1
EXHIBIT 99
[FIRST FEDERAL FINANCIAL SERVICES CORP LETTERHEAD]
NEWS RELEASE
James J. Little, President and Chief Operating Officer FOR IMMEDIATE RELEASE
FirstFederal Financial Services Corp ---------------------
135 East Liberty Street
Wooster, OH 44691 February 2, 1998
Phone: (330) 264-8001
FIRSTFEDERAL FINANCIAL SERVICES CORP
POSTS RECORD YEAR-END EARNINGS OF $14.4 MILLION
FirstFederal Financial Services Corp (NASDAQ - FFSW; FFSWO) today
announced record net earnings of $4.0 million, or $.65 per common share ($.51
diluted), and $14.4 million, or $2.59 per common share ($1.96 diluted), for the
three and twelve month periods ended December 31, 1997, respectively. This
compares favorably to $3.2 million, or $.60 per common share ($.45 diluted), and
$9.9 million, or $1.82 per common share ($1.43 diluted) for the respective three
and twelve month periods ended December 31, 1996. Excluding non-recurring
charges recorded in the third quarter of both years, 1997 net earnings for the
year were $15.4 million, or $2.79 per common share ($2.09 diluted) compared to
1996 net earnings of $12 million, or $2.31 per common share ($1.74 diluted).
Previously reported net earnings of $4.2 million or $.71 per common share ($.55
diluted) for the third quarter of 1997 have been restated to $3.2 million or
$.52 per common share ($.42 diluted) to reflect Summit Bank N.A. (Summit)
acquisition transaction costs of $1 million net of tax. These costs originally
were not included in the Company's third quarter 1997 earnings as Summit had
accrued for acquisition transaction costs in its second quarter prior to
Summit's inclusion in the Company's consolidated earnings.
-MORE-
2
Increased earnings year-to-date in 1997 compared to 1996 reflects
increases in net interest income of $5.0 million, higher manufactured housing
income of $4.5 million and higher mortgage banking income of $3.1 million
partially offset by an increase in non-interest expense of $8.3 million related
to a higher volume of asset originations.
Return on average assets (ROA) before non-recurring charges for the
quarter and twelve months ended December 31, 1997 was 1.11 % and 1.22 % as
compared to 1.15 % and 1.16 %, for the comparable periods of 1996, respectively.
Return on average shareholders' equity (ROE) before non-recurring charges for
the quarter and twelve months ended December 31, 1997 was 15.47% and 16.19 % as
compared to 14.72% and 14.72%, for the comparable periods in 1996, respectively.
The Company's ratio of shareholders' equity to total assets decreased from 7.89%
at December 31, 1996 to 7.23% at December 31, 1997, reflecting asset growth and
improved leverage in 1997.
Net interest income increased $3.2 million to $9.5 million in the fourth
quarter of 1997 from $6.3 million in the fourth quarter of 1996. This increase
reflects growth in average loan and lease balances of $146.1 million and a $92.3
million increase in average securities balances for the three month period ended
December 31, 1997 from 1996. Loan and lease balances as of December 31, 1997
include $70.4 million and $27.1 million reflecting the acquisition of Summit and
Alliance Corporate Resources, Inc. (ACR), respectively in the third quarter of
1997. The net interest margin of 2.62% for the year ended December 31, 1997
compares to 2.60% for 1996 and 2.61% for the third quarter of 1997. Yields on
interest earning assets averaged 7.74% for the year ended December 31, 1997
compared to 7.50% for 1996 reflecting a favorable change in the mix of loans and
leases to higher yielding assets and the acquisitions of Summit and ACR. The
-MORE-
3
average cost of interest-bearing liabilities increased 18 basis points to 5.27 %
for the year ended December 31, 1997 compared to 5.09 % for the same period in
1996. This increase in cost of funds was primarily due to increased rates paid
on borrowings, particularly the subordinated notes issued in March 1997.
The provision for credit losses was $300,000 in the fourth quarter of
1997 and $90,000 in the fourth quarter of 1996. The increased provision was due
primarily to the acquisition of Summit and a continuing increase in commercial
and consumer loan originations which inherently have a higher risk level than
residential mortgage loans. Net chargeoffs for the fourth quarter were .05% of
average loans and leases, compared with .02% for the third quarter, and $14,000
(.00%) for the fourth quarter of 1996. Nonperforming assets as a percentage of
total assets was .31% at December 31, 1997 and .39% at December 31, 1996.
Non-interest income increased $2.4 million for the fourth quarter of
1997 versus fourth quarter 1996 reflecting an increase of $.4 million in
mortgage banking fee income, $.9 million in customer service fee income and $.8
million in gains from security sales.
Non-interest expense increased $3.7 million to $11.1 million for the
quarter ended December 31, 1997 as compared to $7.4 million for the fourth
quarter of 1996. The increase is comprised primarily of higher compensation
expense ($1.8 million), increased occupancy costs ($.5 million) and additional
operating costs ($1.4 million) from the increase in staff and facilities
associated with the Company's investments in Summit, ACR, branch acquisitions
and additional commercial and manufactured housing loan origination capacity.
While the dollar amount of non-interest expense has increased, FirstFederal's
efficiency ratio remains fairly consistent at 56.96% for the fourth quarter of
1997 as compared to 56.67% for the same quarter in 1996.
-MORE-
4
MATERIAL CHANGES IN FINANCIAL CONDITION
Certain material changes that have occurred in the Company's financial condition
during 1997 are as follows ($000's):
DECEMBER 31 DECEMBER 31
1997 1996
---------- ----------
Securities available for sale $ 226,786 $ 159,033
Retained interest 27,023 6,491
Net loans and leases 1,001,311 756,768
Goodwill 32,062 10,572
Deposits 981,675 671,918
Proceeds from the Company's $40.5 million subordinated debt issued in
March 1997 and the $150.6 million Key Bank branch deposit acquisition in
September 1997 were primarily used to reduce increased short-term borrowings in
1997 with remaining funds invested in securities to provide liquidity to fund
loan and lease growth.
Retained interest increased reflecting completion of three asset-backed
securitizations (ABS) of manufactured housing loans in 1997 totaling $150
million.
Net loans and leases increased $244.5 million comparing December 31,
1997 to 1996 reflecting $119.1 million from 1997 acquisitions ($66.3 million
from Summit, $20.1 million from ACR, $8.1 million form Alpha Equipment Group,
Inc. and $24.6 million from branch acquisitions) and net increases in commercial
loans and leases of $47.3 million, a $72 million increase in manufactured
housing finance contracts and a $37.1 million increase in consumer loans
partially offset by a $31 million decrease in residential mortgage loans. Loan
-MORE-
5
originations for 1997 of residential mortgage loans and manufactured housing
finance contracts of $240.2 million and $310.3 million, respectively, compare to
$368.5 million and $260.6 million for 1996, respectively.
Goodwill increased reflecting the acquisition of seven branches in the
third quarter of 1997 with deposits of $150.6 million and $24.6 million in
loans.
Deposits increased $309.8 million comparing December 31, 1997 to 1996
reflecting $223.4 million from acquisitions ($150.6 million from branch
acquisitions and $72.8 million from Summit), a $50 million increase in brokered
deposits and a net increase of $36.4 million in customer deposits.
FirstFederal Financial Services Corp operates in two business segments:
community banking and specialty finance. The community banking segment consists
of Signal Bank, N.A. with 26 full service banking offices and 3 limited service
facilities in North central Ohio, and Summit Bank with 2 offices in Summit
County, Ohio. The specialty finance segment consists primarily of Mobile
Consultants, Inc., a broker and servicer of manufactured housing finance
contracts operating in 41 states.
-MORE-
6
CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
BALANCE SHEET DATA: QUARTERS ENDED DECEMBER 31 YEARS ENDED DECEMBER 31
($ IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1997 1996 1995
----------- ----------- ----------- ----------- -----------
Total assets .......................................... $ 1,457,415 $ 1,080,383 $ 1,457,415 $ 1,080,383 $ 947,270
Net loans and leases .................................. 1,001,311 756,768 1,001,311 756,768 581,060
Deposits .............................................. 981,675 671,918 981,675 671,918 574,041
Borrowings, including advances ........................ 347,243 312,413 347,243 312,413 286,726
Shareholders' equity .................................. 104,735 85,287 104,735 85,287 76,533
INCOME STATEMENT:
Interest income ....................................... 26,193 19,440 90,093 73,559 64,922
Interest expense ...................................... 16,692 13,168 59,550 48,048 41,046
Provision for credit losses ........................... 300 90 842 360 --
Net interest income after provision ................... 9,201 6,182 29,701 25,151 23,876
Non-interest income
Manufactured housing income ........................ 3,437 3,726 16,001 11,550 --
Mortgage banking income ............................ 1,688 1,283 5,168 2,024 2,183
Other non-interest income .......................... 3,484 1,172 8,116 4,355 1,984
Non-interest expense .................................. 11,140 7,415 34,744 24,005 13,651
Non-recurring charges ................................. -- -- 1,209 3,341 --
Income tax provision .................................. 2,687 1,783 8,584 5,884 4,946
Net earnings .......................................... $ 3,982 $ 3,165 $ 14,448 $ 9,850 $ 9,446
Net earnings applicable
to common stock ....................................... $ 3,596 $ 2,751 $ 12,864 $ 8,154 $ 7,660
PER SHARE DATA:(1)
Net earnings per share including non-recurring charges
- basic ............................................ $ .65 $ .60 $ 2.59 $ 1.82 $ 1.85
- diluted .......................................... .51 .45 1.96 1.43 1.42
Net earnings per share before non-recurring charges (2)
- basic ............................................ $ .65 $ .60 $ 2.79 $ 2.31 $ 1.85
- diluted .......................................... .51 .45 2.09 1.74 1.42
Cash earnings per share - diluted (3) ................ .60 .48 2.29 1.86 1.46
Dividends paid per common share(1) .................... .11 .10 .43 .38 .34
PERFORMANCE RATIOS:(2)
Return on average assets .............................. 1.10% 1.15% 1.22% 1.16% 1.07%
Return on common shareholders' equity ................. 15.47 14.72 16.19 14.72 12.90
Net interest margin ................................... 2.85 2.58 2.62 2.60 2.78
Efficiency ratio ...................................... 56.96 56.67 55.07 53.54 50.61
ASSET QUALITY RATIOS:
ALLL to nonperforming assets .......................... 123.71 69.91 123.71 69.91 158.41
Total nonperforming assets to total assets ............ .31 .39 .31 .39 .20
Net charge-offs to average loans ...................... .05 .00 .10 .06 .04
CAPITAL RATIO:
Shareholders' equity to total assets .................. 7.23 7.89 7.23 7.89 8.08
<FN>
(1) All per common share amounts have been restated to reflect stock dividends, stock splits and the application of FASB 128,
Earnings Per Share, which replaced the presentation of primary and fully diluted earnings per share with basic and diluted
earnings per share.
(2) Non-recurring charges of $1.2 million ($1 million after tax) reflecting Summit acquisition costs included in the third
quarter of 1997 and $3.3 million ($2.2 million after tax) included in the third quarter of 1996 for the one-time assessment
for the re-capitalization of the Savings Association Insurance Fund (SAIF) have been excluded for comparative purposes from
per share data and performance ratios shown above.
(3) Cash earnings per share excludes the after tax non-cash impact of amortization expense on goodwill and intangibles.