding Total Operations Company Eliminations Company ---------- ------- ------------ ------- (In thousands) Net interest income $ 2,946 $ 48 $ - $ 2,994 Provision for loan losses 57 - - 57 Noninterest income 469 - - 469 Noninterest expense 2,175 216 - 2,391 ---------- ------- ---------- ---------- Income before income taxes 1,183 (168) - 1,015 Income tax expense 429 (58) - 371 ---------- ------- ---------- ---------- Net income $ 754 $ (110) $ - $ 644 ========== ======= ========== ========== Total assets $ 181,794 $18,446 $ (18,339) $ 181,901 ========== ======= ========== ==========
Six Months Ended June 30, 1998 ------------------------------------------------------- Banking Holding Total Operations Company Eliminations Company ---------- ------- ------------ ------- (In thousands) Net interest income $ 3,066 $ 71 $ - $ 3,137 Provision for loan losses 58 - - 58 Noninterest income 396 - - 396 Noninterest expense 2,135 197 - 2,332 ---------- ------- ---------- ---------- Income before income taxes 1,269 (126) - 1,143 Income tax expense 428 (47) - 381 ---------- ------- ---------- ---------- Net income $ 841 $ (79) $ - $ 762 ========== ======= ========== ========== Total assets $ 179,662 $17,798 $ (17,567) $ 179,893 ========== ======= ========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Management's discussion and analysis includes certain forward-looking statements addressing, among other things, the Company's prospects for earnings, asset growth and net interest margin. Forward-looking statements are accompanied by, and identified with, such terms as "anticipates," "believes," "expects," "intends," and similar phrases. Management's expectations for the Company's future necessarily involve a number of assumptions and estimates. Factors that could cause actual results to differ from the expectations expressed herein are: substantial changes in interest rates, changes in the general economy, and changes in the Company's strategies for credit-risk management, interest-rate risk management and investment activities. Accordingly, any forward-looking statements included herein do not purport to be predictions of future events or circumstances and may not be realized. Comparison of Financial Condition as of June 30, 1999, and December 31, 1998 All dollar amounts, except per share amounts, included hereafter in Management's Discussion and Analysis are in thousands. Cash and cash equivalents decreased $8,180, or 18.7%, to $35,455 at June 30, 1999, from $43,635 at December 31, 1998. This decrease is primarily related to the decrease in deposits for the same period, 8 net of an increase in loans and securities. The Banks had 14-month and 19-month special certificate of deposit programs and these certificates matured primarily during the first half of 1999. Some rate sensitive funds were not retained. Securities available for sale and held to maturity increased $3,825, or 16.2%, to $27,410 at June 30, 1999, primarily due to purchases totaling $12,252 less securities totaling $8,130 either maturing, being called prior to maturity, or payments being received. Loans receivable, net, at June 30, 1999, were $111,277, an increase of $2,068, or 1.9%, from $109,209 at December 31, 1998. The increase in loans receivable, net, was primarily due to an increase in the origination of mortgage loans that were retained in the Banks' portfolios. The Company's consolidated allowance for loan losses decreased slightly to $1,071 at June 30, 1999, from $1,081 at December 31, 1998. This decrease of $10 was due to net charge-offs over recoveries of $67 offset by a provision of $57. Nonperforming loans, which includes nonaccruing loans and accruing loans delinquent ninety days or more, at June 30, 1999, decreased to $1,291, or 1.16% of loans receivable, from $1,735, or 1.48% of loans receivable at December 31, 1998. At June 30, 1999, there were no material loans not included in nonperforming 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 $224 at June 30, 1999, a decrease of $500 from December 31, 1998, as a result of the sale of several properties during the six months ended June 30, 1999. Deposits decreased $4,354, or 2.6%, to $162,903 at June 30, 1999, from $167,257 at December 31, 1998. The decrease in deposits is primarily the result of the maturity of certificates of deposit generated in special programs as previously discussed. The Company had stockholders' equity of $18,445 as of June 30, 1999, an increase of $242, or 1.3%, from $18,203 as of December 31, 1998. The primary components of the change were net income for the six months ended June 30, 1999, of $644 less dividends of $.21 per share totaling $521. Liquidity and Capital Resources Traditionally, the Banks' principal sources of funds have been deposits, principal and interest payments on loans and mortgage-backed securities, and proceeds from interest on and maturities of investments. In addition, First Federal has borrowing ability from the Federal Home Loan Bank of Atlanta if the need for additional funds arises. At June 30, 1999, the Banks had commitments to originate and fund loans of $8.6 million. The Banks anticipate that they will have sufficient funds available to meet their current commitments. First Federal is required by regulation to maintain minimum levels of liquid assets. The liquidity ratio of First Federal at June 30, 1999, was 23.8%, which exceeded the applicable regulatory requirement. Under applicable regulations, First Federal, First State and the Company are each required to maintain minimum capital ratios. Set forth below are actual capital ratios and the minimum regulatory capital requirements as of June 30, 1999. 9
First Federal First State The Company ------------- ----------- ----------- RISK-BASED CAPITAL RATIOS Tier 1 Capital: Stockholders' Equity less goodwill $ 12,234 9.20% $ 3,535 7.51% $ 17,266 9.49% Minimum Required 5,320 4.00% 1,884 4.00% 7,276 4.00% -------- ------- -------- ------ -------- ------ Excess $ 6,914 5.20% $ 1,651 3.51% $ 9,990 5.49% ======== ======= ======== ====== ======== ====== Total Capital: Tier 1 Capital plus allowances for loan losses $ 13,027 16.65% $ 3,814 14.50% $ 18,337 16.89% Minimum Required 6,259 8.00% 2,104 8.00% 8,683 8.00% -------- ------- -------- ------ -------- ------ Excess $ 6,768 8.65% $ 1,710 6.50% $ 9,654 8.89% ======== ======= ======== ====== ======== ====== Total Risk-weighted Assets $ 78,238 $ 26,300 $105,438 ======== ======== ======== LEVERAGE RATIO Tier 1 Capital $ 12,234 9.20% $ 3,535 7.51% $ 17,266 9.49% Minimum Leverage Requirement 5,320 4.00% 1,884 4.00% 7,276 4.00% -------- ------- -------- ------ -------- ------ Excess $ 6,914 5.20% $ 1,651 3.51% $ 9,990 5.49% ======== ======= ======== ====== ======== ====== TANGIBLE CAPITAL RATIO Tangible Capital $12,234 9.20% N/A N/A Tangible Capital Requirement 1,995 1.50% ------- ----- Excess $10,239 7.70% ======= =====
As of June 30, 1999, management was not aware of any trends, events or uncertainties that will have or are reasonably likely to have a material effect on the Company's or the Banks' liquidity, capital resources or operations. Results of Operations - Comparison of the Three Months Ended June 30, 1999 and 1998 Net income for the three months ended June 30, 1999, was $333, a decrease of $43, or 11.4%, from net income of $376 for the three months ended June 30, 1998. The decrease was primarily attributable to an increase in noninterest expense related to upgrades in technology including preparation for Year 2000. Interest Income Total interest income decreased $168, or 5.0%, to $3,215 for the three months ended June 30, 1999. This decrease was primarily due to a decrease in the average yield on interest-earning assets to 7.7%, from 8.2% for the corresponding quarter of the previous year, offset by a slight increase in the average balance of interest-earning assets. Interest Expense Interest expense for the quarter ended June 30, 1999, was $1,646, a decrease of $161, or 8.9%, to $1,646 from the quarter ended June 30, 1998. The decrease was primarily the result of a decrease in the average rate paid on deposits for the three months ended June 30, 1999, to 4.0% from 4.6% for the corresponding quarter of the previous year, net of a slight increase in the average balance of deposits. Net Interest Income Net interest income for the quarter ended June 30, 1999, was $1,569 compared to $1,576 for the quarter 10 ended June 30, 1998. The average net interest spread increased slightly to 3.7% for the three months ended June 30, 1999, from 3.6% for the same period in the prior year. The net interest margin was 3.8% for the three months ended June 30, 1999 and June 30, 1998. Provision for Loan Losses Management increased the Company's total allowance for loan losses by a provision of $28 during the quarter ended June 30, 1999. The Banks' allowances for loan losses were based on management's evaluation of possible losses inherent in the loan portfolio and consider, among other factors, prior years' loss experience, economic conditions, distribution of portfolio loans by risk class and the estimated value of the underlying collateral. Noninterest Income Noninterest income during the quarter ended June 30, 1999, increased $26, to $230, from the June 30, 1998, level of $204. The increase in noninterest income is primarily the result of an increase in secondary market fees for loans sold. Noninterest Expenses Noninterest expenses during the quarter ended June 30, 1999, increased $59 to $1,244 from the June 30, 1998, level of $1,185. Increases in noninterest expense are related to upgrades in technology including preparation for Year 2000. Income Taxes The provision for income taxes increased $4, or 2.1%, to $194 for the quarter ended June 30, 1999, as compared to the corresponding quarter in 1998. Results of Operations - Comparison of the Six Months Ended June 30, 1999 and 1998 Net income for the six months ended June 30, 1999, was $644, a decrease of $118, from net income of $762 for the six months ended June 30, 1998. The decrease was primarily attributable to a decrease in the Banks' interest rate spread because of a higher liquidity position on average during the current year. Interest Income Total interest income decreased $344, or 5.1%, to $6,419 for the six months ended June 30, 1999. This decrease was primarily the result of a decrease in the average yield on the interest-earning assets to 7.6% during the six months ended June 30, 1999, from 8.2% during the six months ended June 30, 1998. The decrease was partially offset by an increase in the average balance of interest-earning assets during the six months ended June 30, 1999, as compared to the six months ended June 30, 1998. Interest Expense Interest expense for the six months ended June 30, 1999, decreased $201, or 5.5%, to $3,425, from $3,626 during the six months ended June 30, 1998. This decrease was primarily attributable to a reduction 11 in the average rate paid on deposits to 4.2% for the six month period ended June 30, 1999, compared to 4.6% for the same period a year ago. Net Interest Income Net interest income for the six months ended June 30, 1999, decreased $142, or 4.6%, to $2,937, from $3,079 for the six months ended June 30, 1998. This decrease was due primarily to a decrease in the average net interest spread to 3.4% for the six months ended June 30, 1999, from 3.6% for the six months ended June 30, 1998. The net interest margin decreased to 3.5% in the six months ended June 30, 1999, from 3.8% in the six months ended June 30, 1998. Provision 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 totaling $57 for the six months ended June 30, 1999. These provisions were recorded to maintain the allowances for loan losses at adequate levels based on management's best estimates. Noninterest Income Noninterest income for the six months ended June 30, 1999, totaled $469 as compared to $396 for the six months ended June 30, 1998. The increase in noninterest income is primarily the result of an increase in secondary market fees for loans sold. Noninterest Expenses Noninterest expenses during the six months ended June 30, 1999, increased $59 to $2,391 from the fiscal 1998 level of $2,332. The increase in noninterest expense is partially related to upgrades in technology including preparation for Year 2000. Income Taxes The provision for income taxes decreased $10, to $371 for the six months ended June 30, 1999, as compared to the corresponding period of the prior year. The decreased tax expense was due to the decrease in pretax income. Year 2000 The Company has addressed, and will continue to address, the issue of Year 2000, which relates to software originally being written using a two digit format rather than a four digit format to represent the year. The date change format requires modification to some software and computer systems so that dates beyond December 31, 1999, will be properly recognized. The Banks have formed committees to assess, test, prepare and overview the applicable software, equipment and related technologies related to Year 2000 readiness. This assessment covered both information technology systems and non-information technology systems. 12 The Banks rely primarily upon a third party processor and other vendors rather than internally-generated software. Based on the analysis of software and equipment, in addition to ongoing discussions with vendors, the Company believes that upgrades, modifications or conversion of software planned by the Company and the third party vendors will properly address the Year 2000 issue. The third party processor, which processes all customer related data, has represented to the Banks that the testing of the software had been substantially completed at June 30, 1999. The Banks have adopted Year 2000 Test Plans and have conducted testing and evaluated results. Management presently believes that the Year 2000 issue will not pose a substantial internal operating risk to the Company. Additionally, the Company has implemented a process for assessing readiness of various suppliers of other services. There can be no guarantee, however, that the systems of these outside parties will be Year 2000 compliant on a timely basis. In turn, this could result in disruption to the operations of the Company. The Banks have adopted a Year 2000 Contingency Plan which would replace its computerized operations with a manual system, if necessary. The Banks are educating and assisting customers in identifying their Year 2000 issues. It has been determined that this is a relatively low risk area in that the Banks' commercial customers have a minimal reliance on computers to conduct business. Total Year 2000 costs include such items as payroll costs, upgrading existing software applications, replacing certain hardware and customer awareness program materials. The Banks do not have a system that specifically tracks all costs and time spent on the Year 2000 issue. The Company is in the process of estimating total expense related to Year 2000. Externally generated expenses incurred during the quarter ended June 30, 1999, are not considered significant. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS From time to time, the Banks are parties to routine legal proceedings occurring in the ordinary course of business. At June 30, 1999, 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. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On April 27, 1999, the Company held the 1999 Annual Meeting of Stockholders. The election of James B. Koikos, E. H. Moore, Jr. and James E. Mulkin as directors was submitted to a vote of the stockholders. The following is the result of the vote: 13 For Withheld --- -------- James B. Koikos 2,146,092 97,800 E. H. Moore, Jr. 2,146,092 97,800 James E. Mulkin 2,146,092 97,800 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. Exhibit 27 - Financial Data Schedule (SEC use only). (b) Reports on Form 8-K. None. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRSTFED BANCORP, INC. Date: August 9, 1999 \s\ B. K. Goodwin, III ------------------------ ---------------------------------- B. K. Goodwin, III, Chairman of the Board, Chief Executive Officer and President Date: August 9, 1999 \s\ Lynn J. Joyce ------------------------ ------------------------------------- Lynn J. Joyce Chief Financial Officer, Vice President, Secretary and Treasurer 15 EX-27 2 FDS - FIRSTFED BANCORP, INC.
9 0000876947 FirstFed Bancorp, Inc. 1,000 U.S. DOLLARS 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 1 7,181 5,774 22,500 0 11,865 15,545 15,556 111,277 1,071 181,901 162,903 0 240 0 0 0 31 18,414 181,901 4,976 661 782 6,419 3,425 3,425 2,994 57 0 2,391 1,015 1,015 0 0 644 .27 .26 7.7 320 1,138 0 0 1,081 101 34 1,071 0 0 1,071
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