UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ---------- to ----------
Commission file number 0-28106
FirstBancorporation, Inc.
(Exact name of registrant as specified in its charter)
South Carolina 57-1033905
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1121 Boundary Street P.O. Box 2147, Beaufort, S.C. 29901-2147
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 803-521-5600
Indicate by check mark whether the registrant (1) has 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 [ ]
The number of outstanding shares of the issuer's $.01 par value common stock
as of April 6, 1996 is 625,586.
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INDEX FORM 10-QSB
Part I
Page
Item 1. Financial Statements and Related Notes---------- 3-5
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations ------------------------- 6-11
Part II
Item 1. Legal Proceedings ------------------------------ 12
Item 2. Changes in Securities -------------------------- 12
Item 3. Defaults upon Senior Securities ---------------- 12
Item 4. Submission of Matters to a Vote
of Security Holders --------------------------- 12
Item 5. Other Information ------------------------------ 12
Item 6. Exhibits and Reports on Form 8-K --------------- 12
Signatures ------------------------------------- 13
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PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS AND RELATED NOTES
BALANCE SHEET
(Dollars in thousands)
March 31, December 31,
1996 1995
(Unaudited) (Unaudited)
ASSETS ----------- -----------
Cash and due from overnight deposits $ 4,094 $ 4,197
Interest bearing overnight deposits 2,170 1,349
Other short-term investment 199 199
Mortgage backed securities 1,943 2,055
Loans 73,977 72,756
Less unearned income (8) (8)
Less allowance for loan losses (519) (470)
---------- ----------
Net loans 73,499 72,277
Federal Home Loan bank and Federal Reserve
Bank Stock 678 575
Premises and equipment 1,016 1,036
Accrued interest receivable
Loans 497 490
Investments 3 7
Real estate owned-acquired through foreclosure 238 443
Deferred organizational costs 109 109
Other assets 354 311
---------- ----------
Total assets $ 84,749 $ 83,047
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 77,076 $ 74,905
Federal Home Loan Bank Advances 0 1,000
Amounts due depository institutions 482 238
Accrued interest payable 131 105
Advances from borrowers for taxes and insurance 114 84
Other liabilities 273 199
---------- ----------
Total liabilities $ 78,077 $ 76,830
Stockholders' Equity
Preferred stock - $.01 par value;
shares authorized - 1,000,000, issued and
outstanding - none
Common stock - $.01 par value;
shares authorized - 3,000,000, issued and outstanding
- 625,586 - 3/31/96; 595,843 - 12/31/95. $ 6 $ 6
Additional paid-in capital 5,037 5,037
Unrealized gain (loss) on securities available-for-
Sale, net of applicable deferred income taxes (26) (19)
Retained earnings 1,655 1,494
---------- ----------
Total stockholders' equity $ 6,672 $ 6,517
Total liabilities and stockholders' equity $ 84,749 $ 83,047
========== ==========
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STATEMENTS OF INCOME FOR THE PERIODS ENDED
MARCH 31, 1996 AND 1995 (Unaudited)
(Dollars in thousands, except per share amounts)
Three Three
Months Months
Ended Ended
3/31/96 3/31/95
--------- ---------
Interest income
Interest on mortgage loans $ 1,191 $ 1,155
Interest on other loans 364 261
Interest on investments 76 54
--------- ---------
Total interest income $ 1,631 $ 1,470
Interest expense
Interest on deposits 781 643
Interest on FHLB advances 17 51
--------- ---------
Total interest expense $ 798 $ 694
Net interest income 833 776
Provision for loan losses 51 68
--------- ---------
Net interest income after provision
for loan losses $ 782 $ 708
Noninterest income
Service charges on deposit accounts 101 106
Other non interest income 78 60
--------- ---------
Total noninterest income $ 179 $ 166
Noninterest expense
Compensation and benefits 366 338
Occupancy 108 104
Data processing 39 34
Other noninterest expense 187 163
--------- ---------
Total noninterest expense $ 700 $ 639
Net income before taxes 261 235
Income tax expense 99 96
--------- ---------
Net income $ 162 $ 139
========= =========
Net income per primary share $ 0.25 $ 0.22
Net income per fully diluted share $ 0.25 $ 0.22
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STATEMENT OF CASH FLOWS FOR THE PERIODS ENDED
MARCH 31, 1996 AND 1995 (unaudited)
(Dollars in thousands)
Three months Three months
Ended Ended
3/31/96 3/31/95
CASH FLOWS FROM OPERATING ACTIVITIES ------------ ------------
Net income $ 162 $ 139
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 49 40
Provision for loan losses 51 68
Decrease (increase) in interest receivable (4) (18)
Decrease (increase) in prepaid expenses &
other assets (46) (98)
Increase (decrease) in accrued interest payable 27 5
Increase (decrease) in accounts payable and
accrued expenses payable 72 45
Increase (decrease) in other liabilities (4) (70)
Total adjustments 144 (28)
------------ ------------
Net cash provided by operating activities $ 306 $ 111
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities 0 0
Maturities of investment securities 0 0
Principal repayments of mortgage-backed securities 98 41
Purchase of Federal Home Loan Bank/Federal Reserve
Bank stock and dividends received (104) 30
Loans originated or acquired, net (1,219) (782)
Capital expenditures (16) (106)
Proceeds from sales of real estate owned 205 4
------------ ------------
Net cash used for investing activities $ (1,035) $ (817)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in noninterest bearing demand accounts (88) 745
Increases (decrease) in Now, money market and
Savings accounts 1,517 (2,872)
(Increase) decrease in certificates of deposit, net 742 1,747
Proceeds from Federal Home Loan Bank Advances 0 3,500
Repayment of Federal Home Loan Bank Advances (1,000) (1,000)
Proceeds from other borrowed money 0 0
Repayment of other borrowed money 0 0
(Decrease) increase in amounts due to depositories 244 (637)
Increase in advances from borrowers for taxes
And insurance 30 57
Proceeds from stock options exercised 0 0
------------ ------------
Net cash provided by financing activities $ 1,446 $ 1,540
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 717 834
------------ ------------
CASH EQUIVALENTS, BEGINNING OF PERIOD 5,546 3,378
CASH EQUIVALENTS, END OF PERIOD $ 6,263 $ 4,212
============ ============
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NOTES TO FINANCIAL STATEMENTS
1. On October 31, 1995, FirstBank, N.A. ("Bank"), (formerly The Savings Bank
of Beaufort County, FSB) reorganized as a wholly-owned subsidiary of
FirstBancorporation, Inc. ("Company"). As a result of the reorganization, each
issued and outstanding share of common stock, $5.00 par value per share, of
the Bank was converted into one share of common stock, $.01 par value per
share, of the Company. The Company's principal business is its investment in
the Bank and, therefore, the assets and liabilities of the Company on a
consolidated basis are substantially those of the Bank. The unaudited interim
financial statements included in this Form 10-QSB are those of the Company for
the periods ended March 31, 1996 and December 31, 1995 and for the Bank alone
for the period ended March 31, 1995 because the reorganization was effective
as of the close of business on October 31, 1995.
2. The unaudited interim financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair presentation of the
results for the reported interim periods. Such adjustments are of a normal
recurring nature. The interim financial statements, including related notes,
should be read in conjunction with the financial statements for the year ended
December 31, 1995 appearing in the 1995 Annual Report of FirstBancorporation,
Inc. The results of operations for the period ended March 31, 1996 are not
necessarily indicative of the results of operations for the full year.
3. Earnings Per Share - Primary earnings per share are based on the weighted
average number of shares outstanding, giving retroactive effect to stock
dividends and the assumed exercise of grants under stock option plans which
are exercisable within five years. The number of shares outstanding for prior
periods has been restated to give effect to prior stock dividends which should
have reduced the exercise price of the stock options. Fully diluted earnings
per share assume the exercise of all grants under the incentive stock option
plan. Primary and fully diluted earnings per share are based on 656,732 shares
and 658,276 shares outstanding respectively for the three months ended March
31, 1996.
4. Loan Commitments - At March 31, 1996, loan commitments consisted of
$2,108,350 in adjustable rate residential mortgage loans, $694,400 in fixed
rate residential mortgage loans, undisbursed amounts of loans in process of
$2,320,678 and unused lines of credit totaling $5,529,000. The Bank s general
practice is to obtain investor commitments for fixed rate loans at the time of
commitment. At March 31, 1996 commitments from investors to purchase loans
originated by the Bank totaled $207,000 with uncovered loans of $487,400.
5. Statement of Cash Flows - For the purposes of reporting cash flows, cash
and cash equivalents include cash, interest-bearing overnight deposits and
other short-term investments with original maturities of 90 days or less.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
During the first three months of the fiscal year the Bank's deposits increased
by $2,171,000 These increases funded net loan growth of $1,172,000 and
repayment of outstanding Federal Home Loan Bank (FHLB) advances of $1,000,000.
Net income for the three month period ended March 31, 1996 was $162,000, or
$.25 per share, as compared to a net income of $139,000, or $.22 per share,
for the first quarter of 1995. Interest income for the current quarter was
$161,000 greater than that of the prior year's period and is mainly
attributable to higher level of average interest earning assets during the
current quarter. Interest expense also increased by $104,000 during the
current quarter as a result of an increase in average interest bearing
liabilities. Net interest income (interest income less interest expense) for
the current quarter was $57,000 greater than net interest income for the
quarter ended March 31, 1995. The current quarter's provision for loan losses
was $17,000 less than that of the prior year's quarter. At March 31, 1996 the
Bank's allowance for loan losses totaled $519,000 or .70% of total loans as
compared to $470,000 or .65% of total loans at March 31, 1995. The Bank
reviews its substandard and non accrual loans at least quarterly to estimate
losses and makes an assessment of losses based on historical experience for
the balance of the portfolio by loan category. The Bank's loan portfolio is
concentrated in lower risk (relative to non-residential mortgage loans), 1-4
residential first mortgage loans which comprise 74% of total loans
outstanding. Consumer loans including open ended home equity consumer loans
totaled 11% of total loans while other real estate loans totaled 11% and
commercial loans totaled 4.1% of loans.
Recent discussions in Congress have focused on the recapitalization of SAIF,
the insurance arm of the FDIC that insures the Bank's deposits. A one-time
charge to the Bank of 80 to 85 basis points of deposits outstanding appears to
be likely. The proposed charge would reduce the capital of the Bank by the
amount of the charge, net of related income taxes. On an after-tax basis this
assessment would approximate $375,000. As of this date the Bank has no
assurance of the certainty or the amount of this assessment.
ASSET/LIABILITY MANAGEMENT AND LIQUIDITY
Asset/Liability management is the process by which the Bank monitors and
controls the pricing, mix and maturity of its assets and liabilities. An
essential purpose of asset/liability management is to ensure adequate
liquidity and to maintain an appropriate balance between interest sensitive
assets and liabilities. Liquidity management involves managing this mix so
that the Bank can meet its demands for cash in a timely manner. The Bank uses
a number of tools to manage its liquidity including maintaining adequate
current asset levels (particularly cash, cash equivalents and overnight
investments), pricing deposits appropriately and ensuring the availability of
sources for borrowed funds (primarily from the FHLB). Current assets,
including cash and due from accounts and overnight investments increased
approximately $716,000 during the quarter. Deposit growth was sufficient
during the quarter to fund loan fundings and repay all outstanding FHLB
advances. As an additional source of liquidity, the Bank has available
borrowing capacity of $11 million at the FHLB-Atlanta to meet future liquidity
needs. The interest rates paid on these borrowings are from time to time
higher than the rates generally paid to deposit customers. Management sees
this capacity as a viable tool in its overall asset/liability strategy of
managing pricing and liquidity.
Commitments and anticipated cash outflows, not including undisbursed portions
of loans in process, totaled approximately $10,161,000 at March 31, 1996, as
compared to $7,249,000 at March 31, 1995.
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ASSET AND LIABILITY MANAGEMENT AND INTEREST RATE RISK
The Bank continues to monitor its interest rate risk through policies designed
to match the maturities of interest-earning assets and interest-bearing
liabilities. One measure of the Bank's interest sensitivity is using a static
gap analysis which compares repricing interest-earning assets and
interest-bearing liabilities for specific time intervals. A gap is considered
positive when the amount of interest sensitive assets exceeds the amount of
interest sensitive liabilities. A gap is considered negative when the amount
of interest sensitive liabilities exceeds the amount of interest sensitive
assets. During a period of rising rates, a negative gap would tend to
adversely affect net interest income while a positive gap would tend to result
in an increase in net interest income. During a period of falling rates, a
negative gap would tend to result in an increase in net interest income while
a positive gap would tend to adversely affect net interest income. The
following table shows the Bank's interest sensitivity position at March 31,
1996.
Interest Sensitivity Position Years
March 31, 1996 Year 1 Year 2 3 & 4 Year 5+ Total
------ ------ ------ ------ ------
Interest earning assets
Loans 42,817 15,009 10,020 6,151 73,997
GNMA MBSs 1,943 -- -- -- 1,943
Overnight and other
investments 2,917 0 0 130 3,047
------ ------ ------ ------ ------
Total interest earning
assets 47,677 15,009 10,020 6,281 78,987
Interest Bearing Liabilities
Deposits 44,519 7,069 15,758 2,123 69,469
Borrowings 0 0 0 0 0
------ ------ ------ ------ ------
Total interest bearing
liabilities 44,519 7,069 15,758 2,123 69,469
Asset (liability) Gap
position 3,158 7,940 (5,738) 4,158 9,518
Cumulative Gap Position 3,158 11,098 5,360 9,518 19,036
Cumulative Gap to Total
Earning Assets 4.00% 14.05% 6.79% 12.05%
(1) Contractual terms regarding periodic repricing during the loan terms are
used to determine repricing periods. Loans are net of undisbursed portions of
loans in process.
(2) Now, money market and savings accounts are considered interest-sensitive.
(3) Repricing considerations for regular savings accounts are based on
estimated decay rates for the Bank.
As of March 31, 1996 the Bank's interest-earning assets that reprice within
one year totaled $47,677,000 while interest-bearing liabilities repricing
within one year totaled $44,519,000 This resulted in a positive gap position
of $3,158,000 or 4.00% of total interest-earning assets. For the same period
last year, the Bank had an asset sensitive position of $620,000 or .85% of
interest-earning assets.
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YIELDS EARNED AND RATES PAID
The following table is a comparison of the three months ended March 31, 1996
and 1995, and balances at December 31, 1995 regarding yields earned and rates
paid.
Average balances and yields earned versus rates paid
Quarter ended March 31, 1996 compared to 1995
(Dollars in thousands)
Average Interest Earned Annualized
Balance or Paid Yield/Rate
For the quarter ended March 31,
1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------
Assets
Interest-earning assets
Loans $73,301 $69,989 $ 1,555 $ 1,416 8.49% 8.09%
Investments 5,237 3,429 76 54 5.81% 6.30%
Total earning assets/
Income earned 78,538 73,418 1,631 1,470 8.31% 8.01%
Non-earning assets 5,389 3,429
------ ------
Total assets $83,927 $77,784
Liabilities
Total Deposits $70,012 $64,800 $ 781 $ 643 4.47% 3.98%
Borrowings 1,154 3,125 17 51 5.91% 6.55%
Interest-bearing
liabilities/expense 71,166 67,925 798 694 4.50% 4.10%
Non-interest-bearing
liabilities 6,173 3,901
Stockholders' Equity 6,588 5,958
Total liabilities and ------ ------
Stockholders' Equity $83,927 $77,784
Net interest income $ 833 $ 776
Interest Rate Spread ======= ======= 3.81% 3.91%
Net yield on Average
interest earning assets 4.24% 4.23%
(1) First quarter 1995 figures are for the Bank only.
(2) Net interest income is the difference between interest income and interest
expense. Interest rate spread is the difference between the average rate on
earning assets and the average rate on interest bearing liabilities. Net
yield on average interest earning assets is net interest income divided by
total interest earning assets.
The decline in interest rate spread was attributable to yields on total
earning assets increasing at a slower rate than rates on total deposits and
other borrowed funds. Net yield on interest earning assets was approximately
the same as the prior year due to a higher level of non interest bearing
deposits in the current quarter. The higher net interest income for the period
was a result of the higher volume of interest earning assets during the
current period.
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OTHER INCOME
During the three-month period ended March 31, 1996, total non interest income
was $179,000 as compared to $166,000 during the same 1995 period. Other income
consists primarily of service charges on deposit accounts of $101,000, rental
income from the Bluffton branch of $9,074 and gains on the sale of loans to
investors of $32,000 (servicing released premiums and fees allowed as income
when a loan is sold to an investor). The increase in other income is
primarily attributable to the sale of property previously carried in its Real
Estate Owned and Other Foreclosed Property category which totaled $12,000.
OTHER EXPENSES
Other expenses for the periods ended March 31, 1996 and March 31, 1995 are
compared and detailed in the table below.
(Dollars in thousands)
3 Months 3 Months
Ended Ended
3/31/96 3/31/95
-------- --------
Other Expenses
Compensation and Benefits $ 366 338
Occupancy 108 104
Marketing 13 11
Data Processing 39 34
FDIC Insurance 42 39
Professional Fees 24 11
Supplies and Printing 13 17
Telephone and Postage 25 31
Loan costs deferred (47) (31)
Other Expenses 104 74
-------- --------
Total Other Expenses 700 639
======== ========
Other expenses increased by 10% during the quarter ended March 31, 1996
as compared to the quarter ended March 31, 1995. Compensation and Benefits
expense accounted for $30,000 of the total increase. This compensation
increase resulted partly from general salary increases and partly from several
positions which were replaced after the first quarter of 1995. Other expense
for the current period increased by $30,000 which included a $17,000 writeoff
of miscellaneous assets during the first quarter of 1996.
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CAPITAL RESOURCES
For regulatory purposes, the Bank is required to maintain a minimum of level
of capital based upon the risk related composition of its loan portfolio. This
risk-based capital requirement requires that the Bank maintain capital at a
minimum 8% level of its regulatory defined risk weighted assets. The Bank may
not declare or pay a cash dividend or repurchase any of its capital stock, if
the effect would cause the stockholders' equity of the Bank to be reduced
below its capital requirements. As of March 31, 1996, the Bank met all of its
risk-based capital requirements and met the definition of a well capitalized
institution under the OCC's regulation entitled Prompt and Corrective Action.
Total Tier 1 risk-based capital was 11.93% and total Risk-based capital was
12.90%.
The table below outlines the capital ratios of the Bank under the capital
regulations of the Office of the Comptroller of the Currency and the dollar
amounts of capital maintained by the Bank at September 30, 1995.
At 9/30/95
-----------
Total Risk-Based Capital $ 7,107,000
Risk-Based Capital/Risk Weighted Assets 12.90%
Tier 1 Risk-Based Capital $ 6,588,000
Tier 1 Risk-Based Capital/Risk Weighted
Assets 11.93%
Tangible Equity Capital $ 6,588,000
Tangible Equity Capital/Risk Weighted
Assets 7.84%
Total equity for the Company at March 31, 1996 was $6,672,129 or 7.87% of
total assets outstanding.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no material legal proceedings pending or settled during the quarter
in which the Company or the Bank was a party.
ITEM 2. CHANGES IN SECURITIES
There were no changes made in the rights of security holders or in the
securities of the Company during the quarter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has not issued any instruments of indebtedness which constitute
securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote by security holders during the
quarter ended March 31,1996.
ITEM 5. OTHER INFORMATION
There were no matters of the registrant which required reporting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No exhibits are applicable.
No reports on Form 8-K were filed during the quarter under report.
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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.
FirstBancorporation, Inc.
DATED: May 8, 1996 /s/James A. Shuford
-------------------------
James A. Shuford, III
Chief Executive Officer
DATED: May 8, 1996 /s/James L. Pate
-------------------------
James L. Pate, III
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4094000
<INT-BEARING-DEPOSITS> 2369000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1943000
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 73977000
<ALLOWANCE> 527000
<TOTAL-ASSETS> 84749000
<DEPOSITS> 77076000
<SHORT-TERM> 114000
<LIABILITIES-OTHER> 886000
<LONG-TERM> 0
0
0
<COMMON> 6000
<OTHER-SE> 6666000
<TOTAL-LIABILITIES-AND-EQUITY> 84749000
<INTEREST-LOAN> 1555000
<INTEREST-INVEST> 76000
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1631000
<INTEREST-DEPOSIT> 781000
<INTEREST-EXPENSE> 798000
<INTEREST-INCOME-NET> 833000
<LOAN-LOSSES> 51000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 700000
<INCOME-PRETAX> 261000
<INCOME-PRE-EXTRAORDINARY> 261000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162000
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 4.24
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 470000
<CHARGE-OFFS> 49000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 519000
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</TABLE>
