UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 18, 2000
FIRST SOUTH BANCORP, INC.
(Exact name of registrant as specified in its charter)
Virginia 56-1999749
- ---------------------------------- -------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Commission File Number: 0-22219
1311 Carolina Avenue, Washington, North Carolina 27889
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(Address of principal executive offices)
(Zip Code)
(252) 946-4178
--------------
(Registrant's telephone number, including area code)
<PAGE>
Information To Be Included In The Report
Item 7. Financial Statements and Exhibits.
- ------------------------------------------
On February 18, 2000, First South Bank (the "Bank"), a wholly owned subsidiary
of First South Bancorp, Inc. (the "Company"), completed its acquisition of five
of Triangle Bank's ("Triangle") branch offices located in Rocky Mount, North
Carolina and one office located in Tarboro, North Carolina, pursuant to a
Purchase and Assumption Agreement (the "Agreement") signed on December 10, 1999
(collectively the "Branch Acquisition"). On February 22, 2000, five of the six
branch offices became branch offices of the Bank, while one office was closed
with the deposits and loans transferred to and serviced out of a nearby existing
branch office of the Bank. With the exception of the one office that was closed,
the buildings and equipment acquired by the Bank will continue to be used for
its banking business.
Under terms of the Agreement, the Bank assumed the deposits of these offices for
a premium of approximately 4% of the assumed deposits, and purchased loans,
premises and equipment and certain other assets associated with the branch
offices. These branch offices had total deposits of approximately $147.5 million
at February 18, 2000.
Item 7(a). Financial statements of business acquired - not applicable.
Item 7(b). Pro forma financial information.
The following unaudited pro forma condensed combined statement of financial
condition as of December 31, 1999 and the unaudited pro forma condensed combined
statements of operations for the three months ended December 31, 1999 and for
year ended September 30, 1999 (filed as Exhibit 99.1 hereto) combine unaudited
condensed financial statements of the Company as of and for the three months
ended December 31, 1999, unaudited pro forma condensed combined financial
statements of the Company as of and for the year ended September 30, 1999, and
the historical financial information of the six branch offices of Triangle
acquired under the purchase method of accounting for business combinations. The
purchase method of accounting requires that all assets and liabilities be
adjusted to their estimated fair values as of the date of the acquisition.
The unaudited pro forma condensed combined statement of financial condition give
effect to the Branch Acquisition as if the transaction had occurred on December
31, 1999. The unaudited pro forma condensed combined statements of operations
gives effect to the Branch Acquisition as if the transaction had occurred on
October 1, 1998. The unaudited pro forma condensed combined financial statements
are provided for informational purposes. The unaudited pro forma condensed
combined financial information presented is not necessarily indicative of what
the actual financial condition or results of operations would have been had the
Branch Acquisition been completed as of December 31, 1999 or as of the beginning
of the periods presented and is not indicative of future financial condition or
future results of operations. The unaudited pro forma condensed combined
financial information does not reflect any non-recurring expenses which may be
realized in connection with the Branch Acquisition. The cost savings associated
with the possible operating efficiencies and synergies have not been quantified,
nor are any such savings assured.
2
<PAGE>
The unaudited pro forma condensed combined financial information set forth
herein was prepared for purposes of complying with Regulation S-X of the
Securities and Exchange Commission in connection with the filing of the Form 8-K
of the Company relating to the Branch Acquisition, since such acquisition is
significant to the financial statements of the Company. These unaudited pro
forma condensed combined financial statements should be read in conjunction with
the audited financial statements of the Company, incorporated by reference to
Item 14 of the Company's Annual Report on Form 10-K for the year ended September
30, 1999.
Item 7(c). Exhibits:
Exhibit 99.1 Unaudited Pro Forma Condensed Combined Statements of
Financial Condition as of December 31, 1999 and Unaudited
Condensed Combined Statements of Operations for the Three
Months Ended December 31, 1999 and for the Year Ended
September 30, 1999.
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 hereunto duly authorized.
First South Bancorp, Inc.
(Registrant)
/s/ William L. Wall
------------------------
Date: May 2, 2000 William L. Wall
Executive Vice President
Chief Financial Officer
Secretary
(Principal Financial Officer)
/s/ Kristie W. Hawkins
-------------------------
Date: May 2, 2000 Controller
Treasurer
(Principal Accounting Officer)
3
Exhibit 99.1
FIRST SOUTH BANCORP, INC.
Item 7 (b). Pro Forma Financial Information
I. Unaudited Pro Forma Condensed Combined Statements of Financial Condition as
of December 31, 1999
<TABLE>
<CAPTION>
Pro Forma
--------------------------
Acquisition
Branch Adjustments
Assets First South (1) Acquisition (a) (Note 3) Combined
--------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Cash and securities $ 24,047 $ 114,072 $ (64,030)(b) $ 74,089
Mortgage backed securities 55,962 -- 51,611 (c) 107,573
Loans receivable 344,393 26,347 (44,214)(c) 326,526
Premises and equipment 5,114 2,770 (66)(d) 7,818
FHLB stock 2,608 -- 43 (e) 2,651
Real estate owned 209 -- -- 209
Accrued interest receivable 1,938 -- 846 (f) 2,784
Goodwill/premium 517 4,983 (2) -- 5,500
Prepaid expenses and other
assets 5,426 9 -- 5,435
--------- --------- --------- ---------
Total assets $ 440,214 $ 148,181 $ (55,810) $ 532,585
========= ========= ========= =========
Liabilities and Stockholders' Equity
Liabilities
Deposits $ 345,501 $ 147,503 $ (26,870)(g) $ 466,134
Borrowed money 33,825 -- (28,940)(h) 4,885
--------- --------- --------- ---------
379,326 147,503 (55,810) 471,019
Accrued expenses and
other liabilities 12,936 678 -- 13,614
--------- --------- --------- ---------
Total liabilities 392,262 148,181 (55,810) 484,633
Stockholders' equity 47,952 -- -- 47,952
--------- --------- --------- ---------
Total liabilities and
Stockholders' equity $ 440,214 $ 148,181 $ (55,810) $ 532,585
========= ========= ========= =========
</TABLE>
Note 1. Incorporated by reference to Item 1 of the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1999.
Note 2. The unaudited pro forma condensed combined statements of financial
condition have been prepared to reflect the acquisition of Triangle Bank
deposits for a premium of approximately 4%, and the assumption of loans and
premises and equipment.
Note 3. Based on a preliminary review of the acquired loans portfolio yields,
premises and equipment, no adjustments to estimated fair value or market value
appears to be necessary as part of the acquisition transaction.
a. Financial information is the sum of the financial data available on
the branch offices purchased.
b. This adjustment records the decrease in cash due to funding repayment
of borrowings, deposit run-off and loan closings.
c. This adjustment reflects the securitization of $52 million of
residential mortgage loans into mortgage-backed securities.
d. Record depreciation allowance on acquired equipment.
e. Purchase of additional FHLB stock to support acquired loans.
f. Record accrued interest receivable on acquired loans.
g. This adjustment reflects an 18% actual deposit run-off experienced
from the acquired branch offices.
h. Record repayment of FHLB advances with excess cash received in branch
purchase funding.
<PAGE>
Exhibit 99.1
FIRST SOUTH BANCORP, INC.
Item 7 (b). Pro Forma Financial Information
II. Unaudited Pro Forma Condensed Combined Statement of Operations for the
Three Months Ended December 31, 1999
Pro Forma
-------------------------------
Acquisition
Adjustments
First South (1) (Note 2) Combined
---------- ---------- ----------
(dollars in thousands)
Interest income $ 6,805 $ 1,599 (a,b,c) $ 8,404
Interest expense 3,170 825 (a,d) 3,995
---------- ---------- ----------
3,635 774 4,409
Provision for loan
losses 227 99 (e) 326
---------- ---------- ----------
Net interest income 3,408 675 4,083
Other income 615 242 (f) 857
Other expenses 2,643 501 (f) 3,144
Premium amortization -- 124 (g) 124
---------- ---------- ----------
Income before
income taxes 1,380 292 1,672
Income taxes 569 114 (h) 683
---------- ---------- ----------
Net income $ 811 $ 178 $ 989
========== ========== ==========
Diluted earnings per share $ 0.25 $ 0.30
========== ==========
Weighted average shares 3,262,897 3,262,897
========== ==========
Note 1. Incorporated by reference to Item 1 of the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1999.
Note 2. The unaudited pro forma condensed combined statement of operations has
been prepared to reflect the purchase of Triangle Bank branch offices. Pro forma
adjustments are made to reflect:
a. Interest income on loans and interest expense on deposits are based on
the acquired balances of loans and deposits multiplied by the
applicable branch's portfolio yields and costs as of December 31,
1999. The average loan yield is 8.87% and the average cost of deposits
is 4.18%.
1. Interest on loans ($26.3 million x 8.87% /4): $583,000
2. Interest on deposits ($120.6 million x 4.18% /4): $1.260 million
b. Interest income on $25.0 million of government and agency securities
purchased at 7.0% yield /4: $438,000
c. Interest income n $42.0 million overnight funds at 5.5% /4: $578,000.
d. Reduction in interest expense on $29.0 million of FHLB borrowings
repaid at 6.0% /4: $ 435,000.
e. Increase loan loss reserves for 1.5% of $26.3 million loans acquired
/4: $99,000.
f. All noninterest income and noninterest expense represents the
historical credits and charges of the branch offices acquired.
g. Amortization of deposit premium based on the straight-line method over
ten years ($4,983,000 / 10 /4): $124,000.
h. Federal and state income tax expense at 39% effective rate on
incremental net operating income before taxes.
<PAGE>
Exhibit 99.1
FIRST SOUTH BANCORP, INC.
Item 7 (b). Pro Forma Financial Information
III. Unaudited Pro Forma Condensed Combined Statement of Operations for the Year
Ended September 30, 1999
Pro Forma
-----------------------------
Acquisition
Adjustments
First South (1) (Note 2) Combined
---------- ---------- ----------
(dollars in thousands)
Interest income $ 33,301 $ 6,393 (a,b,c) $ 39,694
Interest expense 16,695 3,300 (a,d) 19,995
---------- ---------- ----------
16,606 3,093 19,699
Provision for loan
losses 370 395 (e) 765
---------- ---------- ----------
Net interest income 16,236 2,698 18,934
Other income 2,983 968 (f) 3,951
Other expenses 13,217 2,006 (f) 15,223
Goodwill/premium amortization 69 498 (g) 567
---------- ---------- ----------
Income before
income taxes 5,933 1,162 7,095
Income taxes 2,549 453(h) 3,002
---------- ---------- ----------
Net income $ 3,384 $ 709 $ 4,093
========== ========== ==========
Diluted earnings per share $ 0.96 $ 1.16
========== ==========
Weighted average shares 3,530,811 3,530,811
========== ==========
Note 1. Incorporated by reference to Item 7 (b) of the Company's Current Report
Amendment Number 1 to Form 8-K/A filed on February 11, 2000.
Note 2. The unaudited pro forma condensed combined statement of operations has
been prepared to reflect the purchase of Triangle Bank branch offices. Pro forma
adjustments are made to reflect:
a. Interest income on loans and interest expense on deposits are based on
the acquired balances of loans and deposits multiplied by the
applicable branch's portfolio yields and costs as of December 31,
1999. The average loan yield is 8.87% and the average cost of deposits
is 4.18%.
1. Interest on loans ($26.3 million x 8.87%): $2.333 million
2. Interest on deposits ($120.6 million x 4.18%): $5.040 million
b. Interest income on $25.0 million of government and agency securities
purchased at 7.0% yield: $1.750 million.
c. Interest income n $42.0 million overnight funds at 5.5%: $2,310
million.
d. Reduction in interest expense on $29.0 million of FHLB borrowings
repaid at 6.0%: $1.740 million.
e. Increase loan loss reserves for 1.5% of $26.3 million loans acquired:
$395,000.
f. All noninterest income and noninterest expense represents the
historical credits and charges of the branch offices acquired.
g. Amortization of deposit premium based on the straight-line method over
ten years ($4,983,000 / 10): $498,300.
h. Federal and state income tax expense at 39% effective rate on
incremental net operating income before taxes.
