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, 1997
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 May 12, 1997 is 690,323.
<PAGE>
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INDEX FORM 10-QSB
Part I
Page
Item 1. Financial Statements and Related Notes---------3-6
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations ------------------------7-11
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
2
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS AND RELATED NOTES
BALANCE SHEETS (Unaudited)
(Dollars in thousands)
March 31, December 31,
1997 1996
-------- --------
ASSETS
Cash and amounts due from banks $4,772 $4,721
Interest bearing overnight deposits 1,259 3,150
Other short-term investments 199 199
Securities available for sale 2,146 2,485
Loans available for sale 140 663
Loans 81,285 78,780
Less allowance for loan losses (661) (630)
------- -------
Net loans 80,624 78,150
------- -------
Premises and equipment 1,266 1,147
Accrued interest receivable 459 502
Real estate owned-acquired through foreclosure 222 228
Deferred organizational costs 132 135
Other assets 471 353
------- -------
Total assets $91,960 $91,733
======= =======
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities
Deposits $79,681 $78,300
Federal Home Loan Bank Advances 4,350 5,600
Amounts due depository institutions 87 200
Accrued interest payable 149 119
Advances from borrowers for taxes
and insurance 114 76
Other liabilities 342 393
------- -------
Total liabilities $84,723 $84,688
======= =======
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 - 690,323 - 3/31/97;
627,587 - 12/31/96. $ 6 $ 6
Additional paid-in capital 5,441 5,441
Unrealized gain (loss) on securities
available-for-Sale, net of applicable
deferred income taxes (13) (13)
Retained earnings 1,803 1,608
-------- --------
Total stockholders equity $ 7,237 $ 7,045
-------- --------
Total liabilities and stockholders'
equity $ 91,960 $ 91,733
======== ========
3
PAGE
<PAGE>
STATEMENTS OF INCOME FOR THE PERIODS ENDED
March 31, 1997 and 1996 (Unaudited)
(Dollars in thousands, except per share amounts)
Three Three
Months Months
Ended Ended
3/31/97 3/31/96
------- -------
Interest income
Interest on mortgage loans $1,263 $1,191
Interest on other loans 449 364
Interest on investments 65 76
------ ------
Total interest income 1,777 1,631
------ ------
Interest expense
Interest on deposits 778 781
Interest on FHLB advances 50 17
------ ------
Total interest expense 828 798
Net interest income 949 833
------ ------
Provision for loan losses 30 51
------ ------
Net interest income after
provision for loan losses 919 782
Non interest income
Service charges on deposit accounts 120 101
Other non interest income 79 78
------ ------
Total non interest income 199 179
Non interest expense
Compensation and benefits 407 366
Occupancy 120 108
Data processing 56 39
Other non interest expense 223 187
------ ------
Total non interest expense 806 700
Net income (loss) before taxes 312 261
------ ------
Income tax expense 118 99
------ ------
Net income (loss) $ 194 $ 162
====== ======
Net income (loss) per primary share $ .27 $ 0.22
====== ======
Net income (loss) per fully diluted share $ .27 $ 0.22
====== ======
4
PAGE
<PAGE>
STATEMENT OF CASH FLOWS FOR THE PERIODS ENDED
March 31, 1997 and 1996 (unaudited)
(Dollars in thousands)
Three months Three months
Ended Ended
3/31/97 3/31/96
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 194 $ 162
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 28 49
Provision for loan losses 30 51
Decrease (increase) in interest receivable 44 (4)
Decrease (increase) in prepaid expenses &
other assets (121) (46)
Originations of loans sold to investors 1,607 1,847
Proceeds from sales of loans to investors (1,607) (1,847)
Increase (decrease) in accrued interest payable 30 27
Increase (decrease) in accounts payable and
accrued expenses payable (69) 71
Increase (decrease) in other liabilities 25 (4)
------ ------
Net cash provided by operating activities 161 306
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities 0 0
Maturities of investment securities 0 0
Principal repayments of mortgage-backed
securities 69 98
Purchase of Federal Home Loan Bank/
Federal Reserve
Bank stock and dividends received 0 (104)
Loans originated or acquired, net (1,977) (1,219)
Capital expenditures (145) (16)
Proceeds from sales of fixed assets 0 0
Proceeds from sales of real estate owned 0 205
------ ------
Net cash used for investing activities (2,053) (1,036)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in non interest bearing demand accounts 216 (88)
Increases (decrease) in Now, money market and
Savings accounts 1,635 (1,517)
(Increase) decrease in certificates
of deposit, net (473) 742
Proceeds from Federal Home Loan Bank Advances 2,000 0
Repayment of Federal Home Loan Bank Advances (3,250) (1,000)
(Decrease) increase in amounts
due to depositories (113) (244)
Increase in advances from borrowers for taxes
and insurance 37 30
------ ------
Net cash provided by financing activities 52 1,446
------ ------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,840) 717
CASH EQUIVALENTS, BEGINNING OF PERIOD 7,871 5,546
------ ------
CASH EQUIVALENTS, END OF PERIOD $6,031 $6,263
====== ======
5
PAGE
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. On October 31, 1996, 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.
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, 1996 appearing in the 1996 Annual Report of FirstBancorporation,
Inc. The results of operations for the period ended March 31, 1997 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 722,415
shares and 723,966 shares outstanding respectively for the three months ended
March 31, 1997.
4. Loan Commitments - At March 31, 1997, the Bank had total unused loan
commitments outstanding of $11,019,000 which were comprised of construction
and commercial unfunded lines of $3,187,000, unfunded consumer lines of credit
of $7,643,000 and letters of credit issued totaling $189,0000. In the normal
course of business, the Bank issues loan commitments to customers at market
rates of interest. The Bank s general practice is to obtain investor
commitments for fixed rate loans at the time of commitment. At March 31,
1997, all fixed rate residential loan commitments were covered by commitments
from investors for sale.
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.
6
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
----------------------
During the first three months of the 1997 year, total assets were
relatively unchanged with an increase of $227,000 from December 31, 1996.
During this period, the Bank's deposits increased by $1,381,000 and its
Federal Home Loan Bank advances decreased by $1,250,000. Current assets in
the form of cash and short term investments and increased deposits funded net
loan growth of $2,474,000. Real estate owned at 3/31/97 consisted primarily of
two construction loans on single family homes.
The Company had a net income for the three month period ended March 31,
1997 of $194,000, or $.27 per share, as compared to a net income of $162,000,
or $.22 per share, for the first quarter of 1996. Interest income for the
current quarter was $146,000 greater than that of the prior year's period and
is primarily attributable to an increase in average interest earning assets of
$5,818,000 during the current quarter. Interest expense increased by $30,000
during the current quarter as average interest bearing liabilities increased
by $3,354,000. The higher volume of interest bearing liabilities was partially
offset by a lower rate paid on interest bearing liabilities during the current
quarter. Net interest income (interest income less interest expense) for the
current quarter was $116,000 greater than net interest income for the quarter
ended March 31, 1996. The Bank provided $30,000 in provision for loan losses
during the current quarter as compared to $51,000 during the first quarter of
1996. At March 31, 1997 the Bank's allowance for loan losses totaled $661,000
or .81% of total loans as compared to $519,000 or .70% of total loans at March
31, 1996. 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 and its assessment of future economic conditions 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. Such loans comprise 71% of total loans
outstanding at March 31, 1997. Consumer loans, including open ended home
equity consumer loans, totaled 10% of total loans while other real estate
loans totaled 13% and commercial loans totaled 6% of loans at March 31, 1997.
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 decreased
approximately $1,840,000 during the year to date. This, along with deposit
growth of $1,381,000 funded loan growth during the first three months The
Bank also reduced FHLB advances by $1,250,000 during the period. At March 31,
1997, the Bank had total credit lines of $11 million at the FHLB-Atlanta to
assist in meeting 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 tool in its overall
asset/liability strategy of managing pricing and liquidity.
The Bank has total unused lines of credit outstanding of $9,618,000
excluding undisbursed portions of construction loans in process as compared to
$7,400,000 outstanding at March 31, 1996. See Note 4 for additional
information.
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
7
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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, 1997.
Interest Sensitivity Position
March 31, 1997 Year 1 Years 2 Years 4 Year 8+ Total
(Dollars in thousands) and 3 thru 7
Interest earning assets
Loans $48,034 $20,067 $ 5,074 $8,110 $81,285
GNMA MBSs 1,638 0 0 0 1,638
Overnight and other
investments 2,246 0 0 130 2,376
------- ------ ------- ------ -------
Total interest earning assets 51,918 20,067 5,074 8,240 85,299
Interest Bearing Liabilities
Deposits 46,394 20,450 5,506 72,350
FHLB Borrowings 3,400 450 500 0 4,350
------ ------ ------ ------ -------
Total interest bearing
liabilities 49,794 20,900 6,006 0 76,700
Asset (liability) Gap
position $ 2,124 ($ 833) (932) $8,240 $ 8,599
======= ======== ====== ====== ========
Cumulative Gap Position $ 2,124 $ 1,291 $ 359 $8,599
Cumulative Gap to Total ======= ======== ====== ======
Earning
Assets 2.39% 1.41% .31% 9.52%
======= ======= ====== ======
(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, 1997, the Bank's interest-earning assets that reprice
within one year totaled $51,918,000 while interest-bearing liabilities
repricing within one year totaled $49,794,000 This resulted in a positive gap
position of $2,124,000 or 2.39% of total interest-earning assets.
8
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<PAGE>
YIELDS EARNED AND RATES PAID
The following table is a comparison of the three months ended March 31,
1997 and 1996.
Average balances and yields earned versus rates paid
Quarter ended March 31, 1997 compared to 1996
(Dollars in thousands)
Average Interest Earned Annualized
Balance or Paid Yield/Rate
For the quarter ended March 31,
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
Assets
Interest-earning
assets
Loans $79,985 $73,301 $1,712 $1,555 8.56% 8.49%
Investments 4,371 5,237 65 76 5.95% 5.80%
------- ------- ------ ------ ---- ----
Total earning assets/
Income earned 84,356 78,538 1,777 1,631 8.43% 8.31%
Non-earning assets 6,509 5,389
------ ------
Total assets $90,865 $83,927
======= =======
Liabilities
Interest bearing
deposits $71,101 $70,012 $ 778 $ 781 4.39% 4.47%
Borrowings 3,419 1,154 50 17 5.87% 5.91%
------- ------- ------ ----- ---- ----
Interest bearing
deposits and
borrowings/expense 74,520 71,166 828 798 4.46% 4.50%
Non-interest-bearing
Liabilities 9,261 6,173
Stockholders' Equity 7,084 6,588
------- -------
Total Liabilities and
Stockholders Equity $90,865 $83,927
======= =======
Net interest income $ 949 $ 833
===== =====
Interest Rate Spread(1) 3.97% 3.81%
Net yield on average(1)
interest earning assets (1) 4.50% 4.24%
(1) 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.
Net interest income increased by $116,000 during the current year s
quarter as a result of the combined effects of a greater net interest rate
spread and a higher volume of interest earning assets. Yield on interest
earning assets increased by .12% during the current year s quarter and the
rate paid on interest bearing liabilities decreased by .04% resulting in
an increase in the net interest rate spread of .16% over the same period
last year. Total interest earning assets increased by $5,818,000 while
interest bearing liabilities increased by $3,354,000 from first quarter
1996.
9
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<PAGE>
NON INTEREST INCOME
During the three month period ended March 31, 1997, total non interest
income was $199,000 as compared to $179,000 during the same 1996 period.
Non interest income in the current quarter consisted primarily of service
charges on deposit accounts of $120,000 as compared to $101,000 in the
first quarter of 1996. First quarter rental income from the Bluffton branch
was $7,000 in both 1997 and 1996. Gains on the sale of loans to investors
(servicing released premiums and fees allowed as income when a loan is sold
to an investor) totaled $52,000 in the first quarter of 1997 versus $41,000
in the first quarter of 1996. The March 31, 1996 quarter included a gain
on sale of real estate owned of $12,000 versus $0 in the March 31, 1997
quarter.
NON INTEREST EXPENSES
Other non interest expenses for the periods ended March 31, 1997 and March
31, 1996 are compared and detailed in the table below.
(Dollars in thousands)
3 Months 3 Months
Ended Ended
3/31/97 3/31/96
--------- ----------
Other Expenses
Compensation and Benefits $ 407 366
Occupancy 120 108
Marketing 22 13
Data Processing 56 39
FDIC Insurance 16 42
Professional Fees 27 24
Supplies and Printing 39 13
Telephone and Postage 40 25
Loan costs deferred (17) (47)
Other Misc. Expenses 96 117
------ ------
Total Other Expenses 806 700
====== ======
Other non interest expenses increased by 15% during the quarter ended
March 31, 1997 as compared to the quarter ended March 31, 1996. During the
current period the Bank charged $13,000 in equipment depreciation expenses
included in occupancy costs for costs related to a change in data
processing systems. Salary costs were higher as a result of a higher
staffing complement and because of increased overtime expense. Data
processing fees and supplies and printing were higher because of costs
associated with the data processing conversion.
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, 1997, 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.
10
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<PAGE>
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 March 31, 1997.
At 3/31/97
-----------
Total Risk-Based Capital $ 7,751,000
Risk-Based Capital/Risk Weighted Assets 12.20%
Tier 1 Risk-Based Capital $ 7,090,000
Tier 1 Risk-Based Capital/Risk Weighted
Assets 11.16%
Tangible Equity Capital $ 6,649,000
Tangible Equity Capital/Total Assets 7.48%
Total equity for the Company at March 31, 1997 was $7,237,000 or 7.87% of
total assets outstanding.
11
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<PAGE>
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.
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.
12
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<PAGE>
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 12, 1997 /s/James A. Shuford, III
----------------------------------
James A. Shuford, III
Chief Executive Officer
DATED: May 12, 1997 /s/James L. Pate, III
----------------------------------
James L. Pate, III
Chief Financial Officer
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4772
<INT-BEARING-DEPOSITS> 1259
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2556
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 81285
<ALLOWANCE> 661
<TOTAL-ASSETS> 91960
<DEPOSITS> 79681
<SHORT-TERM> 4464
<LIABILITIES-OTHER> 578
<LONG-TERM> 0
0
0
<COMMON> 6
<OTHER-SE> 7231
<TOTAL-LIABILITIES-AND-EQUITY> 91960
<INTEREST-LOAN> 1712
<INTEREST-INVEST> 65
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1777
<INTEREST-DEPOSIT> 778
<INTEREST-EXPENSE> 828
<INTEREST-INCOME-NET> 949
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 806
<INCOME-PRETAX> 312
<INCOME-PRE-EXTRAORDINARY> 194
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 194
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
<YIELD-ACTUAL> 4.50
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 631
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 661
<ALLOWANCE-DOMESTIC> 661
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
