FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-20380
FIRST FEDERAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
Ohio 31-1341110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
505 Market Street
Zanesville, Ohio 43701
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (740) 588-2222
As of April 30, 2003, the latest practicable date, 3,218,695 shares of the
registrant's common stock, no par value, were issued and outstanding.
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
Page 1 of 14 Pages
FIRST FEDERAL BANCORP, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Controls and Procedures
PART II OTHER INFORMATION 10
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 11
Certifications 12
2
PART I
------
ITEM 1. FINANCIAL INFORMATION
First Federal Bancorp, Inc.
CONSOLIDATED BALANCE SHEETS
At March 31 At Sept. 30
2003 2002
----------- -----------
(unaudited)
<s> <c> <c>
ASSETS
Cash and amounts due from banks $ 5,051,483 $ 4,723,753
Interest-bearing demand deposits 1,500,000 1,500,000
------------ ------------
Cash and cash equivalents $ 6,551,483 $ 6,223,753
Interest-bearing deposits 695,000 698,000
Investment securities held to maturity
(Fair value - $10,088,988 in 3/03 and
$10,236,000 in 9/02) 10,088,355 10,110,104
Loans receivable, net of losses of
$1,526,000 and $1,688,000 198,450,466 195,525,552
Federal Home Loan Bank stock 4,689,000 4,591,300
Premises and equipment 6,922,117 7,163,805
Interest receivable 1,268,406 1,265,491
Other assets 748,307 873,305
------------ ------------
Total Assets $229,413,134 $226,451,310
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $162,914,072 $157,687,991
Short-term FHLB advances 10,209,000 2,778,000
Long-term debt 32,933,208 42,941,048
Interest payable 305,376 347,682
Other liabilities 1,551,418 1,402,318
------------ ------------
Total Liabilities $207,913,074 $205,157,039
------------ ------------
COMMITMENTS AND CONTINGENCIES
Stockholders' Equity
Preferred stock: $100 par value;
1,000,000 shares authorized; no
shares issued and outstanding
Common stock: no par value;
9,000,000 shares authorized;
3,303,400 shares issued;
3,218,695 shares outstanding
at 3/03 and 3,263,165 at 9/02 $ 3,823,153 $ 3,823,153
Retained earnings 18,311,042 17,751,308
Treasury shares, 84,705 shares at 3/03
and 40,235 at 9/02, at cost (634,135) (280,190)
------------ ------------
Total Stockholders' Equity $ 21,500,060 $ 21,294,271
------------ ------------
Total Liabilities and Stockholders'
Equity $229,413,134 $226,451,310
See Notes to the Consolidated Financial Statements.
3
First Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Six Months Ended
March 31 March 31
-------------------------- --------------------------
2003 2002 2003 2002
---- ---- ---- ----
<s> <c> <c> <c> <c>
INTEREST INCOME
Loans receivable $3,366,100 $3,754,049 $6,814,131 $7,906,466
Investment securities 126,433 171,769 272,846 348,875
Deposits with financial institutions 8,336 11,163 18,408 27,687
---------- ---------- ---------- ----------
Total Interest Income 3,500,869 3,936,981 7,105,385 8,283,028
---------- ---------- ---------- ----------
INTEREST EXPENSE
Deposits 882,144 1,011,505 1,860,412 2,247,397
Borrowed money 491,231 710,755 1,045,004 1,462,135
---------- ---------- ---------- ----------
Total Interest Expense 1,373,375 1,722,260 2,905,416 3,709,532
---------- ---------- ---------- ----------
Net Interest Income 2,127,494 2,214,721 4,199,969 4,573,496
Provision for Loan Losses (6,151) 156,736 69,371 205,034
---------- ---------- ---------- ----------
Net Interest Income After
Provision for Loan Losses 2,133,645 2,057,985 4,130,598 4,368,462
---------- ---------- ---------- ----------
INCOME
Service charges on deposit accounts 159,341 117,190 333,115 244,680
Net gains on loan sales 33,927 133,083 (16,979) 330,199
Other income 160,084 119,038 343,665 322,939
---------- ---------- ---------- ----------
Total other income 353,352 369,311 659,801 897,818
---------- ---------- ---------- ----------
EXPENSE
Salaries and employee benefits 715,593 752,919 1,467,288 1,579,400
Occupancy and equipment expense 256,275 236,154 504,817 462,585
Data processing expense 166,078 204,784 325,672 475,596
Deposit insurance expense 21,887 22,035 43,736 43,959
Advertising 105,272 112,581 181,721 173,287
Ohio franchise taxes 61,000 61,499 122,094 116,877
Other operating expenses 412,937 349,030 743,715 668,236
---------- ---------- ---------- ----------
Total other expenses 1,739,042 1,739,002 3,389,043 3,519,940
---------- ---------- ---------- ----------
Income Before Income Taxes 747,955 688,294 1,401,356 1,746,340
Income tax expense 257,809 237,431 483,423 611,646
---------- ---------- ---------- ----------
Net Income $ 490,146 $ 450,863 $ 917,933 $1,134,694
========== ========== ========== ==========
EARNINGS PER SHARE
Basic $ .15 $ .14 $ .28 $ .36
---------- ---------- ---------- ----------
Diluted $ .15 $ .13 $ .27 $ .32
---------- ---------- ---------- ----------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
Basic 3,234,782 3,161,549 3,246,284 3,147,454
---------- ---------- ---------- ----------
Diluted 3,349,369 3,351,398 3,365,043 3,522,486
---------- ---------- ---------- ----------
DIVIDENDS DECLARED PER SHARE $ .055 $ .050 $ .11 $ .095
---------- ---------- ---------- ----------
See Notes to the Consolidated Financial Statements.
4
First Federal Bancorp, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
March 31
------------------------------
2003 2002
---- ----
<s> <c> <c>
OPERATING ACTIVITIES:
Net Income $ 917,933 $ 1,134,694
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 69,371 205,034
Depreciation and amortization 307,858 348,963
Investment securities accretion, net 89,295 101,203
FHLB stock dividend (97,700) (109,800)
Net change in
Mortgage loans held for sale 0 327,196
Other assets and other liabilities 239,672 (507,137)
------------ ------------
Net Cash Provided by Operating Activities 1,526,429 1,500,153
------------ ------------
INVESTING ACTIVITIES:
Net change in interest-bearing deposits 3,000 398,000
Purchase of securities held to maturity (4,025,365) (2,485,909)
Proceeds from maturities of securities held to
maturity 3,957,819 2,494,939
Net change in loans (3,370,448) 4,311,655
Purchase of premises and equipment (66,169) (603,900)
Proceeds from sales and payments received on
real estate owned and repossessed assets 376,164 314,863
------------ ------------
Net Cash (Used) Provided by Investing
Activities (3,124,999) 4,429,648
------------ ------------
FINANCING ACTIVITIES:
Net change in
Deposits 5,226,082 (2,534,810)
Advance payments by borrowers for taxes and
insurance (10,802) (3,439)
Short-term borrowings 7,431,000 (9,695,000)
Proceeds of long-term debt 0 10,000,000
Repayment of long-term debt (10,007,839) (5,007,384)
Cash dividends (355,123) (300,352)
Treasury Shares Purchased (360,548) 0
Proceeds from exercise of options 3,530 47,305
------------ ------------
Net Cash (Used) Provided by Financing Activities 1,926,300 (7,493,680)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 327,730 (1,563,879)
------------ ------------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR $ 6,223,753 6,496,134
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 6,551,483 $ 4,932,255
------------ ------------
See Notes to the Consolidated Financial Statements.
5
FIRST FEDERAL BANCORP, INC.
Notes to Consolidated Financial Statements
1. Basis of Presentation
---------------------
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the
instructions to Form 10-QSB. The Form 10-QSB does not include all the
information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
Only material changes in financial condition and results of operations are
discussed in Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The consolidated balance sheet as of September 30, 2002 has been derived
from the audited consolidated balance sheet as of that date.
In the opinion of management, the Consolidated Financial Statements contain
all adjustments necessary to present fairly the financial condition of
First Federal Bancorp, Inc. ("Bancorp"), as of March 31, 2003, and
September 30, 2002, and the results of its operations for the three and six
months ended March 31, 2003, and 2002, and its cash flow for the six months
ended March, 2003 and 2002. The results of operations for the interim
periods reported herein are not necessarily indicative of results of
operations to be expected for the entire year.
2. Commitments
-----------
Outstanding commitments to originate mortgage loans and to sell mortgage
loans were $1,805,585 and $1,022,650 respectively, at March 31, 2003, and
$2,147,875 and $751,100 respectively at September 30, 2002.
3. Earnings Per Common Share
-------------------------
Basic earnings per share is based on net income divided by the weighted
average number of shares outstanding during the period. Diluted earnings
per share shows the dilutive effect of additional common shares issuable
under stock options.
4. Allowance for Losses on Loans
-----------------------------
Because some loans may not be repaid in full, an allowance for loan losses
is recorded. Increases to the allowance are recorded by a provision for
loan losses charged to expense. Estimating the risk of loss and the amount
of loss on any loan is necessarily subjective. Accordingly, the allowance
is maintained by management at a level considered adequate to cover
probable losses that are currently anticipated based on past loss
experience, general economic conditions, information about specific
borrower situations, including their financial position and collateral
values, and other factors and estimates which are subject to change over
time. While management may periodically allocate portions of the allowance
for specific problem loan situations, the whole allowance is available for
any loan charge-offs that occur. A loan is charged-off by management as a
loss when deemed uncollectible, although collection efforts continue and
future recoveries may occur.
Loans are considered impaired if full principal or interest payments are
not anticipated. Impaired loans are carried at the present value of
expected cash flows discounted at the loan's effective interest rate or at
the fair value of the collateral if the loan is collateral dependent. A
portion of the allowance for loan losses may be allocated to impaired
loans.
Smaller-balance, homogeneous loans are evaluated for impairment in total.
Such loans include residential first mortgage loans secured by one- to
four-family residences, residential construction loans, and automobile,
home equity and second mortgage loans. Mortgage loans secured by other
properties are evaluated individually for impairment. When analysis of
borrower operating results and financial condition indicates that
underlying cash flows of the borrower's business are not adequate to meet
its debt service requirements, the loan is evaluated for impairment. Loans
are generally moved to nonaccrual status when 90 days or more past due.
These loans are often also considered impaired. Impaired loans, or
portions thereof, are charged-off when deemed uncollectible. The nature of
disclosures for impaired loans is considered generally comparable to prior
nonaccrual and renegotiated loans and nonperforming and past-due asset
disclosures. The Savings Bank had no loans meeting the definition of
impaired during the quarter ended March 31, 2003, and the year ended
September 30, 2002.
6
5. Stock Options
-------------
Bancorp accounts for its stock option plan under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued
to Employees, and related Interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under
those plans had an exercise price equal to the market value of the
underlying common stock on the grant date. The following table illustrates
the effect on net income and earnings per share if the company had applied
the fair value provisions of FASB Statement No. 123, Accounting for Stock
Based Compensation, to stock-based employee compensation.
Three Months Ended Six Months Ended
March 31 March 31
---------------------- ------------------------
2003 2002 2003 2002
---- ---- ---- ----
<s> <c> <c> <c> <c>
Net Income, as reported $490,146 $450,863 $917,933 $1,134,694
Less: Total stock-based employee
compensation cost determined
under the fair value based
method, net of income taxes (23,583) (36,611) (42,195) (57,671)
-------- -------- -------- ----------
Pro forma net income $446,563 $414,252 $875,738 $1,077,023
======== ======== ======== ==========
Earnings Per Share:
Basic - as reported $ .15 $ .14 $ .28 $ .36
-------- -------- -------- ----------
Basic - pro forma $ .14 $ .13 $ .27 $ .34
-------- -------- -------- ----------
Diluted - as reported $ .15 $ .13 $ .27 $ .32
-------- -------- -------- ----------
Diluted - pro forma $ .14 $ .12 $ .26 $ .31
-------- -------- -------- ----------
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
- -------
First Federal Bancorp, Inc. ("Bancorp"), is a savings and loan holding
company that wholly owns First Federal Savings Bank of Eastern Ohio (the
"Savings Bank"). The Savings Bank is engaged in the savings and loan
business primarily in Central and Eastern Ohio. The Savings Bank is a
member of the Federal Home Loan Bank ("FHLB") of Cincinnati, and the
deposit accounts in the Savings Bank are insured up to the applicable
limits by the Federal Deposit Insurance Corporation in the Savings
Association Insurance Fund ("SAIF").
Note Regarding Forward-Looking Statements
- -----------------------------------------
In addition to historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Economic circumstances, the Savings Bank's operations and
the Savings Bank's actual results could differ significantly from those
discussed in the forward-looking statements. Some of the factors that
could cause or contribute to such differences are discussed herein, but
also include changes in the economy and interest rates in the nation and
the Savings Bank's market area generally.
Some of the forward-looking statements included herein are the statements
regarding the following:
1. Management's determination of the amount of loan loss
allowance;
2. Management's belief that deposits will increase during the
remaining fiscal year 2003;
3. Management's anticipation that loan demand will remain stable,
but that the mortgage loan portfolio will decrease as lower
interest rates make adjustable mortgages, which are held in
portfolio rather than being sold, less attractive;
4. Management's anticipation that advances from the FHLB will
increase to fund loan originations;
5. Management's anticipation that adjustable-rate loans will
reprice lower in fiscal year 2003 if interest rates remain
relatively stable or decrease; and
6. Legislative changes with respect to the activities of financial
institutions.
7
Changes in Financial Condition from September 30, 2002 to March 31, 2003
- ------------------------------------------------------------------------
Total consolidated assets of Bancorp increased by $2.9 million, or 1.31%,
from $226.5 million at September 30, 2002, to $229.4 million at March 31,
2003. The increase is due primarily to an increase of $2.9 million in
loans receivable.
Total liquidity (consisting of cash and amounts due from depository
institutions, interest-bearing deposits in other banks, and investment
securities) was $17.3 million at March 31, 2003, which is an increase of
$300,000 from September 30, 2002. The OTS requires savings associations to
maintain a sufficient level of investments in specified types of liquid
assets intended to provide a source of relatively liquid funds upon which
the Savings Bank may rely if necessary to fund deposit withdrawals and
other short-term funding needs. The liquidity of the Savings Bank, defined
as adjusted liquid assets divided by deposits (not including jumbo
certificates due in one year or less), was 7.47% at March 31, 2003 and
6.86% at September 30, 2002. Funds are available through FHLB advances to
meet the Savings Bank's liquidity needs.
The loans receivable balance increased $2.9 million for the six-month
period. The increase in loans receivable was comprised of an increase in
residential real estate loans of $2.1 million, a $2.6 million increase in
non-residential real estate loans and commercial loans, and a $1.5 million
increase in other consumer loans, offset by a $3.5 million decrease in
consumer automobile loans. The increase in residential loans was due to
the financing of a group of non-owner occupied loans at a variable rate.
The decrease in consumer auto loans was due to a decreased volume in loans
originated due to lack of demand.
As of March 31, 2003, the Savings Bank had long- and short-term borrowed
funds from the FHLB in the amount of $32.9 million and $10.2 million,
respectively, at a weighted average rate of 4.81%. Long-term FHLB advances
decreased $10.0 million from $42.9 million and short-term FHLB advances
increased $7.4 million from September 30, 2002. As of March 31, 2003, the
Savings Bank had a borrowing limit of $71.6 million at the FHLB. The limit
is collateralized by one-to-four and multi-family mortgage loans. The net
decrease in FHLB advances of $2.6 million was due to the use of increased
deposits and loan pay downs to pay off FHLB advances. Deposits increased
by $5.2 million, or 3.31%, from $157.7 million at September 30, 2002, to
$162.9 million at March 31, 2003. The increase in savings was in various
checking and larger minimum balance savings accounts. Management believes
that deposits will increase during the remaining fiscal year 2003 but that
it may be necessary to fund the anticipated steady loan demand with further
advances from the FHLB. No assurance can be provided, however, that
deposits will increase, that the loan portfolio will decrease as lower
interest rates make adjustable mortgages, which are held in portfolio
rather than being sold, less attractive or that loan demand will remain
stable. Deposit levels and loan demand are affected by national, as well
as local, interest rates, the attractiveness of alternative investments and
other national and local economic circumstances.
The Savings Bank is subject to regulatory capital requirements established
by the Office of Thrift Supervision ("OTS"). The Savings Bank's capital
ratios were as follows at March 31, 2003.
Amount Percent of
(In Thousands) Assets
-------------- ----------
<s> <c> <c>
Actual Tangible Capital $17,389 7.56%
Required Tangible Capital 3,452 1.50%
------- -----
Excess Tangible Capital $13,937 6.06%
Actual Core Capital $17,389 7.56%
Required Core Capital (1) 9,205 4.00%
------- -----
Excess Core Capital $ 8,184 3.56%
Actual Risk Based Capital $18,725 10.84%
Required Risk Based Capital 13,818 8.00%
------- -----
Excess Risk Based Capital $ 4,907 2.84%
<FN>
___________________
(1) Although the general required minimum core capital is 4.00%, savings
associations that meet certain requirements may be permitted to
maintain minimum core capital of 3.00%.
</FN>
8
Management is not aware of any proposed regulations or recommendations by
the OTS that, if implemented, would have a material effect upon the Savings
Bank's capital.
Comparison of Operating Results for the Three-and Six-Month Periods
- -------------------------------------------------------------------
Ended March 31, 2003, and 2002
------------------------------
Net Interest Income
- -------------------
Net interest income before provision for loan losses decreased $87,000 for
the comparative three-month periods and $374,000 for the comparative six-
month periods. Total interest income decreased $436,000 for the three-
month period and $1.2 million for the six-month period ended March 31,
2003, compared to the same period in 2002, but was partially offset by a
decrease of interest expense of $349,000 and $800,000 for the same period.
Total interest income decreased primarily due to a decrease in the interest
rate on loans receivable and the reduction in the average loan portfolio
balance outstanding. The average balance outstanding of loans receivable
decreased $5.3 million to $194.9 million at March 2003, compared to $200.2
million at March 2002. Total interest expense decreased due to the
reduction in interest rates paid on deposits and due to the shift in
savings to lower yielding accounts from certificates since March 31, 2002.
The majority of the loans in the Savings Bank's portfolio are adjustable-
rate mortgage loans whose interest rates fluctuate with market interest
rates. With the recent lowering of rates, many loan customers have chosen
fixed-rate loans over adjustable-rate loans. This has resulted in selling
more loans in the secondary market versus keeping the loans in the Savings
Bank's portfolio. If interest rates remain relatively stable or decrease
during fiscal year 2003, the adjustable-rate mortgage loan portfolio will
reprice at lower rates, due to the rapid decrease in interest rates, while
rising interest rates could result in upward adjustments to the interest
rates on those loans. No assurance can be provided with respect to which
direction interest rates will move. Interest rates are affected by
general, local and national economic conditions, the policies of various
regulatory authorities and other factors beyond the control of the Savings
Bank.
Nonperforming and Delinquent Loans and Allowance for Loan Losses
- ----------------------------------------------------------------
Total nonaccrual loans and accruing loans that are 90 days past due were
$355,000 at March 31, 2003, which represents .18% of total loans. This was
a decrease of $223,000 from March 31, 2002.
There were no loans that are not currently classified as nonaccrual, 90
days past due or restructured but which may be so classified in the near
future because management has concerns as to the ability of the borrowers
to comply with repayment terms.
The Savings Bank maintains an allowance for losses on loans. The allowance
for losses on loans was $1,526,000 at March 31, 2003, compared to
$1,729,899 at March 31, 2002. During the six-month periods ended March 31,
2003, and March 31, 2002, the Savings Bank recorded recoveries of $113,139
and $25,069 and charge-offs of $344,783 and $105,181 respectively. The
provisions for loan losses during the six-month periods ended March 31,
2003, and 2002, were $69,371 and $205,034 respectively.
Noninterest Income and Expense
- ------------------------------
The federal income tax provision increased $20,378 for the three-month
period and decreased $128,223 for the six-month period ended March 31,
2003, compared to the same period in 2002 due to a corresponding adjustment
in pre-tax net income for the period.
Total noninterest income decreased $16,000 for the three-month period and
$238,000 for the six-month period ended March 31, 2003, compared to the
same period in 2002. There was a decrease in the gain on the sale of loans
of $99,000 for the three-month period and $347,000 for the six-month period
ended March 31, 2003, due to the recording of impairment of mortgage
servicing rights on loans that were sold in the secondary market. Service
charges on deposit accounts increased $42,000 and $88,000 for the three-
and six-month periods ended March 31, 2003. Other fee income increased
$41,000 and $21,000 for the three- and six-month periods ended March 31,
2003.
Total noninterest expenses remained stable for the quarter ended March 31,
2003, and decreased $131,000 for the six months ended March 31, 2003
compared to the same period in 2002. Salaries and benefits decreased
$37,000 and $112,000 as a result of normal pay increases offset by
decreased incentive pay in the three-and six-month period ended March 2003
compared to the three-and six-month period ended March 31, 2003. Data
processing costs decreased $39,000 and $150,000 for the three-and six-month
period ended March 31, 2003 due to not having the additional costs
associated with changing our core processor in November 2001. Other
operating expenses increased $64,000 and $75,000 for the three- and six-
month periods ended March 31, 2003, due to increased operating costs and
professional fees.
9
Impact of Inflation and Changing Prices
- ---------------------------------------
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles
("GAAP"), which require the measurement of financial position and results
of operations in terms of historical dollars without considering changes in
relative purchasing power of money over time because of inflation.
Unlike most industrial companies, virtually all of the assets and
liabilities of the Savings Bank are monetary in nature. As a result,
interest rates have a more significant impact on the Savings Bank's
performance than the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services.
Effect of Accounting Changes
- ----------------------------
In July 2001, the FASB (Financial Accounting Standards Board) issued
Statements (SFAS) No. 141, "Accounting for Business Combinations" and No.
142, "Accounting for Goodwill and Intangible Assets." These Statements
will have no material effect on the Company at this time since it has not
been involved in a "business combination" subject to SFAS No. 141 and does
not have goodwill or other intangible assets subject to SFAS No. 142.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which amends SFAS No. 121 by
addressing business segments accounted for as a discontinued operation
under Accounting Principles Board Opinion No. 30. This Statement is
effective beginning July 1, 2002. The effect of this Statement on the
financial position and results of operations of the Company is not
material.
The FASB also recently issued SFAS No. 145 and SFAS No. 146. SFAS 145
covers debt extinguishments and leases, and made some minor technical
corrections. Gains and losses on extinguishments of debt, always treated
as an extraordinary item under a previous standard, will no longer be
considered extraordinary, except under very limited conditions. If a
capital lease is modified to an operating, it will be treated as a sale-
leaseback instead of a new lease. SFAS No. 146 covers accounting for costs
associated with exit or disposal activities, such as lease termination
costs or employee severance costs. The Statement replaces Emerging Issues
Task Force (EITF) 94-3, and is to be applied prospectively to exit or
disposal activities initiated after December 31, 2002. It requires these
costs to be recognized when they are incurred rather than at date of
commitment to an exit or disposal plan. The Company does not expect the
effect of adoption of these Standards to be material.
On November 25, 2002, the Financial Accounting Standards Board (FASB)
issued Interpretation No. 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others (FIN No. 45) which expands on the accounting guidance of
Statements No. 5, 57 and 107 and incorporates without change the provisions
of FASB Interpretation No. 34, which is being superseded.
FIN No. 45, which is applicable to public and non-public entities, will
significantly change current practice in the accounting for, and disclosure
of, guarantees. Each guarantee meeting the characteristics described in FIN
No. 45 is to be recognized and initially measured at fair value, which will
be a change from current practice for most entities. In addition,
guarantors will be required to make significant new disclosures, even if
the likelihood of the guarantor making payments under the guarantee is
remote, which represents another change from current general practice.
FIN No. 45's disclosure requirements are effective for financial statements
of interim or annual periods ending after December 15, 2002, while the
initial recognition and initial measurement provisions are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002.
The Company has changed its method of accounting and financial reporting
for standby letters of credit by adopting the provisions of FIN No. 45
effective January 1, 2003. There was no material impact of the adoption on
the financial statements.
ITEM 3. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded, based upon their evaluation of the registrant's
disclosure controls and procedures as of April 23, 2003, that the
registrant's disclosure controls and procedures are effective.
(b) There have been no significant changes in the registrant's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
10
PART II
OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
Not applicable
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
At the 2003 Annual Meeting of Shareholders of Bancorp, the shareholders
voted to amend the Code of Regulations of Bancorp to restrict the removal
of directors to removal for cause (as required by Ohio law); to expand the
indemnification of directors and officers; and to make technical changes
with respect to the use of communications equipment and remove obsolete
provisions. None of such amendments effect a material change in the rights
of holders of the shares of Bancorp. All of such amendments are described
in the definitive proxy statement of Bancorp used in connection with the
2003 Annual Meeting.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The annual meeting of shareholders was held on February 19, 2003. The
following Directors were elected to terms expiring in 2005.
NAME FOR WITHHELD
- ---- --- --------
Ward D. Coffman, III 2,496,312 587,292
Robert D. Goodrich, II 2,496,312 587,292
Patrick L. Hennessey 2,756,662 326,942
Connie Ayres LaPlante 2,422,743 660,861
Those directors continuing their term were John C. Matesich III, Don R.
Parkhill, and J. William Plummer.
Two other matters were presented to the shareholders.
1. The following proposals related to the adoption of the Amended and
Restated Code of Regulations for Bancorp were adopted by the
following votes:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
<s> <c> <c> <c> <c>
(a) Adoption of the Amended and Restated
Code of Regulations in its entirety 1,654,818 805,461 43,116 580,209
(b) Adoption of Article Two, Section 2.04,
of the Amended and Restated Code of
Regulations 1,654,887 813,123 35,385 580,209
(c) Adoption of Article Five of the Amended
and Restated Code of Regulations 1,729,787 729,423 44,185 580,209
(d) Adoption of technical changes in the
Amended and Restated Code of Regulations 1,709,118 758,761 35,516 580,209
2. To ratify the selection of BKD LLP as the Auditors of Bancorp for the
current fiscal year:
For 2,710,968 Against 332,820 Abstentions 39,816
--------- ------- ------
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ITEM 5. OTHER INFORMATION
-----------------
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
Exhibit 3.2 Amended and Restated Code of Regulations
(incorporated by reference to Exhibit A to the
Definitive Proxy Statement filed by the registrant on
January 7, 2003.)
Exhibit 99.1 Safe Harbor Under the Private Securities Litigation
Reform Act of 1995
Exhibit 99.2 Certification Pursuant to18 U.S.C. Section 1350 -
President and Chief Executive Officer
Exhibit 99.3 Certification Pursuant to 18 U.S.C. Section 1350 -
Chief Financial Officer
No reports on Form 8-K were filed during the quarter for which this report
is filed.
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.
Date: May 13, 2003 By: /s/ J. William Plummer
--------------------------------
J. William Plummer
President
Date: May 13, 2003 By: /s/ Connie Ayres LaPlante
--------------------------------
Connie Ayres LaPlante
Chief Financial Officer
CERTIFICATIONS
I, J. William Plummer, the Chief Executive Officer and President of
First Federal Bancorp, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of First
Federal Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report;
12
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or
persons performing equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003 /s/ J. William Plummer
J. William Plummer
Chief Executive Officer, President
I, Connie Ayres LaPlante, the Treasurer of First Federal Bancorp,
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of First
Federal Bancorp, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in
all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
13
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or
persons performing equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003 /s/ Connie Ayres LaPlante
Connie Ayres LaPlante
Treasurer
14