FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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
( ) 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
0-17915
1ST BANCORP
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1775411
- -------------------------------------- ------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification
Incorporation or organization) Number)
101 N. Third Street
Vincennes, Indiana 47591
- -------------------------------------- ------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including are code: (812) 882-4528
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______________
As of April 23, 1997, there were 697,538 Shares of the Registrant's Common Stock
issued and outstanding.
<PAGE>
1ST BANCORP AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION: Number
Item 1. Financial Statements
Consolidated Condensed Statements
of Financial Condition,
March 31, 1997 and June 30,
1996 (Unaudited) 3
Consolidated Condensed Statements
of Earnings, Three Months and
Nine Months Ended March 31, 1997
and 1996 (Unaudited) 4
Consolidated Condensed Statements of
Cash Flows, Nine Months Ended
March 31, 1997 and 1996 (Unaudited) 5
Notes to Consolidated Condensed
Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-14
PART II. OTHER INFORMATION 15
SIGNATURES 16
<PAGE>
1ST BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Unaudited and in Thousands)
March 31, June 30,
1997 1996
--------- ---------
ASSETS
Cash and cash equivalents:
Interest bearing deposits $ 18,239 $ 24,689
Non-interest bearing deposits 369 410
--------- ---------
Cash and cash equivalents 18,608 25,099
--------- ---------
Trading account securities 1,973 --
Securities available for sale 9,509 10,499
Securities held to maturity (market value
of $45,911 at March 31, 1997 and
$42,184 at June 30, 1996) 47,072 43,624
Loans receivable, net 159,223 150,749
Loans held for sale 21,312 18,590
Accrued interest receivable:
Securities 704 1,036
Loans 1,094 1,179
Stock in FHLB of Indianapolis, at cost 4,864 4,864
Office premises and equipment 3,236 2,950
Real estate owned 326 177
Prepaid expenses and other assets 5,169 4,716
--------- ---------
TOTAL ASSETS $ 273,090 $ 263,483
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 146,641 $ 137,148
Advances from FHLB and other borrowings 101,325 100,885
Advance payments by borrowers
for taxes and insurance 644 492
Accrued interest payable on deposits 803 816
Accrued expenses and other liabilities 1,918 2,413
--------- ---------
Total Liabilities $ 251,331 $ 241,754
--------- ---------
Stockholders' Equity:
Preferred stock, no par value; shares authorized
of 2,000,000, none outstanding -- --
Common stock, $1 par value; shares authorized
of 5,000,000; shares issued and outstanding
of 697,538 at March 31, 1997 and
699,889 at June 30, 1996 $ 698 $ 667
Paid-in capital 2,631 2,747
Retained earnings, substantially restricted 18,636 18,560
Unrealized depreciation on securities (206) (245)
--------- ---------
Total Stockholders' Equity $ 21,759 $ 21,729
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 273,090 $ 263,483
========= =========
See Notes to Consolidated Condensed Financial Statements.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited and in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 3,897 $ 3,811 $ 11,243 $ 12,221
Investment securities 970 762 2,826 2,985
Trading account securities 14 3 14 3
Other short-term investments and
interest bearing deposits 149 187 464 625
-------- -------- -------- --------
Total Interest Income 5,030 4,763 14,547 15,834
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits 1,949 1,817 5,655 7,086
Short-term borrowings 18 22 43 78
FHLB advances and other borrowings 1,369 1,409 4,189 3,886
-------- -------- -------- --------
Total Interest Expense 3,336 3,248 9,887 11,050
-------- -------- -------- --------
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 1,694 1,515 4,660 4,784
Provision for loan losses 84 15 170 60
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,610 1,500 4,490 4,724
-------- -------- -------- --------
NON-INTEREST INCOME:
Fees and service charges 101 66 273 213
Net loss on sales of investment securities available
for sale and trading account investments (34) (42) (32) (164)
Net gain on sales of loans 392 498 1,593 1,494
Net gain on sale of branch offices -- -- -- 7,274
Other 172 184 478 774
-------- -------- -------- --------
Total Non-Interest Income 631 706 2,312 9,591
-------- -------- -------- --------
NON-INTEREST EXPENSE:
Compensation and employee benefits 1,010 906 2,995 3,146
Net occupancy 185 168 545 571
Federal insurance premiums 40 101 1,549 369
Other 472 468 1,616 1,566
-------- -------- -------- --------
Total Non-Interest Expense 1,707 1,643 6,705 5,652
-------- -------- -------- --------
Earnings Before Income Taxes 534 563 97 8,663
Income Taxes (6) 218 (188) 3,248
-------- -------- -------- --------
NET EARNINGS $ 540 $ 345 $ 285 $ 5,415
======== ======== ======== ========
EARNINGS PER SHARE: $ 0.78 $ 0.50 $ 0.41 $ 7.70
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------
1997 1996
--------- ---------
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings $ 285 $ 5,415
Adjustments to reconcile net cash
provided by operating activities:
Depreciation and amortization 241 256
Amortization of mortgage servicing rights 83 90
Gain on sale of loans (1,593) (1,494)
Net change in trading account securities (1,973) --
Loss on sale of securities 32 164
Gain on sale of branches -- (7274)
Net change in loans held for sale (2,722) (5,352)
Provision for loan losses 170 60
Decrease in accrued interest receivable 417 726
Decrease (increase) in prepaid expenses and other assets (464) 1,081
Decrease in accrued expenses and other liabilities (534) (1,257)
Undistributed loss of investment in limited partnership 95 227
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES (5,963) (7,358)
--------- ---------
Cash Flows From Investing Activities:
Purchase of investment and mortgage-backed securities
available for sale (20,982) (34,024)
Proceeds from maturities, calls, repayment
of principal and sales
of investment and mortgage-backed
securities available for sale 22,007 64,056
Purchase of investment and mortgage-backed securities (3,518) (33,266)
Proceeds from maturities, calls, and
repayment of principal of
investment and mortgage-backed securities 59 19,670
Principal collected on loans, net of originations (7,207) (8,002)
Purchases of life insurance policies (35) --
Purchases of stock of FHLB of Indianpolis -- (988)
Purchases of office premises and equipment (494) (118)
Proceeds from sale of office premises and
equipment - branch sales -- 1,316
Proceeds from sale of loans - branch sales -- 28,875
Sale of deposits - branch sales -- (78,473)
Other (149) 15
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (10,319) (40,939)
--------- ---------
Cash Flows From Financing Activities:
Net increase in deposits 9,493 14,620
Proceeds from FHLB advances and other borrowings 51,818 139,344
Repayment of FHLB advances and other borrowings (51,378) (110,890)
Proceeds from issuance of common stock 116 123
Purchase and retirement of common stock (207) (181)
Payment of dividends on common stock (203) (200)
Increase (decrease) in advance payments by borrowers
for taxes and insurance 152 (1,498
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,791 41,318
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (6,491) (6,979)
Cash and Cash Equivalents at Beginning of Period 25,099 17,332
--------- ---------
Cash and Cash Equivalents at End of Period $ 18,608 $ 10,353
========= =========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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<PAGE>
Note 1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary for a fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results which may be expected for an entire year.
These financial statements are condensed and do not contain all disclosures
required by generally accepted accounting principles which would be included in
a complete set of financial statements.
Note 2. Stock Dividend
On November 22, 1996, the Board of Directors approved a 5% common stock dividend
with a record date of December 27, 1996, and payment date of January 10, 1997.
All share and per share data have been adjusted to reflect the 5% stock
dividend.
Note 3. Earnings Per Share
Earnings per share have been computed on the basis of the weighted average
number of common shares outstanding and the dilutive effect of stock options not
exercised during the periods presented using the treasury stock method. The
weighted average number of shares outstanding for use in the earnings per share
computations was 697,159 and 699,118 for the three months ended and 700,147 and
702,179 for the nine months ended March 31, 1997 and 1996, respectively.
Note 4. Stock Purchase Plans
The Corporation maintains an Employee Stock Purchase Plan whereby full-time
employees of First Federal Bank, a Federal Savings Bank (the "Bank") and First
Financial Insurance Agency, Inc. can purchase the Corporation's common stock at
a discount. The purchase price of the shares under this plan is 85% of the fair
market value of such stock at the beginning or end of the offering period,
whichever is lesser. A total of 15,750 authorized but unissued shares were
reserved for issuance under this plan. No shares have been issued under this
plan to date. Under a former plan, with identical terms as the exisiting plan,
13,781 authorized but unissued shares were reserved for issuance. A total of
3,749 shares were issued and purchased by employees in the first quarter of
fiscal year 1997 for the fiscal 1996 plan year under the former plan. A total of
11,472 shares were issued under the former plan.
Note 5. Stock Repurchase Plan
In August 1996, the Board authorized the repurchase of up to 5% of the
outstanding shares of common stock (703,638 shares were outstanding at the
time), subject to market
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<PAGE>
conditions, over a two year period which expires in August 1998. During the
quarter ended December 31, 1996, 7,383 shares of common stock were repurchased.
These 7,383 shares represent the cumulative total purchased under this plan to
date.
Note 6. Savings Association Insurance Fund ("SAIF") Recapitalization
On September 30, 1996, the federal government mandated an industry wide
assessment to recapitalize the SAIF, which is a part of the Federal Deposit
Insurance Corporation ("FDIC"). The special assessment was charged to savings
associations with insured deposits by the SAIF. The assessment was calculated at
0.657% of insured deposits as of March 31, 1995. The Bank's portion of the
assessment was $1,330,000 and is included in non-interest expense for the nine
months ended March 31, 1997.
Note 7. Branch Sales
On December 16, 1995, 1ST BANCORP completed the sale of certain assets and
certain liabilities (the "Branch Sales") of two of the Bank's full-service
retail branch offices in Tipton and Kokomo, Indiana resulting in a pre-tax gain
of $7,274,000. The transaction consisted of the sale of certain mortgage and
consumer loans, office premises and equipment and certain deposit liabilities.
Note 8. Reclassifications
Certain amounts in the fiscal year 1996 consolidated financial statements have
been reclassified to conform to the fiscal year 1997 presentation.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
(a) Financial Condition:
Total assets increased by $9,607,000, or 3.65%, to $273,090,000 at March 31,
1997, compared to total assets of $263,483,000 at June 30, 1996. The increase is
primarily attributable to increases in loans receivable and the investment
securities portfolio.
Cash and cash equivalents declined by $6,491,000, or 25.86%, to $18,608,000 at
March 31, 1997, from $25,099,000 at June 30, 1996. At June 30, 1996, cash and
cash equivalents were at above normal levels primarily due to a significant bulk
sale of lower yielding conforming mortgage loans during the fourth quarter of
fiscal year 1996. The decline in cash and cash equivalents was used to fund a
portion of the increased loan and investment portfolio.
Investment securities consist primarily of U.S. Agency securities. The majority
of securities have either a "call" or "step-up" feature, which provides the Bank
with flexibility under varying interest rate scenarios. In a falling interest
rate environment, the securities with a "call" feature would be called by the
issuer. The rates paid on the "step-up" securities increase after a period of
time. Generally, the rates increase on the securities several times prior to
maturity.
The level of investment securities held to maturity (including mortgage-backed
securities) increased by $3,448,000, or 7.90%, to $47,072,000, at March 31,
1997, from $43,624,000 at June 30, 1996. Investment securities available for
sale (including mortgage-backed securities) declined by $990,000, or 9.43%, to
$9,509,000 at March 31, 1997, from $10,499,000 at June 30, 1996. Trading account
securities totaled $1,973,000 at March 31, 1997, compared with no trading
account securities at June 30, 1996.
Net loans receivable increased by $8,474,000, or 5.62%, to $159,223,000 at March
31, 1997, from $150,749,000 at June 30, 1996. The increase in net loans
receivable is attributable to residential mortgage loan production. Growth
occurred primarily in the non-conforming mortgage loan portfolios. Emphasis
continues to be placed on increasing the non-conforming loan portfolio to
further enhance the Bank's net interest margin.
Loan production during the nine months ended March 31, 1997 decreased compared
to the same period of the prior year. During the nine months ended March 31,
1997, the Bank funded $93.2 million of loans compared to $125.7 million of loans
during the nine months ended March 31, 1996. Primarily responsible for the
decrease in loan production was the decline in purchases of one-to-four family
mortgage loans. The Bank purchased and funded $2.0 million in one-to-four family
mortgage loans during the nine months ended March 31, 1997, compared with $21.9
million for the same period of the prior year. This occurred because of the
Bank's decision to decrease the correspondent loan program due to pricing
constraints.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
During the nine months ended March 31, 1997, non-conforming mortgage lending
constituted $57.6 million, or 61.8%, of total loans funded during the period.
During the same nine month period, $29.4 million of non-conforming loans were
sold on a non-recourse basis in the secondary market. The remainder of the loans
are retained in portfolio to increase the net interest margin. Non-conforming
loans, including those held for sale, increased to $64.8 million at March 31,
1997 compared to $39.9 million at June 30, 1996.
Loans held for sale totaled $21,312,000 at March 31, 1997, an increase of
$2,722,000, or 14.64%, from $18,590,000 at June 30, 1996. Primarily responsible
for the change in the level of loans held for sale is the timing of the sale of
bulk packages of non-conforming loans.
At March 31, 1997, non-performing assets totaled $1,951,000, or .71% of total
assets. This compares to $732,000 of non-performing assets, or .29% of total
assets, at June 30, 1996. The increase in non-performing assets was primarily
the result of one-to-four family mortgage loans becoming 90 days or more past
due. Increased conforming loan and non-conforming loan delinquencies contributed
to the increased non-performing assets. Management is actively monitoring the
upward trend in non-performing assets. As a result of the increased
delinquencies, mortgage loan collection personnel have been increased. In
addition, the loan loss valuation allowance accounts have been actively
increased to compensate for the increased level of non-performing assets.
The table below sets forth the amounts and categories of 1ST BANCORP's
non-performing assets (non-accrual loans and other non-performing assets) for
the balance sheet dates presented. Loans are reviewed regularly and are
generally placed on non-accrual status when they become contractually past due
90 days or more.
March 31, June 30,
1997 1996
---------- -----------
Non-performing assets:
Non-accrual loans $1,625,000 $ 555,000
Other non-performing assets (1) 326,000 177,000
Restructured loans -- --
Total non-performing assets $1,951,000 $ 732,000
---------- ----------
Non-performing assets to total assets 0.71% 0.29%
- -----------------
(1) Certain assets acquired through foreclosures or deeds in lieu of
foreclosure, which are included in the Consolidated Condensed Statement
of Financial Condition as real estate owned.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
During the nine months ended March 31, 1997, the Bank established, through
operations, provisions for loan losses totaling $170,000. In addition, the Bank
realized net charge-offs through its allowance for loan loss accounts of
$71,000. The Bank's allowance for loan loss was $995,000 at March 31, 1997 and
$896,000 at June 30, 1996.
Prepaid expenses and other assets increased to $5,169,000 at March 31, 1997 from
$4,716,000 at June 30, 1996. The increase was primarily attributable to the
purchase of the book of business of an existing independent insurance agency
during December 1996. The book of business was merged with the existing customer
base of First Financial Insurance Agency, Inc. As a result of the acquisition,
First Financial Insurance, Inc. opened a full service insurance office in
Princeton, Indiana in addition to its existing full service office in Vincennes,
Indiana.
Total deposits increased by $9,493,000, or 6.92%, to $146,641,000 at March 31,
1997 from $137,148,000 at June 30, 1996. The increase in deposits was primarily
the result of an increased use of brokered funds during the nine months ended
March 31, 1997. The additional brokered deposits were used to fund on-going loan
and investment operations. Advances from the Federal Home Loan Bank ("FHLB") and
other borrowings increased slightly to $101,325,000 at March 31, 1997 from
$100,885,000 at June 30, 1996.
Accrued expenses and other liabilities decreased to $1,918,000 at March 31,
1997, from $2,413,000 at June 30, 1996. The decrease is primarily attributable
to two items. First, accrued income tax payable decreased due to a lower level
of earnings for the nine months ended March 31, 1997. The lower earnings were
directly attributable to the SAIF assessment. The assessment expense was
recognized during the first quarter of fiscal 1997 on a tax effected basis, and
was paid during the second quarter of fiscal 1997. Second, the management
incentive plan payable was distributed during the first quarter of fiscal year
1997 for the fiscal 1996 plan year. Offsetting the decrease from these items was
an increased payable to the Federal Home Loan Mortgage Corporation ("FHLMC").
The increase was caused by an increased number of mortgage loan payoffs for
loans that had been sold to FHLMC near the end of the quarter.
(b) Results of Operations:
During the three months ended March 31, 1997, 1ST BANCORP had net income of
$540,000, or $0.78 per share, compared to net earnings of $345,000, or $0.50 per
share, for the three months ended March 31, 1996. During the nine months ended
March 31, 1997, 1ST BANCORP recorded net income of $285,000, or $0.41 per share,
compared to net earnings of $5,415,000, or $7.70 per share, for the nine months
ended March 31, 1996.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The lower level of net earnings for the nine months ended March 31, 1997 as
compared to the nine months ended March 31, 1996 is attributable to two primary
factors. The net earnings for the nine months ended March 31, 1997 included a
one time pre-tax assessment of $1,330,000 for the recapitalization of the SAIF.
The assessment was realized through earnings during the first quarter of fiscal
year 1997. The net earnings for the nine months ended March 31, 1996 included a
pre-tax gain of $7,274,000 from the Branch Sales. The gain from the Branch Sales
was realized through earnings during the second quarter of fiscal year 1996.
Net earnings for the three months ended March 31, 1997 and 1996, are more
readily comparable. The net earnings increase for the quarter ended March 31,
1997 as compared with the same period of the previous year resulted from
increased net interest income and a substantially reduced income tax expense,
offset by increased net non-interest expense.
Net interest income before provision for loan losses was $1,694,000 for the
three months ended March 31, 1997, compared to $1,515,000 for the three months
ended March 31, 1996. The net interest margin was 2.64% for the three months
ended March 31, 1997 compared to 2.42% for the three months ended March 31,
1996. The increased level of net interest income was the result of the expanded
net interest margin. The net interest margin was expanded primarily through the
increased level of higher yielding non-conforming mortgage loans which have been
retained in the loan portfolio. Also contributing to the increased net interest
margin for the three months ended March 31, 1997 as compared with the same
period of the previous year, was a slightly higher level of interest-earning
assets and interest-bearing liabilities and a relatively stable cost of funds.
Net interest income before provision for loan losses was $4,660,000 for the nine
months ended March 31, 1997, compared to $4,784,000 for the nine months ended
March 31, 1996. The net interest margin was 2.45% for the nine months ended
March 31, 1997 compared to 2.33% for the nine months ended March 31, 1996. The
lower level of net interest income for the nine months ended March 31, 1997 was
attributable to a lower average level of interest-earning assets and
interest-bearing liabilities which resulted from the Branch Sales during the
second quarter of fiscal 1996. However, offsetting the decreased volume, the
average excess of interest-earning assets over interest-bearing liabilities was
greater during the nine months ended March 31, 1997 as compared to the same
period of the prior year. This enabled the net interest margin as a percent of
total assets to expand despite the lower actual net interest income.
In addition, the Bank's continued emphasis on non-conforming loan originations,
which typically are higher yielding than conforming loan products, has augmented
the expansion of the net interest margin by enhancing the yield on
interest-earning assets. This, combined with a slightly lower average cost of
funds during the nine month period ended March 31,
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
1997, has assisted in the expansion of the net interest margin as a percent of
total assets.
Non-interest income for the three months ended March 31, 1997 totaled $631,000
compared to $706,000 for the three months ended March 31, 1996. The lower level
of non-interest income for the three months ended March 31, 1997 resulted
primarily from a decreased gain on sale of loans because of fewer loan sales.
Non-interest income for the nine months ended March 31, 1997 totaled $2,312,000
compared to $9,591,000 for the nine months ended March 31, 1996. The lower level
of non-interest income for the nine months ended March 31, 1997 was attributable
to the Branch Sales which occurred during fiscal year 1996.
Fees and service charges totaled $101,000 and $273,000 for the three and nine
months ended March 31, 1997 compared to $66,000 and $213,000 for the three and
nine months ended March 31, 1996. The increased income for the three and nine
month periods ended March 31, 1997 was attributable to increased mortgage
servicing fees for loans serviced for others and increased prepayment fees for
non-conforming mortgage loans.
The net losses on the sale of investment securities available for sale and
trading account investments totaled $34,000 and $32,000 for the three and nine
months ended March 31, 1997, respectively, compared with net losses of $42,000
and $164,000 for the three and nine months ended March 31, 1996, respectively.
The higher losses during the nine months ended March 31, 1996 resulted in large
part from the sale of available for sale securities used to fund the sale of
deposits that was a part of the Branch Sales. The sales and trading activity
during 1997 has been in the normal course of business and largely driven by cash
flow needs.
The gain on sale of mortgage loans totaled $392,000 for the quarter ended March
31, 1997 compared to $498,000 for the quarter ended March 31, 1996. The decline
in the gain on sale of loans for the three months ended March 31, 1997 resulted
from a lower volume of conforming loan sales. The total volume of loans sold,
conforming and non-conforming mortgage loans, declined for the three months
ended March 31, 1997 to $16.5 million from $21.5 million for the quarter ended
March 31, 1996. Lower conforming loan sales levels represented 96.7% of the
overall lower volume of loan sales.
The gain on sale of mortgage loans totaled $1,593,000 for the nine months ended
March 31, 1997 compared to $1,494,000 for the nine months ended March 31, 1996.
The total volume of mortgage loan sales declined for the nine months ended March
31, 1997 to $57.5 million from $72.3 million (excluding loans sold as part of
the Branch Sales) for the same period of the prior year. However, non-conforming
loan sales represented an increased percentage of the loans sold during the nine
months ended March 31, 1997 as compared with the same period of the prior year
which resulted in the increased gain on sale of loans. Nonconforming loan sales
totaled $29.4 million for the nine months ended March 31, 1997
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
compared with $14.8 million for the same period of the prior year.
Non-conforming loans have been sold at higher gain levels compared with
conforming loan sales due to pricing methodology differences (including loan
origination fees collected) at the time the loans are originated.
"Other" non-interest income remained relatively stable during the three months
ended March 31, 1997 and totaled $172,000 compared with $184,000 during the
three months ended March 31, 1996. "Other" non-interest income totaled $478,000
for the nine months ended March 31, 1997 compared to $774,000 for the nine
months ended March 31, 1996. The lower level of "Other" non-interest income
resulted from two primary factors. First, there were no sales of mortgage
servicing rights during the nine months ended March 31, 1997 compared to a net
gain of $237,000 on the sale of mortgage servicing rights during the nine months
ended March 31, 1996. Second, service charges for deposit accounts declined
during the nine months ended March 31, 1997 compared with the same period of the
prior year. The decline was attributable to the reduction of retail deposit
accounts which resulted from the Branch Sales.
Non-interest expense totaled $1,707,000 for the three months ended March 31,
1997, compared to $1,643,000 for the three months ended March 31, 1996.
Non-interest expense totaled $6,705,000 for the nine months ended March 31,
1997, compared to $5,652,000 for the nine months ended March 31, 1996.
On September 30, 1996, the federal government mandated an industry wide
assessment to recapitalize the SAIF, which is a part of the FDIC. The special
assessment was charged to savings associations with insured deposits by the
SAIF. The assessment was calculated at 0.657% of insured deposits as of March
31, 1995. The Bank's portion of the assessment was $1,330,000 and was included
in non-interest expense for the first quarter of fiscal 1997 and paid during the
second quarter of fiscal 1997. While the immediate effect on earnings of the
one-time assessment is significant, future earnings will be augmented by lower
deposit insurance premiums. The Bank began paying an assessment of 0.065%
premium for insured deposits as of January 1, 1997, compared with the previous
assessment rate of 0.23%.
Federal insurance premium expense totaled $40,000 for the quarter ended March
31, 1997 compared to $101,000 for the quarter ended March 31, 1996. The lower
expense resulted from a reduced assessment rate as mandated by the FDIC. The
assessment to recapitalize the SAIF is directly responsible for the significant
increase in non-interest expense for the nine months ended March 31, 1997.
Federal insurance premium expense totaled $1,549,000 for the nine months ended
March 31, 1997 compared to $369,000 the nine months ended March 31, 1996.
Compensation and employee benefits expense totaled $1,010,000 for the three
months ended March 31, 1997 compared to $906,000 for three months ended March
31, 1996. The higher level of compensation and employee benefits during the
quarter ended March 31, 1997 resulted from increased staffing levels for the
Bank's non-conforming loan origination operation and for First Financial
Insurance Agency, Inc. Compensation and employee benefits expense totaled
$2,995,000 for the nine months ended March 31, 1997 compared to $3,146,000 for
nine months ended March 31, 1996. The lower level of compensation and employee
benefit expense for the nine months ended March 31, 1997 was primarily due to
lower expenses associated with the management incentive plan and the employee
pension plan.
- 13 -
<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
"Other" non-interest expense remained relatively stable for the three and nine
month periods ended March 31, 1997 as compared with the same periods of the
prior year. "Other" non-interest expense totaled $472,000 for the three months
ended March 31, 1997 compared to $468,000 for the three months ended March 31,
1996. "Other" non-interest expense totaled $1,616,000 for the nine months ended
March 31, 1997 compared to $1,566,000 for the nine months ended March 31, 1996.
The Corporation realized an income tax benefit for the nine months ended March
31, 1997 of $188,000 compared to an income tax expense of $3,248,000 for nine
months ended March 31, 1996. The income tax benefit for the nine months ended
March 31, 1997 resulted from the recognition of income tax credits generated by
an affordable housing limited partnership investment.
(c) Capital Resources and Liquidity:
The Corporation is subject to regulation as a savings and loan holding company
by the Office of Thrift Supervision ("OTS"). First Federal Bank, A Federal
Savings Bank, as a subsidiary of a savings and loan holding company, is subject
to certain restrictions in its dealings with the Corporation. The Bank is also
subject to the regulatory requirements applicable to a federal savings bank.
Current capital regulations require savings institutions to have minimum
tangible capital equal to 1.5% of total assets and a minimum 3% core capital
ratio. Additionally, savings institutions are required to meet a risk-based
capital ratio equal to 8.0% of risk-weighted assets. At March 31, 1997, the Bank
met all current capital requirements.
The following is a summary of the Bank's regulatory capital and capital
requirements at March 31, 1997:
Tangible Core Risk-Based
Capital Capital Capital
----------- ----------- -----------
Regulatory Capital $22,522,000 $22,522,000 $23,031,000
Minimum Capital Requirement 4,101,000 8,201,000 11,747,000
----------- ----------- -----------
Excess Capital $18,421,000 $14,321,000 $11,284,000
Regulatory Capital Ratio 8.24% 8.24% 15.69%
Required Capital Ratio 1.50% 3.00% 8.00%
During the quarter ended March 31, 1997, 1ST BANCORP paid a $0.10 cash dividend
per share to shareholders. This is the eighteenth consecutive quarterly dividend
1ST BANCORP has paid to shareholders.
Liquidity measures the Bank's ability to meet savings withdrawals and lending
commitments. Management believes that liquidity is adequate to meet current
requirements, including the funding of $31,515,000 in loan commitments and
$1,562,000 of loans in process outstanding at March 31, 1997. The majority of
these commitments are expected to be funded within the three month period ending
June 30, 1997. At March 31, 1997, the Bank had $2,546,000 in outstanding
commitments to sell mortgage loans and mortgage-backed securities. The Bank
maintains liquidity of at least 5% of net withdrawable assets. The liquidity
ratio at March 31, 1997 was 10.34%.
There are no other known trends, events, or uncertainties, including current
recommendations by regulatory authorities, that should have, or that are
reasonably likely to have, a material effect on the liquidity, capital
resources, or operations of 1ST BANCORP.
- 14 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Neither 1ST BANCORP nor its subsidiaries is involved in any legal proceedings,
other than routine proceedings occurring in the ordinary course of its business.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during the quarter
ended March 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibits are filed herewith:
Exhibit 3a Certificate of Incorporation of Registrant
(incorporated by reference to exhibit 3.1 to
Registrant's Registration Statement on Form S-4,
Registration No. 33-24587, filed September 28, 1988)
Exhibit 3b Restated Code of By-Laws of Registrant (incorporated
by reference to Exhibit 3b to Registrant's Form 10-K
for the year ended June 30, 1994)
Exhibit 27 Financial Data Schedule
b) Reports on Form 8-K -- There were no reports on Form 8-K filed during the
three months ended March 31, 1997.
- 15 -
<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.
1ST BANCORP
Date: May 13, 1997 By: /s/ C. James McCormick
--------------------------
C. James McCormick, Chairman and
hief Executive Officer
Date: May 13, 1997 By: /s/ Frank D. Baracani
----------------------------
Frank D. Baracani, President
Date: May 13, 1997 By: /s/ Mary Lynn Stenftenagel
---------------------------------
Mary Lynn Stenftenagel,
Secretary-Treasurer and
Chief Accounting Officer
- 16 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1ST
BANCORP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000840458
<NAME> 1ST BANCORP
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1.000
<CASH> 369
<INT-BEARING-DEPOSITS> 18,239
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 1,973
<INVESTMENTS-HELD-FOR-SALE> 9,509
<INVESTMENTS-CARRYING> 47,072
<INVESTMENTS-MARKET> 45,911
<LOANS> 181,530
<ALLOWANCE> 995
<TOTAL-ASSETS> 273,090
<DEPOSITS> 146,641
<SHORT-TERM> 2,980
<LIABILITIES-OTHER> 3,365
<LONG-TERM> 98,345
<COMMON> 0
0
698
<OTHER-SE> 21,061
<TOTAL-LIABILITIES-AND-EQUITY> 273,980
<INTEREST-LOAN> 11,243
<INTEREST-INVEST> 2,840
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<INTEREST-TOTAL> 14,547
<INTEREST-DEPOSIT> 5,655
<INTEREST-EXPENSE> 9,887
<INTEREST-INCOME-NET> 4,660
<LOAN-LOSSES> 170
<SECURITIES-GAINS> (32)
<EXPENSE-OTHER> 6,705
<INCOME-PRETAX> 97
<INCOME-PRE-EXTRAORDINARY> (188)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 285
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
<YIELD-ACTUAL> 7.66
<LOANS-NON> 1,625
<LOANS-PAST> 0
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<LOANS-PROBLEM> 1,811
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</TABLE>
