EXHIBIT 99.1
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Safe Harbor Under the Private Securities Litigation Reform Act of 1995
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The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a "safe harbor" for forward-looking statements to encourage
companies to provide prospective information about their companies, so long
as those statements are identified as forward-looking and are accompanied
by meaningful cautionary statements identifying important factors that
could cause actual results to differ materially from those discussed in the
statement. First Federal Bancorp, Inc. ("Bancorp") desires to take
advantage of the "safe harbor" provisions of the Act. Certain information,
particularly information regarding future economic performance and finances
and plans and objectives of management, contained or incorporated by
reference in Bancorp's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1999, is forward-looking. In some cases, information
regarding certain important factors that could cause actual results of
operations or outcomes of other events to differ materially from any such
forward-looking statement appear together with such statement. In
addition, forward-looking statements are subject to other risks and
uncertainties affecting the financial institutions industry, including, but
not limited to, the following:
Interest Rate Risk
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Bancorp's operating results are dependent to a significant degree on
its net interest income, which is the difference between interest income
from loans, investments and other interest-earning assets and interest
expense on deposits, borrowings and other interest-bearing liabilities.
The interest income and interest expense of Bancorp change as the interest
rates on interest-earning assets and interest-bearing liabilities change.
Interest rates may change because of general economic conditions, the
policies of various regulatory authorities and other factors beyond
Bancorp's control. In a rising interest rate environment, loans tend to
prepay slowly and new loans at higher rates increase slowly, while interest
paid on deposits increases rapidly because the terms to maturity of
deposits tend to be shorter than the terms to maturity or prepayment of
loans. Such differences in the adjustment of interest rates on assets and
liabilities may negatively affect Bancorp's income.
Possible Inadequacy of the Allowance for Loan Losses
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Bancorp maintains an allowance for loan losses based upon a number of
relevant factors, including, but not limited to, trends in the level of
nonperforming assets and classified loans, current and anticipated economic
conditions in the primary lending area, past loss experience, possible
losses arising from specific problem loans and changes in the composition
of the loan portfolio. While the Board of Directors of Bancorp believes
that it uses the best information available to determine the allowance for
loan losses, unforeseen market conditions could result in material
adjustments, and net earnings could be significantly adversely affected if
circumstances differ substantially from the assumptions used in making the
final determination.
Loans not secured by one- to four-family residential real estate are
generally considered to involve greater risk of loss than loans secured by
one- to four-family residential real estate due, in part, to the effects of
general economic conditions. The repayment of multifamily residential and
nonresidential real estate loans generally depends upon the cash flow from
the operation of the property, which may be negatively affected by national
and local economic conditions. Construction loans may also be negatively
affected by such economic conditions, particularly loans made to developers
who do not have a buyer for a property before the loan is made. The risk
of default on consumer loans increases during periods of recession, high
unemployment and other adverse economic conditions. When consumers have
trouble paying their bills, they are more likely to pay mortgage loans than
consumer loans. In addition, the collateral securing such loans, if any,
may decrease in value more rapidly than the outstanding balance of the
loan.
Competition
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First Federal Savings Bank of Eastern Ohio ("First Federal") competes
for deposits with other savings associations, commercial banks and credit
unions and issuers of commercial paper and other securities, such as shares
in money market mutual funds. The primary factors in competing for
deposits are interest rates and convenience of office location. In making
loans, First Federal competes with other savings associations, commercial
banks, consumer finance companies, credit unions, leasing companies,
mortgage companies and other lenders. Competition is affected by, among
other things, the general availability of lendable funds, general and local
economic conditions, current interest rate levels and other factors that
are not readily predictable. The size of financial institutions competing
with First Federal is likely to increase as a result of changes in statutes
and regulations eliminating various restrictions on interstate and inter-
industry branching and acquisitions. Such increased competition may have
an adverse effect upon Bancorp.
Legislation and Regulation that may Adversely Affect Bancorp's Earnings
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First Federal is subject to extensive regulation by the Office of
Thrift Supervision (the "OTS") and the Federal Deposit Insurance
Corporation (the "FDIC") and is periodically examined by such regulatory
agencies to test compliance with various regulatory requirements. As a
savings and loan holding company, Bancorp is also subject to regulation and
examination by the OTS. Such supervision and regulation of First Federal
and Bancorp are intended primarily for the protection of depositors and not
for the maximization of shareholder value and may affect the ability of the
company to engage in various business activities. The assessments, filing
fees and other costs associated with reports, examinations and other
regulatory matters are significant and may have an adverse effect on
Bancorp's net earnings.
The FDIC is authorized to establish separate annual assessment rates
for deposit insurance of members of the Bank Insurance Fund (the "BIF") and
the Savings Association Insurance Fund (the "SAIF"). The FDIC has
established a risk-based assessment system for both SAIF and BIF members.
Under such system, assessments may vary depending on the risk the
institution poses to its deposit insurance fund. Such risk level is
determined by reference to the institution's capital level and the FDIC's
level of supervisory concern about the institution.
For several years, Congress has been considering various changes to
the bank and savings association charters, the activities in which banks
and savings associations and their holding companies and subsidiaries may
engage and the authority of various regulatory authorities over the
financial institutions and their holding companies and subsidiaries.
Bancorp cannot predict at this time whether and when Congress will actually
adopt such "financial modernization legislation" or in what form it will be
adopted. It is expected, however, that the range of activities in which
banks and their affiliated companies may engage will be expanded, and it is
possible that the range of activities in which Bancorp and First Federal
may engage will be restricted. It is not anticipated that the current
activities of Bancorp or First Federal will be materially affected by any
such legislation.
Legislation to recapitalize the SAIF, which was enacted in 1996,
provided that the SAIF and the Bank Insurance Fund (the "BIF") would be
merged if the federal savings association charter was eliminated. Although
the elimination of the federal savings association charter has not occurred
and is not now expected in the near future, Congress is still discussing
the merger of the SAIF and the BIF. Although the merger could be expected
to change the deposit insurance premiums paid by First Federal, the effect
on First Federal and Bancorp cannot be predicted at this time.