<PAGE>
FORM 10-Q
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SECURITIES and EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended Federal Home Loan Bank
December 31, 1996 Docket Number 1509
FIRST PALMETTO FINANCIAL CORPORATION
------------------------------------
(Exact Name of Registrant As Specified In Its Charter)
Delaware 57-0921284
- ----------------------------- --------------------------------
(State of Incorporation) (I.R.S. Employer Identification
Number)
407 DeKalb Street
Camden, South Carolina 29020 (803) 432-2265
- ----------------------------- --------------------------------
(Address of Principal Executive (Registrant's Telephone Number,
Office Including Zip Code) Including Area Code)
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 requested to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No
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(2) Yes X No
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Number of shares of common stock outstanding as of February 5, 1997 693,010
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<PAGE>
INDEX
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Part I - Financial Information Page
- ------ ----
Consolidated Statement of Financial Condition as of
December 31, 1996 and September 30, 1996 1
Consolidated Statement of Income for the Three Months
Ended December 31, 1996 and 1995 2
Consolidated Statement of Cash Flows for the
Three Months Ended December 31, 1996 and 1995 3-4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-8
Part II - Other Information 9
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Signatures 10
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<PAGE>
FIRST PALMETTO FINANCIAL CORPORATION and SUBSIDIARY
CONSOLIDATED STATEMENT of FINANCIAL CONDITION (UNAUDITED)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
----------- -----------
ASSETS (In thousands)
<S> <C> <C>
Cash and due from banks $ 6,088 $ 8,867
Interest-bearing deposits in other banks 7,276 13,649
Certificates of deposit in other banks 399 399
Available-for-sale securities (cost of
$595 at December 31, 1996 and
September 30, 1996) 997 997
Investment securities (market value of
$48,274 and $47,096 at December 31,
1996 and September 30, 1996, respectively) 47,752 46,607
Mortgage-backed securities held for investment
(market value of $31,965 and $32,788 at
December 31, 1996 and September 30, 1996,
respectively) 31,876 33,010
Loans, net of allowance for loan losses of
$2,466 and $2,364 at December 31, 1996
and September 30, 1996, respectively 234,590 227,209
Accrued interest receivable 2,560 2,380
Real estate acquired in settlement of loans 291 480
Stock in Federal Home Loan Bank (FHLB) 2,122 2,122
Premises and equipment 5,169 5,117
Intangible assets 2,392 2,623
Prepaid expenses and other assets 824 1,087
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Total assets $ 342,336 $ 344,547
=========== ===========
LIABILITIES and STOCKHOLDERS'
EQUITY
Deposits $ 288,666 $ 288,157
FHLB advances 30,050 32,550
Accrued expenses and other
liabilities 2,586 3,632
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Total liabilities 321,302 324,339
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Stockholders' equity
Preferred stock, $.01 par value, 500,000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value, 1,500,000 shares
authorized, 733,014 shares issued at
December 31, 1996 and September 30, 1996 7 7
Additional paid-in capital 6,080 6,080
Retained earnings, substantially restricted 15,305 14,474
Unrealized gain on available-for-sale securities 267 272
Treasury stock, at cost (40,004 shares at
December 31, 1996 and September 30, 1996) (625) (625)
----------- -----------
Total stockholders' equity 21,034 20,208
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Commitments
Total liabilities and stockholders' equity $ 342,336 $ 344,547
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</TABLE>
See Notes to Consolidated Financial Statements
(1)
<PAGE>
FIRST PALMETTO FINANCIAL CORPORATION and SUBSIDIARY
CONSOLIDATED STATEMENT of INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, December 31,
1996 1995
------------ ------------
(In thousands, except per share
and number of shares data)
<S> <C> <C>
Interest income:
Loans $ 5,180 $ 4,664
Investment securities 801 898
Mortgage-backed securities 544 653
Other 221 142
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Total interest income 6,746 6,357
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Interest expense:
Deposits 3,202 3,119
FHLB advances 448 449
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Total interest expense 3,650 3,568
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Net interest income 3,096 2,789
Provision for loan losses 125 75
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Net interest income after
provision for loan losses 2,971 2,714
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Other income:
Service charges 287 291
Loan servicing 116 127
Gain on sales of loans 33 32
Miscellaneous 300 58
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Total other income 736 508
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Other expense:
Compensation and fringe
benefits 968 914
Net occupancy 255 225
Data processing fees 229 229
Amortization of
intangible assets 232 142
Federal and other
insurance premiums 156 113
Telephone, postage, and
supplies 125 130
Miscellaneous 401 333
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Total other expense 2,366 2,086
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Income before income taxes 1,341 1,136
Income taxes 510 400
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Net income $ 831 $ 736
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Earnings per share $ 1.20 $ 1.06
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Weighted average number of
shares 693,010 693,018
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</TABLE>
See Notes to Consolidated Financial Statements
(2)
<PAGE>
FIRST PALMETTO FINANCIAL CORPORATION and SUBSIDIARY
CONSOLIDATED STATEMENT of CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, December 31,
1996 1995
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Cash flows from operating activities: (In thousands)
<S> <C> <C>
Net income $ 831 $ 736
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Decrease in deferred loan fees, net (15) (7)
Accretion and amortization of investment
discounts and premiums, net (64) (50)
Provision for loan losses 125 75
Gain on sale of loans (33) (32)
Depreciation 126 76
Amortization of intangible assets 232 142
Proceeds from sale of loans 2,053 5,344
Originations and principal repayments of
loans held for sale, net (2,020) (5,312)
Increase in accrued interest receivable (181) (335)
Decrease in prepaid expenses and other assets 261 172
Decrease in accrued expenses and
other liabilities (1,047) (1,225)
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Net cash provided by (used in)
operating activities 268 (416)
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Cash flows from investing activities:
Proceeds from maturities of investment securities 3,000 3,000
Purchases of investment securities (4,086) -
Principal repayments on mortgage-backed securities 1,135 1,713
Net increase in loans (7,491) (7,790)
Proceeds from sale of real estate acquired in
settlement of loans 190 32
Capital expenditures for premises and equipment (176) (51)
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Net cash used in investing activities (7,428) (3,096)
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Cash flows from financing activities:
Net increase in deposits 508 2,572
Proceeds from FHLB advances - 7,000
Repayments of FHLB advances (2,500) (5,500)
Purchase of common stock - (4)
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Net cash provided by (used in) financing
activities (1,992) 4,068
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Net increase (decrease) in cash and
cash equivalents (9,152) 556
Cash and cash equivalents at beginning
of year 22,516 12,979
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Cash and cash equivalents at end of year $ 13,364 $ 13,535
------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements
(3)
<PAGE>
FIRST PALMETTO FINANCIAL CORPORATION and SUBSIDIARY
CONSOLIDATED STATEMENT of CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
December 31, December 31,
1996 1995
------------ ------------
(In thousands)
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 3,564 $ 3,569
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Income taxes $ 36 $ 39
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Supplemental schedule of noncash investing
and financing activities:
Decrease in unrealized gain on
available-for-sale securities $ -0- $ 13
------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements
(4)
<PAGE>
FIRST PALMETTO FINANCIAL CORPORATION and SUBSIDIARY
NOTES to CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1 Basis of Presentation
---------------------
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to form 10Q and do not include all
disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management of First
Palmetto Financial Corporation ("First Palmetto"), the financial
statements reflect all adjustments necessary to present fairly the
financial position of First Palmetto and subsidiary, First Palmetto
Savings Bank, F.S.B. (the "Bank") and the results of operations and
changes in cash flow for the interim period. All adjustments are of a
normal and recurring nature.
(5)
<PAGE>
FIRST PALMETTO FINANCIAL CORPORATION and SUBSIDIARY
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Management's Discussion and Analysis of Financial Condition and Results of
- --------------------------------------------------------------------------
Operations
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Financial Condition
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Total assets remained relatively stable amounting to $342.3 million at December
31, 1996 as compared to $344.5 million at September 30, 1996.
Interest-bearing deposits in other banks decreased by $6.4 million, or 46.7%,
and loans receivable increased by $7.4 million from $227.2 million to $234.6
million. This increase in loans is primarily attributable to increased real
estate mortgage loan demand.
The following table sets forth selected data relating to the composition of
First Palmetto's loan portfolio at the dates indicated.
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
----------- -----------
(In thousands)
<S> <C> <C>
Real Estate
Mortgage $ 192,975 $ 185,198
Construction 6,813 8,695
Consumer 27,404 27,847
Commercial business 12,657 12,578
Less:
Undisbursed loan
proceeds 2,523 4,461
Deferred loan fees 270 284
Allowance for loan losses 2,466 2,364
----------- -----------
Total $ 234,590 $ 227,209
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</TABLE>
As of December 31, 1996, and September 30, 1996, there were no concentrations of
loans in any types of industry which exceeded 10% of First Palmetto's total
loans that are not disclosed as a loan category.
Loans are placed on non-accrual status when, in the opinion of management, the
collection of interest is doubtful. As of December 31, 1996 and September 30,
1996, the Bank had non-accrual loans in the amount of $1,591,000 and $984,000,
respectively. The increase is primarily related to one real estate loan in the
amount of $347,000, which has been adequately reserved for in the allowance for
loan losses. Interest income that was foregone on the non-accrual loans that
would have been recorded if the loans had been current in accordance with their
original terms amounted to $101,000 and $95,000 at December 31, 1996 and
September 30, 1996, respectively. Interest income recognized on non-accrual
loans amounted to $25,000 and $52,000 for the periods ended December 31, 1996
and September 30, 1996, respectively.
There were no loans which were not classified as non-accrual or restructured at
December 31, 1996 or September 30, 1996 which may be so classified in the near
future because of management concerns as to the ability of the borrowers to
comply with repayment terms.
Deposits remained stable at $288.7 million at December 31, 1996 and $288.2
million at September 30, 1996.
(6)
<PAGE>
FIRST PALMETTO FINANCIAL CORPORATION and SUBSIDIARY
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Federal Home Loan Bank advances decreased to $30.1 million at December 31, 1996,
from $32.6 million at September 30, 1996.
Stockholders' Equity increased by $826,000 which equaled net income for the
period of $831,000 plus a decrease in unrealized gain on available-for-sale
investments of $5,000. Book value per share at December 31, 1996, was $30.35 as
compared to $29.16 at September 30, 1996.
Results of Operations
- ---------------------
Interest income for the three months ended December 31, 1996, amounted to $6.7
million as compared to $6.4 million for the three months ended December 31,
1995. The increase in interest income equaled $389,000 or 6.1%. The primary
reason for the increase was an increase in the volume of loans for the
comparative periods. Additionally, the Bank's mix changed in the comparative
periods so that more of the Bank's assets were in the higher interest-earning
categories. Interest expense for the three months ended December 31, 1996,
amounted to $3.6 million as compared to $3.6 million for the comparative three
month period of 1995. Net interest income for the 1996 period was $3.0 million
as compared to $2.7 million for the 1995 period. The increase of $257.000
equaled 9.5%.
The following table sets forth analysis of First Palmetto's allowance for loan
losses for the period indicated.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended Year Ended
December 31, December 31, September 30,
1995 1996 1996
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of (In thousands)
period $ 1,800 $ 2,364 $ 1,800
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Loans charged off:
Real estate - - 63
Consumer 27 42 220
Commercial - - 284
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Total charge-offs 27 42 567
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Recoveries 34 19 246
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Provision for loan 75 125 885
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Balance at end of $ 1,882 $ 2,466 $ 2,364
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Ratio of net charge-offs to
average loans outstanding
during the period (.004%) .010% .15%
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</TABLE>
Management of First Palmetto continually reviews the adequacy of the allowance
for loan losses. Factors considered in evaluating the adequacy of the allowance
for loan losses include specific reviews of delinquent loans and other loans
with known problems, composition of First Palmetto's loan portfolio, general
economic conditions which may affect the borrower's ability to repay and the
value of the collateral and other factors affecting the loan portfolio.
Other income for the two comparative periods increased by $228,000 totaling
$736,000 for the 1996 period and $508,000 for the 1995 period. The primary
reason for the increase was from the gain on a sale of a branch office in the
three month period ended December 31, 1996.
(7)
<PAGE>
FIRST PALMETTO FINANCIAL CORPORATION and SUBSIDIARY
---------------------------------------------------
Other expenses increased $280,000, amounting to $2.4 million for the three
months ended December 31, 1996, from $2.1 million for the three months ended
December 31, 1995. Increases in operating expenses were primarily related to
compensation and other fringe benefits as a result of normal salary increases.
All categories which increased resulted from higher operating expenses from an
increase in the average number of branches for the comparative periods.
Earnings per share, using the weighted average method, were $1.20 for the 1996
period compared to $1.06 for the 1995 period.
The effective tax rate for the 1996 period was 38.0% as compared to 35.2% for
the 1995 periods.
Liquidity
- ---------
First Palmetto's liquidity ratio as defined by the Federal Home Loan Bank
Regulations was 13.5% for December 31, 1996 which exceeded the 5% regulatory
requirements. First Palmetto does not know of any demands, commitments, events
or uncertainties that would have a materially adverse effect on its liquidity.
Customer deposits, loan principal repayments, loan sales and Federal Home Loan
Bank advances are the primary sources of First Palmetto's liquidity, and it is
anticipated that these will be adequate to meet First Palmetto's needs.
Capital Resources
- -----------------
First Palmetto does not presently have any material commitments for capital
expenditures.
Regulatory Capital Requirements
- -------------------------------
The following table sets forth the Bank's capital position relative to its
various minimum regulatory capital requirements at December 31, 1996.
<TABLE>
<CAPTION>
Percent of
Amount Assets (a)
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Tangible Capital $ 17,286 5.1%
Tangible Capital Requirement 5,081 1.5
------------ ------------
Excess $ 12,205 3.6%
============ ============
Core Capital $ 18,092 5.3%
Core Capital Requirement 10,188 3.0
------------ ------------
Excess $ 7,904 2.3%
============ ============
Total Capital (i.e., Core and
Supplementary Capital) $ 20,556 10.3%
Risk-Based Capital Requirement 16,034 8.0
------------ ------------
Excess $ 4,522 2.3%
============ ============
</TABLE>
(a) Percent of adjusted total assets for the purposes of the tangible and
core capital requirements and risk-weighted assets for the purpose of the
risk-based capital requirement.
(8)
<PAGE>
FIRST PALMETTO FINANCIAL CORPORATION and SUBSIDIARY
---------------------------------------------------
Part II - Other Information
---------------------------
Item 1. Legal Proceedings
-----------------
First Palmetto is not engaged in any legal proceedings of a material nature at
this time. From time to time it is party to legal proceedings in the ordinary
course of business wherein it enforces its security interest.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Materially Important Events
---------------------------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
(9)
<PAGE>
Signatures
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Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
First Palmetto Financial Corporation
------------------------------------
DATED: 2/11/97 By: /s/ Samuel R. Small
------------------ ----------------------------------------
Samuel R. Small
President and Chief Executive Officer
DATED: 2/11/97 By: /s/ Steve G. Williams, Jr.
------------------ ----------------------------------------
Steve G. Williams, Jr.
Chief Financial Officer
(10)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,088
<INT-BEARING-DEPOSITS> 7,276
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 997
<INVESTMENTS-CARRYING> 79,628
<INVESTMENTS-MARKET> 80,239
<LOANS> 234,590
<ALLOWANCE> 2,466
<TOTAL-ASSETS> 342,336
<DEPOSITS> 288,666
<SHORT-TERM> 30,050
<LIABILITIES-OTHER> 2,586
<LONG-TERM> 0
0
0
<COMMON> 7
<OTHER-SE> 21,207
<TOTAL-LIABILITIES-AND-EQUITY> 342,336
<INTEREST-LOAN> 5,180
<INTEREST-INVEST> 1,345
<INTEREST-OTHER> 221
<INTEREST-TOTAL> 6,746
<INTEREST-DEPOSIT> 3,202
<INTEREST-EXPENSE> 3,650
<INTEREST-INCOME-NET> 3,096
<LOAN-LOSSES> 125
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,366
<INCOME-PRETAX> 1,341
<INCOME-PRE-EXTRAORDINARY> 831
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 831
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
<YIELD-ACTUAL> 3.84
<LOANS-NON> 1,596
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,364
<CHARGE-OFFS> 42
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 2,466
<ALLOWANCE-DOMESTIC> 2,466
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
