UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Quarterly Period Ended September 30, 2000
[ ] 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: 0-22445
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FIRSTSPARTAN FINANCIAL CORP.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 56-2015272
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
380 East Main Street, Spartanburg, South Carolina 29302
(Address of principal executive office)
(864) 582-2391
(Registrant's telephone number)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock Outstanding: 3,720,270 shares as of November 5, 2000.
<PAGE>
FIRSTSPARTAN FINANCIAL CORP. AND SUBSIDIARIES
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C>
Page
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at September 30, 2000 and June 30, 2000 1
Consolidated Statements of Income for the Three-Month Periods Ended
September 30, 2000 and 1999 2
Consolidated Statements of Stockholders' Equity for the Three-Month Period
Ended September 30, 2000 and 1999 3
Consolidated Statements of Cash Flows for the Three-Month Periods Ended
September 30, 2000 and 1999 4-5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Default 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 13
Signatures 14
</TABLE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
FirstSpartan Financial Corp. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
---------------- ---------------
<S> <C> <C>
Assets
Cash $ 13,667 $ 13,375
Federal funds sold and overnight interest-bearing deposits 5,794 7,231
--------- ---------
Total cash and cash equivalents 19,461 20,606
Investment securities available-for-sale - at fair value (amortized cost:
$38,024 and $34,239 at September 30, 2000 and June 30, 2000, respectively) 37,661 33,693
Loans receivable, net 512,029 503,095
Loans held-for-sale - at lower of cost or market (market value: $2,078
and $1,967 at September 30, 2000 and June 30, 2000, respectively) 2,050 1,933
Office properties and equipment, net 10,587 10,241
Federal Home Loan Bank of Atlanta stock - at cost 4,100 4,100
Real estate acquired in settlement of loans 798 478
Other assets 12,116 11,511
--------- ---------
Total Assets $ 598,802 $ 585,657
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposit accounts $ 430,596 $ 419,619
Advances from Federal Home Loan Bank of Atlanta 81,000 82,000
Other borrowings 9,169 8,763
Other liabilities 7,348 5,891
--------- ---------
Total liabilities 528,113 516,273
--------- ---------
Stockholders' Equity:
Preferred stock, $0.01 par value:
Authorized - 250,000 shares; none issued or outstanding
at September 30, 2000 and June 30, 2000 -- --
Common stock, $0.01 par value:
Authorized - 12,000,000 shares; issued: 4,430,375 at September 30,
2000 and June 30, 2000; outstanding: 3,720,270 at September 30,
2000 and June 30, 2000 44 44
Additional paid-in capital 42,987 42,894
Retained earnings 58,336 57,674
Treasury stock - at cost (710,105 shares at September 30,
2000 and June 30, 2000) (22,126) (22,126)
Unearned restricted stock (3,213) (3,502)
Unallocated ESOP stock (5,113) (5,261)
Accumulated other comprehensive loss (226) (339)
--------- ---------
Total stockholders' equity 70,689 69,384
--------- ---------
Total Liabilities and Stockholders' Equity $ 598,802 $ 585,657
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
FirstSpartan Financial Corp. and Subsidiaries
Consolidated Statements of Income
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Investment Income:
Interest on loans $ 10,421 $ 8,837
Interest and dividends on investment securities,
mortgage-backed securities, and other 841 950
---------- ----------
Total investment income 11,262 9,787
---------- ----------
Interest Expense:
Deposit accounts 5,008 4,194
Other borrowings 151 127
Federal Home Loan Bank of Atlanta advances 1,263 698
---------- ----------
Total interest expense 6,422 5,019
---------- ----------
Net Interest Income 4,840 4,768
Provision for Loan Losses 100 100
---------- ----------
Net Interest Income After Provision for Loan Losses 4,740 4,668
---------- ----------
Non-interest Income:
Service charges and fees 910 724
Gain on sale of mortgage loans 79 99
Other, net 225 200
---------- ----------
Total non-interest income, net 1,214 1,023
---------- ----------
Non-interest Expense:
Employee compensation and benefits 1,910 1,909
Federal deposit insurance premium 49 84
Occupancy and equipment expense 384 403
Computer services 172 154
Advertising and promotions 97 155
Office supplies, postage, printing, etc 182 178
Other 759 517
---------- ----------
Total non-interest expense 3,553 3,400
---------- ----------
Income Before Income Taxes 2401 2,291
Provision for Income Taxes 914 921
---------- ----------
Net Income $ 1,487 $ 1,370
========== ==========
Basic and Diluted Earnings Per Share $ 0.45 $ 0.41
========== ==========
Weighted Average Shares Outstanding - Basic 3,328,870 3,351,990
========== ==========
Weighted Average Shares Outstanding - Diluted 3,330,728 3,351,990
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FirstSpartan Financial Corp. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Three Months Ended September 30, 2000 and 1999
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Common Stock Additional Unearned
------------------------- Paid-In Retained Treasury Restricted
Shares Amount Capital Earnings Stock Stock
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1999 3,787,970 $ 44 $ 42,648 $ 54,905 $ (20,955) $ (4,660)
--------- --------- --------- --------- --------- ---------
Net income -- -- -- 1,370 -- --
Unrealized loss on securities
available-for-sale, net of taxes -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Total comprehensive income -- -- -- 1,370 -- --
--------- --------- --------- --------- --------- ---------
ESOP stock committed for release -- -- 96 -- -- --
Dividends ($0.20 per share) -- -- -- (665) -- --
Prorata vesting of restricted stock -- -- -- -- -- 290
--------- --------- --------- --------- --------- ---------
Balance September 30, 1999 3,787,970 $ 44 $ 42,744 $ 55,610 $ (20,955) $ (4,370)
========= ========= ========= ========= ========= =========
Balance, June 30, 2000 3,720,270 $ 44 $ 42,894 $ 57,674 $ (22,126) $ (3,502)
--------- --------- --------- --------- --------- ---------
Net income -- -- -- 1,487 -- --
Unrealized gain on securities
available-for-sale, net of taxes -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Total comprehensive income -- -- -- 1,487 -- --
--------- --------- --------- --------- --------- ---------
ESOP stock committed for release -- -- 93 -- -- --
Dividends ($0.25 per share) -- -- -- (825) -- --
Prorata vesting of restricted stock -- -- -- -- -- 289
--------- --------- --------- --------- --------- ---------
Balance September 30, 2000 3,720,270 $ 44 $ 42,987 $ 58,336 $ (22,126) $ (3,213)
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehen-
Unallocated sive Total
ESOP (Loss) Stockholders'
Stock Income Equity
--------- --------- ---------
<S> <C> <C> <C>
Balance, June 30, 1999 $ (5,851) $ (90) $ 66,041
--------- --------- ---------
Net income -- -- 1,370
Unrealized loss on securities
available-for-sale, net of taxes -- (60) (60)
--------- --------- ---------
Total comprehensive income -- (60) 1,310
--------- --------- ---------
ESOP stock committed for release 147 -- 243
Dividends ($0.20 per share) -- -- (665)
Prorata vesting of restricted stock -- -- 290
--------- --------- ---------
Balance September 30, 1999 $ (5,704) $ (150) $ 67,219
========= ========= =========
Balance, June 30, 2000 $ (5,261) $ (339) $ 69,384
--------- --------- ---------
Net income -- -- 1,487
Unrealized gain on securities
available-for-sale, net of taxes -- 113 113
--------- --------- ---------
Total comprehensive income -- 113 1,600
--------- --------- ---------
ESOP stock committed for release 148 -- 241
Dividends ($0.25 per share) -- -- (825)
Prorata vesting of restricted stock -- -- 289
--------- --------- ---------
Balance September 30, 2000 $ (5,113) $ (226) $ 70,689
========= ========= =========
</TABLE>
3
<PAGE>
FirstSpartan Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------------
2000 1999
---------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,487 $ 1,370
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 100 100
Accretion (amortization) of deferred income 44 (54)
Amortization of loan servicing assets 55 45
Accretion of discounts on investment securities -- (1)
Depreciation 203 207
Allocation of ESOP stock at fair value 241 243
Prorata vesting of restricted MRDP stock 289 290
Gain on disposal of property and equipment (8) --
Gain on sale of real estate acquired in settlement of loans (21) --
(Increase) decrease in loans held-for-sale (117) 4,489
Increase in other assets (660) (5,468)
Increase in other liabilities 1,387 2,275
-------- --------
Net cash provided by operating activities 3,000 3,496
-------- --------
Cash Flows from Investing Activities:
Net loan originations and principal collections 6,168 (2,381)
Purchase of loans (15,426) (13,350)
Purchase of investment securities available-for-sale (3,785) (1,012)
Proceeds from sale of real estate acquired in settlement of loans 46 42
Improvements on real estate acquired in settlement of loans (165) --
Purchase of property and equipment (549) (318)
Proceeds from sale of property and equipment 8 --
-------- --------
Net cash used in investing activities (13,703) (17,019)
-------- --------
Cash Flows from Financing Activities:
Net increase in deposits 10,977 1,997
Dividends paid (825) (665)
Advances from Federal Home Loan Bank of Atlanta 2,000 25,000
Repayment of Advances from Federal Home Loan Bank of Atlanta (3,000) --
Other borrowings 406 --
Principal payments on other borrowings -- (35,000)
-------- --------
Net cash provided by (used in) financing activities $ 9,558 $ (8,668)
-------- --------
</TABLE>
4
<PAGE>
FirstSpartan Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
--------- ---------
<S> <C> <C>
Net Decrease in Cash and Cash Equivalents $ (1,145) $(22,191)
Cash and Cash Equivalents at Beginning of Period 20,606 58,420
-------- --------
Cash and Cash Equivalents at End of Period $ 19,461 $ 36,229
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 6,268 $ 5,121
======== ========
Income taxes $ -- $ --
======== ========
Transfers from loans to real estate acquired in settlement of loan $ 180 $ 42
======== ========
Change in unrealized loss on investment securities available-for-sale $ 183 $ (96)
======== ========
Change in deferred taxes related to unrealized loss on
investment securities available-for-sale $ (70) $ 36
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
FIRSTSPARTAN FINANCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Basis of Presentation
FirstSpartan Financial Corp. ("FirstSpartan" or the "Company"), a
Delaware corporation, is the holding company for First Federal
Bank ("First Federal" or the "Bank"), a federally chartered stock
savings bank.
The accompanying consolidated financial statements of the Company
have been prepared in accordance with the instructions to Form
10-Q. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. However, such information
reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary
for a fair statement of results for the interim periods. Also,
certain June 30, 2000 balance sheet amounts have been
reclassified to conform to the September 30, 2000 presentation.
The results of operations for the three- and nine-month periods
ended September 30, 2000 are not necessarily indicative of the
results to be expected for the year ending June 30, 2000. The
unaudited consolidated financial statements and notes thereto
should be read in conjunction with the audited financial
statements and notes thereto contained in the Annual Report on
Form 10-K for the year ended June 30, 2000.
2. Pending Merger
On September 5, 2000, the Corporation and BB&T Corporation
("BB&T") entered into an Agreement and Plan of Reorganization
(the "Agreement") pursuant to which the Corporation will merge
with and into BB&T. Pursuant to the terms of the Agreement, each
share of the Corporation's common stock issued and outstanding at
the effective time of the merger will become and be converted
into the right to receive one share of BB&T common stock.
Consummation of the merger is subject to various conditions,
including the approval of the Corporation's stockholders and the
receipt of all requisite regulatory approvals.
In connection with the Agreement, the Corporation granted to BB&T
a stock option pursuant to a stock option agreement dated as of
September 5, 2000, which under certain defined circumstances,
would enable BB&T to purchase 740,300 shares of the Corporation's
common stock, subject to adjustment, at a price of $21.25 per
share.
6
<PAGE>
3. Earnings Per Share
The following schedule reconciles the numerators and denominators
of the basic and diluted earnings per share ("EPS") computations
for the three-month periods ended September 30, 2000 and 1999.
Diluted common shares arise from the potentially dilutive effect
of the Company's stock options outstanding.
Quarter Ended September 30,
-----------------------------------
2000 1999
-------------- --------------
Basic EPS:
Net income $1,487,000 $1,370,000
Average common shares outstanding 3,328,870 3,351,990
---------- ----------
Earnings per share $ 0.45 $ 0.41
========== ==========
Diluted EPS:
Net income $1,487,000 $1,370,000
---------- ----------
Average common shares outstanding 3,328,870 3,351,990
Dilutive effect of stock options 1,859 -
---------- ---------
Average dilutive shares outstanding 3,330,870 3,351,990
---------- ----------
Earnings per share $ 0.45 $ 0.41
========== ==========
4. Recently Issued Accounting Standards and Guidance
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No.
133, Accounting for Derivative Instruments and Hedging
Activities. This statement, as amended, establishes accounting
and reporting standards for derivative instruments and for
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. The accounting for
changes in the fair value of a derivative (that is, gains and
losses) depends on the intended use of the derivative. The
Company adopted this statement as of July 1, 2000. SFAS No. 133
had no effect on the Company's financial position or results of
operations.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin ("SAB") No. 101, Revenue
Recognition in Financial Statements which summarizes certain
views of the SEC staff related to the application of generally
accepted accounting principles with respect to revenue
recognition in financial statements. SAB No. 101, as amended,
must be adopted by the Company no later than April 1, 2001. The
Company believes that adoption of SAB No. 101 will not materially
affect its financial position or results of operations.
7
<PAGE>
In September 2000, the FASB issued SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. This new statement replaces SFAS No.125 and
provides further standards on accounting and reporting for
transfers and servicing of financial assets and extinguishments
of liabilities. SFAS No. 140 is effective for transfers occurring
after March 31, 2001 and for disclosures relating to
securitization transactions and collateral for fiscal years
ending after December 15, 2000. The Company has not completed the
analysis of the impact that this standard may have on the
Company's financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Private Securities Litigation Reform Act Safe Harbor Statement
This Quarterly Report contains forward-looking statements within
the meaning of the federal securities laws. These statements are
not historical facts, rather statements based on the Company's
current expectations regarding its business strategies and their
intended results and its future performance. Forward-looking
statements are preceded by terms such as "expects," "believes,"
"anticipates," "intends," and similar expressions.
Forward-looking statements are not guarantees of future
performance. Numerous risks and uncertainties could cause the
Company's actual results, performance, and achievements to be
materially different from those expressed or implied by the
forward-looking statements. Factors that may cause or contribute
to these differences include, without limitation, general
economic conditions, including changes in market interest rates
and changes in monetary and fiscal policies of the federal
government; legislative and regulatory changes; and other factors
disclosed periodically in the Company's filings with the
Securities and Exchange Commission.
Because of the risks and uncertainties inherent in
forward-looking statements, readers are cautioned not to place
undue reliance on them, whether included in this report or made
elsewhere from time to time by the Company or on its behalf. The
Company assumes no obligation to update any forward- looking
statements.
Comparison of Financial Condition at September 30, 2000 and June 30, 2000
Total assets were $598.8 million at September 30, 2000 and $585.7
million at June 30, 2000, an increase of $13.1 million or 2%. The
primary components of this increase are $8.9 million, or 2%, in
loans receivable, net, and $4.0 million, or 12%, in investment
securities available-for-sale. Loans receivable, net, increased
primarily as a result of an increase of $6.2 million in mortgage
loans since June 30, 2000. Included in the $6.2 million increase
were increases of $2.1 million in commercial mortgage loans and
$5.2 million in one- to four-family mortgage loans offset by a
decline of $1.0 million in construction and land development
loans combined. Loans receivable, net, also increased due to a
$2.0 million increase in non-mortgage commercial loans.
Deposit accounts increased $11.0 million to $430.6 million at
September 30, 2000 from $419.6 million at June 30, 2000 primarily
as a result of an increase in certificates of deposit.
8
<PAGE>
Stockholders' equity increased by $1.3 million to $70.7 million
at September 30, 2000 from $69.4 million at June 30, 2000. Items
that increased stockholders' equity were the allocation of shares
in the amount of $530,000 under the Bank's Employee Stock
Ownership Plan ("ESOP") and restricted stock plan and net income
of $1.5 million for the three months ended September 30, 2000.
Offsetting these increases to stockholders' equity was the
payment of dividends of $825,000.
Non-performing assets increased by $2.1 million to $6.0 million,
or 1.00% of total assets, at September 30, 2000 from $3.9
million, or 0.67% of total assets, at June 30, 2000. The increase
was due primarily to increases of $1.1 million in one- to
four-family mortgage loans on non-accrual status, $580,000 in
construction loans contractually past due 90 days and still
accruing, and $320,000 in real estate acquired in settlement of
loans.
Comparison of Operating Results for the Three Months Ended September 30, 2000
and September 30, 1999
Net Income. Net income increased $100,000 to $1.5 million for the
three months ended September 30, 2000 from $1.4 million for the
three months ended September 30, 1999. The principal items
increasing earnings for the quarter were increases in net
interest income and non-interest income offset by an increase in
non-interest expense.
Net Interest Income. Net interest income increased by $72,000 for
the three months ended September 30, 2000 from the three months
ended September 30, 1999. Investment income increased by $1.5
million, or 15%, to $11.3 million for the three months ended
September 30, 2000 from $9.8 million for the three months ended
September 30, 1999. The increase in investment income was offset
by an increase in interest expense of $1.4 million, or 28%, to
$6.4 million for the three months ended September 30, 2000 from
$5.0 million for the three months ended September 30, 1999.
The average balance of interest-earning assets was $556.7 million
during the quarter ended September 30, 2000 compared to $516.1
million during the quarter ended September 30, 1999. The average
yield increased to 8.09% from 7.59% for the prior year quarter
due to higher market interest rates in recent quarters.
The average balance of interest-bearing liabilities increased to
$513.3 million during the three months ended September 30, 2000
from $470.9 million during the three months ended September 30,
1999. The average cost of interest-bearing liabilities increased
to 4.96% from 4.23% for the prior year quarter due to higher
market interest rates in recent quarters. The cost of
interest-bearing liabilities is expected to increase if current
interest rates prevail or increase. Due to the inability to
predict interest rates, the amount of increase in the cost of
deposits and borrowings, if any, cannot be quantified.
Net yield on interest-earning assets decreased to 3.48% for the
quarter ended September 30, 2000 from 3.70% for the quarter ended
September 30, 1999.
9
<PAGE>
Provision for Loan Losses. Provisions for loan losses are charges
to earnings to bring the total allowance for loan losses to a
level considered by management as adequate to provide for
estimated loan losses based on management's evaluation of the
collectibility of the loan portfolio. The allowance for loan
losses represents an amount that management believes will be
adequate to absorb estimated losses inherent in the total loan
portfolio which may become uncollectible. Factors considered in
assessing the adequacy of the allowance include historical loss
experience, delinquency trends, characteristics of specific loan
types, growth and composition of the loan portfolios, loans
classified under OTS regulations, and other factors. Management
also considers the level of problem assets that the Company
classifies in accordance with regulatory requirements. The
Company gives greater weight to the level of classified assets
than to the level of non-performing assets (non-accrual loans,
accruing loans contractually past due 90 days or more, and real
estate acquired in settlement of loans) because classified assets
include not only non-performing assets but also performing assets
that otherwise exhibit, in management's judgment, potential
credit weaknesses.
The provision for loan losses was $100,000 for both the three
months ended September 30, 2000 and 1999. Non-performing assets
increased primarily because of a related group of one- to
four-family mortgage loans, however, management did not believe
that an increase in the provision for loan losses was warranted
for these loans. See Comparison of Financial Condition at
September 30, 2000 and June 30, 2000. Management deemed the
allowance for loan losses to be adequate at September 30, 2000.
Based on the uncertainty in the estimation process, however,
management's estimate of the allowance for loan losses may change
in the near term. Further, the allowance for loan losses is
subject to periodic evaluation by various regulatory authorities
and could be adjusted as a result of their examinations.
The allowance for loan losses increased to $3.6 million at
September 30, 2000 from $3.5 million at June 30, 2000 and was
0.65% of gross loans receivable at September 30, 2000 compared to
0.64% at June 30, 2000. The ratio of allowance for loan losses to
non-performing loans decreased to 68.5% at September 30, 2000
from 100.9% at June 30, 2000 due primarily to the increase in
non-performing loans described above.
Non-interest Income. Non-interest income increased to $1.2
million for the three months ended September 30, 2000 from $1.0
million for the three months ended September 30, 1999. Fee income
increased to $910,000 from $724,000 principally due to the growth
in checking accounts.
Non-interest Expense. Non-interest expense was $3.6 million for
the three months ended September 30, 2000 compared to $3.4
million for the same period in 1999. The increase was primarily
due to expenses incurred relating to the pending merger with BB&T
Corporation which was announced September 6, 2000.
Income Taxes. The provision for income taxes was $914,000 for the
three months ended September 30, 2000 compared to $921,000 for
the three months ended September 30, 1999.
10
<PAGE>
Liquidity and Capital Resources
The Company's primary sources of funds are customer deposits,
proceeds from principal and interest payments from loans, the
sale of loans, maturing securities, FHLB of Atlanta advances, and
other borrowings. While maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows and
mortgage prepayments are influenced greatly by general interest
rates, other economic conditions, and competition. Federal
regulations require the Bank to maintain an adequate level of
liquidity to ensure the availability of sufficient funds to fund
loan originations, deposit withdrawals and to satisfy other
financial commitments. Currently, the federal regulatory
liquidity requirement for the Bank is the maintenance of an
average daily balance of liquid assets (cash and eligible
investments) equal to at least 4% of the average daily balance of
net withdrawable deposits and short-term borrowings. This
liquidity requirement is subject to periodic change. The Company
and the Bank generally maintain sufficient cash and short-term
investments to meet short-term liquidity needs. At September 30,
2000, cash and cash equivalents totaled $19.5 million, or 3% of
total assets, and investment securities classified as
available-for-sale with maturities of one year or less totaled
$18.6 million, or 3% of total assets. At September 30, 2000, the
Bank also maintained an uncommitted credit facility with the FHLB
of Atlanta, which provides for immediately available advances up
to an aggregate amount of approximately $149.6 million of which
$81.0 million had been advanced.
FirstSpartan is not subject to any separate regulatory capital
requirements. As of September 30, 2000, the Bank's regulatory
capital was in excess of all applicable regulatory requirements.
At September 30, 2000, under applicable regulations, the Bank's
actual tangible, core and risk-based capital ratios were 10.0%,
10.0% and 15.3%, respectively, compared to regulatory
requirements of 1.5%, 3.0% and 8.0%, respectively.
At September 30, 2000, the Company had loan commitments
(excluding undisbursed portions of interim construction loans) of
approximately $3.7 million ($1.0 million at fixed rates ranging
from 7.625% to 9.500%). In addition, at September 30, 2000, the
unused portion of lines of credit (principally variable-rate home
equity lines of credit) extended by the Company was approximately
$60.5 million. Furthermore, at September 30, 2000, the Company
had certificates of deposit scheduled to mature in one year or
less of $234.5 million. Based on historical experience, the
Company anticipates that a majority of such certificates of
deposit will be renewed at maturity.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2000, there have been no material changes in
the quantitative and qualitative disclosures about market risks
presented in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2000.
11
<PAGE>
FIRSTSPARTAN FINANCIAL CORP. AND SUBSIDIARIES
Part II. Other Information
Item 1. Legal Proceedings
The Company is not involved in any pending legal
proceedings other than routine legal proceedings
occurring in the ordinary course of business.
Management believes that such routine legal
proceedings, in the aggregate, are not material to
the Company's financial condition or results of
operations.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2) (a) Agreement and Plan of Reorganization by and Between
BB&T Corporation and FirstSpartan Financial Corp.*******
(3) (a) Certificate of Incorporation of the Registrant*
(3) (b) Bylaws of the Registrant*
(10) (a) Employment Agreement with Billy L. Painter*****
(10) (b) Employment Agreement with Hugh H. Brantley******
(10) (c) Employment Agreement with J. Stephen Sinclair******
(10) (d) Employment Agreement with R. Lamar Simpson******
(10) (e) Severance Agreement with Rand Peterson**
(10) (f) Severance Agreement with Thomas Bridgeman**
(10) (g) Severance Agreement with Katherine A. Dunleavy***
(10) (h) Employee Severance Compensation Plan**
(10) (i) Employee Stock Ownership Plan**
(10) (j) Registrant's 1997 Stock Option Plan****
(10) (k) Registrant's Management Recognition and Development
Plan****
(10) (l) Severance Agreement with J. Timothy Camp*****
(23) Consent of Deloitte & Touche LLP
(21) Subsidiaries of the Registrant**
(27) Financial Data Schedule
(b) Reports on Form 8-K:
On September 8, 2000, the Company filed a Form 8-K to report that
the Company and BB&T Corporation had entered into a definitive
merger agreement on September 5, 2000. A copy of the merger
agreement and the related stock option agreement are filed as
exhibits to the Form 8-K.
--------------------------------
* Filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (333-23015) and incorporated herein by reference.
** Filed as an exhibit to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1997 and incorporated
herein by reference.
*** Filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 31, 1997 and incorporated
herein by reference.
**** Filed as an exhibit to the Registrant's Annual Meeting Definitive
Proxy Statement dated December 12, 1997 and incorporated herein
by reference.
***** Filed as an exhibit to the Registrant's Form 10-Q for the quarter
ended December 31, 1999 and incorporated herein by reference.
****** Filed as an exhibit to the Registrant's Form 10-Q for the quarter
ended March 31, 2000 and incorporated herein by reference.
****** Filed as an exhibit to the Registrant's Current Report on Form
8-K, filed on September 8, 2000, and incorporated herein by
reference.
13
<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.
FirstSpartan Financial Corp.
Date: November 13, 2000 By: /s/ Billy L. Painter
------------------ ---------------------------------------
Billy L. Painter
President and Chief Executive Officer
Date: November 13, 2000 By: /s/ R. Lamar Simpson
------------------ ---------------------------------------
R. Lamar Simpson
Treasurer, Secretary and
Chief Financial Officer
14
