SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 24, 2003
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
(Exact Name of Registrant as specified in Charter)
Kentucky 1-18832 61-1168311
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2323 Ring Road, Elizabethtown, Kentucky 42701
(Address of principal executive offices) (Zip code)
Registrant's telephone number,
including area code: (270) 765-2131
N/A
(Former name or former address, if changed since last report.)
INFORMATION TO BE INCLUDED IN THE REPORT
Items 1, 2, 3, 4, 5, 6, 7, 8, and 10, are not applicable and are omitted from this Report.
Item 9 and 12. Regulation FD Disclosure
FFKY's press release dated April 24, 2003, announcing its first quarter ended March 31, 2003, earnings is attached as
Exhibit 99 to this report.
The following exhibits are filed with this Report on Form 8-K:
REGULATION S-K
EXHIBIT NUMBERS EXHIBIT
99 Press Release dated April 24, 2003, announcing first quarter ended March 31, 2003 earnings.
SIGNATURE
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 hereunto duly authorized.
FIRST FEDERAL FINANCIAL CORPORATION
OF KENTUCKY
Date: April 29, 2003 By /s/ B. Keith Johnson
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B. Keith Johnson
President and Chief Executive Officer
EHIBIT 99
For Immediate Release - April 24, 2003
Contact: B. Keith Johnson
President & CEO
FIRST FEDERAL FINANCIAL CORPORATION OF KENTUCKY
ANNOUNCES 17% GROWTH IN FIRST QUARTER EARNINGS PER SHARE
ELIZABETHTOWN, Kentucky (April 24, 2003) - First Federal Financial Corporation of Kentucky (the "Company") NASDAQ
NMS: FFKY, the parent bank holding company of First Federal Savings Bank, (the "Bank"), today announced diluted
earnings per share of $.54 for the quarter ended March 31, 2003, a 17% increase from the March 2002 diluted
earnings per share of $.46. Return on equity was 14.56% for the 2003 quarter compared to 13.34% for the 2002
quarter.
Commenting on the quarter's results, B. Keith Johnson, President and Chief Executive Officer said, "The
challenges facing all banks from the economic slump and the unfavorable interest rate environment have been
successfully met by the Company and the Bank. I am proud of the Company's financial performance and the
opportunities that lie ahead. All of this is attributable to a great staff of dedicated and hard-working
associates coupled with a tremendous customer base and market share in the Central Kentucky region we serve."
Net Interest Income:
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Average interest earning assets were 8.5% higher in the March 2003 quarter than the March 2002 quarter. The
increase, primarily attributable to an 8% growth in customer deposits, offset the Bank's declining net interest
margin which fell to 3.63% for the March 2003 quarter from 3.96% for the March 2002 quarter. As a result, net
interest income remained relatively constant at $5.8 million for the 2003 quarter, compared to $5.9 million for
the 2002 quarter.
The net interest margin declined 22 basis points from the quarter ended December 31, 2002, due to several
factors. A November 2002 reduction in the federal discount rate by the Federal Open Market Committee tightened
the margin as customer deposit interest rates could not adjust downward in a corresponding relationship to the
falling interest yields on loans and investments. Additionally, a heavy volume of residential mortgage loans
were refinanced into the secondary market reducing the Bank's residential mortgage loan portfolio by $15
million. Although the Bank grew commercial loans by $10 million, the remaining $5 million decline in the Bank's
loan portfolio was temporarily placed in short-term investments yielding a much lower interest rate. On a
positive note, the decline in residential mortgage loans and the commercial loan growth are accelerating the
achievement of the Bank's long-term strategy of reducing the interest rate risk. Residential mortgage loans
declined from 53% of the Bank's total loan portfolio at December 31, 2002 to 51% at March 31, 2003. Finally,
at March 31, 2003, of the $106 million of cash and cash equivalents, the Bank had $82 million or 12% of its total
assets temporarily invested in low-yielding federal fund investments. This liquidity affords the Bank the
opportunity to invest at higher yields should rates rise and thereby improve the Bank's net interest margin in the
future.
Non-Interest Income:
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Non interest income increased by $390,000 or 29% during the March 2003 quarter compared to the March 2002
quarter. Gains on the sales of mortgage loans increased by $250,000 to $407,000 for the 2003 quarter. All other
non-interest income increased by $140,000 or 12% during the 2003 quarter, resulting from the growth in customer
deposits and the sale of fee based products.
Non-Interest Expense:
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Non-interest expense increased by $131,000 or 3% during the March 2003 quarter compared to the March 2002
quarter. During the 2003 quarter, the Bank achieved a 54% efficiency ratio. Total personnel costs increased by
$363,000. Employee compensation expense increased by $231,000 from the 2002 quarter resulting from 26 new
positions in the retail, commercial, and support staff, coupled with higher incentive bonuses for performance and
Bank profitability. Employee benefits expense increased by $132,000 or 41% primarily due to the increased cost
for the defined benefit plan. Although the plan was frozen as of March 2003, continuing plan contributions may
be required based on economic conditions in the stock and bond markets. Offsetting the growth in personnel costs
was a decline in goodwill amortization expense of $208,000 for the 2003 quarter, resulting from a change in
accounting effective July 1, 2002 for the Company. All other non-interest expenses declined $23,000 to $1.8
million during the 2003 quarter compared to the 2002 quarter.
Other Highlights:
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Other highlights for the quarter include the announcement of a new stock repurchase plan. Most of the stock
authorized to be repurchased under the previous plan was acquired during the past 12 months. During the quarter
ended March 31, 2003, 268,643 shares were repurchased from shareholders. The remaining shareholders may benefit
by an increase in ownership percentage, accretive impact on earnings per share, and an improvement in the
Company's return on equity. As most of the shares were repurchased March 2003, these accretive benefits will be
experienced more fully starting next quarter.
Another highlight is the April 2003 announcement of the Board's decision to issue a 10% stock dividend to its
shareholders of record on April 28, 2003, payable on May 14, 2003. The payment of this dividend is in addition
to the regular quarterly cash dividends. Per share amounts have been restated for the impact of the stock
dividend.
First Federal Financial Corporation of Kentucky is the parent bank holding company of First Federal Savings Bank
of Elizabethtown which was chartered in 1923. Today, the Bank serves Central Kentucky through its 13
full-service banking centers.
In this release, and from time to time in its public disclosures, First Federal makes forward-looking statements
relating to its financial condition, results of operations, plans, objectives, future performance and business.
Words such as "believes," "anticipates," "expects," "intends," "plans," "targeted," "strategy," and similar
expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying
such statements.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially
from those indicated by the forward-looking statements. In its annual and quarterly reports filed with the
Securities and Exchange Commission, First Federal identifies important factors that could cause the Company's
results to differ materially from those contained in such forward-looking statements. Please refer to the
discussion of those factors in First Federal's filed reports.
First Federal's stock is traded on the Nasdaq National Market under the symbol "FFKY." Market makers for the
stock are:
J.J.B. Hilliard, W.L. Lyons Company, Inc. Keefe, Bruyette & Woods, Inc.
Stifel Nicholas & Company Goldman, Sachs & Company
First Tennessee Securities Knight Securities, LP
Trident Securities Spear, Leeds & Kellogg
Sandler O'Neill Howe Barnes Investments, Inc.
CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except net income per share)
(Unaudited)
Three Months Ended
March 31,
2003 2002
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Interest Income $10,124 $10,735
Interest Expense 4,296 4,883
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Net Interest Income 5,828 5,852
Provision for Loan Losses (329) (415)
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Net Interest Income After Provision for Loan Losses 5,499 5,437
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Customer Service Fees on Deposit Accounts 1,000 849
Gain on Sale of Mortgage Loans 407 157
Brokerage and Insurance Commissions 96 141
Other Income 215 181
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Total Non-interest Income 1,718 1,328
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Employee Compensation and Benefits (2,236) (1,874)
Office Occupancy and Equipment Expense (368) (368)
Marketing and Advertising (148) (162)
Outside Services and Data Processing (467) (390)
State Franchise Tax (141) (129)
Goodwill Amortization 0 (208)
Other Expense (684) (782)
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Total Non-interest Expense (4,044) (3,913)
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Income Before Income Taxes 3,173 2,852
Income Taxes (1,051) (927)
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Net Income $2,122 $1,925
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(1)Earnings Per Share:
Basic $0.54 $0.46
Diluted $0.54 $0.46
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(1)Weighted average shares outstanding 3,930,497 4,134,387
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(1) Adjusted to reflect the impact of the stock dividend declared April 16, 2003.
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
March 31, December 31,
2003 200
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Assets:
Cash and Cash Equivalents $106,520 $91,776
Investment Securities 19,139 18,575
Loans Held for Sale 2,139 3,676
Loans Receivable, net 518,947 524,859
Other Assets 31,377 31,570
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Total Assets $678,122 $670,456
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Liabilities and Stockholders' Equity:
Deposits $534,288 $521,121
Federal Home Loan Bank Advances 77,740 77,683
Trust Preferred Securities 9,731 9,728
Other Liabilities 3,714 2,277
Stockholders' Equity 52,649 59,647
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Total Liabilities and Stockholders' Equity $678,122 $670,456
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Book Value Per Share $14.17 $14.88
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