<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
______
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1997 Commission File Number 0-27098
FIRST SAVINGS BANCORP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1842701
-------------- ----------
(State of jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
205 SE Broad Street, Southern Pines, North Carolina 28387
- --------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(910) 692-6222
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 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 30, 1997, there were 3,696,944 shares of the issuer's common stock
issued and outstanding.
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FIRST SAVINGS BANCORP, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION Page Number
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flow 5
Notes to Consolidate Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II OTHER INFORMATION
-----------------
Item 5. Other Information 9
SIGNATURES 10
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FIRST SAVINGS BANCORP, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, June 30,
--------- ---------
1997 1996
--------- ---------
($in thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents (including
interest-bearing deposits of $13,678 at
March 31, 1997; $713 at June 30, 1996) $ 15,285 $ 4,718
Securities available for sale, at market value 57,944 67,998
Securities at amortized cost (market
values - $6,796 at March 31, 1997;
$3,016 at June 30, 1996) 6,788 2,965
Loans receivable (net of allowance for loan losses
of $604 at March 31, 1997; $609 at June 30, 1996) 187,110 177,431
Premises and equipment 1,987 2,019
Accrued interest receivable 1,086 1,622
Prepaid expenses and other assets 921 233
-------- --------
TOTAL $271,121 $256,986
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits: 202,335 187,424
ESOP note payable 422
Accrued expenses and other liabilities 2,076 2,329
-------- --------
Total liabilities 204,411 190,175
-------- --------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 5,000,000
shares, authorized, none issued and
outstanding
Common stock, no par value, 20,000,000 shares
authorized, 3,696,944 shares issued
and outstanding 35,593 36,451
Unearned compensation related to ESOP note
payable (326) (422)
Net unrealized gain on securities available
for sale 15
Retained earnings 31,428 30,782
-------- --------
Total shareholders' equity 66,710 66,811
-------- --------
TOTAL $271,121 $256,986
-------- --------
</TABLE>
See notes to consolidated financial statements
3
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FIRST SAVINGS BANCORP, INC.
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED Nine Months Ended
MARCH 31, March 31,
--------------------------------------------------
($ in thousands except per share data) 1997 1996 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest on loans receivable $3,750 3,377 11,092 9,934
Interest on mortgage-backed securities 120 74 203 235
Interest on securities 901 1,139 2,905 3,491
Dividends on securities 34 35 105 105
Other 143 20 307 111
------ ----- ------ ------
Total interest income 4,948 4,645 14,612 13,876
------ ----- ------ ------
INTEREST EXPENSE:
Interest on deposits 2,377 2,257 7,044 6,914
Interest on borrowings 26 13 42
------ ----- ------ ------
Total interest expense 2,377 2,283 7,057 6,956
------ ----- ------ ------
Net interest income 2,571 2,362 7,555 6,920
Provision for loan losses
Net interest income after provision
for loan losses 2,571 2,362 7,555 6,920
------ ----- ------ ------
NONINTEREST INCOME:
Fees and service charges 88 81 261 227
Income from real estate operations 2 2 7 7
Rent on safe deposit boxes 10 11 19 21
Other, net 1 6 3 11
------ ----- ------ ------
Total noninterest income, net 101 100 290 266
------ ----- ------ ------
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and fringe benefits 481 538 1,542 1,506
Occupancy and building 47 55 154 168
Premiums and assessments 31 105 1,295 311
Computer services 86 74 226 211
Other 212 188 577 555
------ ----- ------ ------
Total general and administrative
expenses 857 960 3,794 2,751
------ ----- ------ ------
INCOME BEFORE INCOME TAXES 1,815 1,502 4,051 4,435
INCOME TAX EXPENSE 656 522 1,415 1,533
------ ----- ------ ------
NET INCOME $1,159 980 $2,636 2,902
====== ===== ====== ======
EARNINGS PER COMMON SHARE:
Net income $ 0.29 0.25 0.66 0.73
====== ===== ====== ======
Average common and common equivalent
shares outstanding 3,960,572 3,978,248 3,965,005 3,989,174
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
4
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FIRST SAVINGS BANCORP, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
------------------
($ IN THOUSANDS) 1997 1996
------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,636 $ 2,902
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 71 88
Issuance of ESOP shares 179 166
Net amortization on investments 395 476
Loan origination fees and costs deferred,
net of current amortization 28
Changes in:
Other assets (65) 297
Other liabilities (58) 26
------- --------
Net cash provided by operating activities 3,186 3,955
------- --------
INVESTING ACTIVITIES:
Purchases of certificates of deposits (7,000)
Proceeds from maturities of certificates of deposits 7,000 6,000
Proceeds from maturities of securities 9,700 6,000
Purchases of securities (5,373)
Principal payments on mortgage-backed
securities 1,532 912
Loan originations net of principal
repayments (9,794) (12,110)
Purchases of premises and equipment (39) (70)
------- --------
Net cash provided by (used in) investing
activities (3,974) 732
------- --------
FINANCING ACTIVITIES:
Net increase in deposits 14,911 3,412
Net decrease in borrowed funds (422) (110)
Cash dividends paid (2,193) (1,949)
Exercise of stock options 35
Repurchase of common stock (976)
------- --------
Net cash provided by financing activities 11,355 1,353
------- --------
INCREASE IN CASH AND CASH
EQUIVALENTS 10,567 6,040
CASH AND CASH EQUIVALENTS BEGINNING OF
PERIOD 4,718 3,209
------- --------
CASH AND CASH EQUIVALENTS END OF PERIOD $15,285 $ 9,249
======= ========
SUPPLEMENTAL DISCLOSURES:
- ------------------------
Cash paid for:
Interest on deposits $ 7,070 $ 6,899
Interest on borrowed funds 15 44
Income taxes 1,546 1,501
</TABLE>
See notes to consolidated financial statements.
5
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FIRST SAVINGS BANCORP, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation: The accompanying consolidated financial statements
----------------------
are presented for First Savings Bancorp, Inc., ("First Savings"), First
Savings Bank of Moore county, Inc., SSB (the "Bank") and its wholly-owned
subsidiary, Moore Service Corporation. All significant intercompany
balances and transactions have been eliminated.
2. Accounting Policies: The significant accounting policies followed by First
--------------------
Savings for interim financial reporting are consistent with the accounting
policies followed for annual financial reporting. The accompanying
unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
or Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (none of which were other than normal accruals) necessary for a
fair presentation of the financial position and results of operations for
the periods presented have been included. The results of operations for
the three and nine month periods ended March 31, 1997 is not necessarily
indicative of the results of operations that may be expected for the year
ending June 30, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the annual report on
Form 10-K for the year ended June 30, 1996.
3. Holding Company Reorganization: On November 1, 1995, First Savings
-------------------------------
Bancorp, Inc. (First Savings) completed the acquisition of First Savings
Bank of Moore County, Inc., SSB. (the "Bank") pursuant to an Agreement and
Plan of Reorganization in which the Bank became a wholly-owned subsidiary
of First Savings. Under the terms of the Agreement and Plan of
Reorganization, each outstanding share of the common stock, no par value
per share, of the Bank was exchanged for one share of the common stock, no
par value per share, of First Savings and the former holders of the Bank's
common stock are now the holders of all First Savings' outstanding common
stock. Prior to the acquisition of the Bank on November 1, 1995, First
Savings had not issued any stock, had no assets or liabilities, and had not
engaged in any business activities other than of an organizational nature.
Accordingly, the financial statements included herein as of dates or for
periods ended prior to November 1, 1995 do not reflect the operations of
First Savings.
4. Earnings Per Common Share: Earnings per common share is calculated by
--------------------------
dividing net income by the weighted average number of common and common
equivalent shares outstanding. Common stock equivalents consist of stock
options. In determining the number of common stock equivalent shares
outstanding, the number of shares issuable upon exercise of stock options
has been reduced by the number of common shares assumed purchased with a
portion of the proceeds from the assumed exercise of the common stock
equivalents. The weighted average number of common shares given effect to
options outstanding during the three and nine month periods ended March 31,
1997 and 1996 were 3,960,572 and 3,965,005, respectively,and 3,978,248 and
3,989,174, respectively.
5. Stock Repurchase Plan: On September 12, 1996 First Savings' Board of
----------------------
Directors adopted the First Savings Bancorp, Inc. Stock Repurchase Plan.
Pursuant to the Plan, First Savings may repurchase shares of its
outstanding common stock in the open market or in privately negotiated
transactions in accordance with regulatory requirements. On September 27,
1996 First Savings initiated a plan to repurchase 10% or its stock over the
next twelve months. As of March 31, 1997, 55,000 shares have been
repurchased.
6
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FIRST SAVINGS BANCORP, INC.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
First Savings Bancorp, Inc., a North Carolina holding company ("First Savings"),
was formed on November 1, 1995 to become the parent holding company of First
Savings Bank of Moore County, Inc., SSB (the "Bank"), a North Carolina chartered
stock savings bank. First Savings engages in no substantial business activities
other than the activities related to ownership of the Bank.
The Bank is primarily engaged in the business of attracting deposits from the
general public and using those funds to originate mortgage loans for the
purchase or construction of one-to-four family homes. To a lesser extent, the
Bank also originates multi-family residential mortgage loans, nonresidential
real estate loans, loans secured by deposits, home equity lines of credit,
installment loans and credit card loans. As a savings bank, the Bank's deposit
accounts are insured up to applicable limits by the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation ("FDIC").
The Bank conducts its operations through its main office in Southern Pines,
North Carolina and 4 branch offices located in Moore County.
FINANCIAL CONDITION
First Savings had total assets of $271.1 million at March 31, 1997 compared to
$257.0 million at June 30, 1996. The increase was primarily related to a 5.0%
increase in net loans. Net loans increased from $177.4 million at June 30, 1996
to $187.1 million at March 31, 1997. The increase in loans is attributable to a
slowing of refinancing, a favorable rate environment, and strong marketing
programs. In addition to loans, cash and cash equivalents increased $10.6
million. First Savings' securities decreased $6.2 million or 8.8% to $64.7
million at Mrch 31, 1997 from $71.0 million at June 30, 1996. The decrease in
securities was related to maturing securities and principal payments on
mortgage-backed securities.
Supporting the asset growth was an increase in deposits of 8.0% from $187.4
million at June 30, 1996 to $202.3 million at March 31, 1997.
LIQUIDITY
Maintaining adequate liquidity while managing interest rate risk is the primary
goal of First Savings' asset and liability management strategy. Liquidity is
the ability to fund the needs of the Bank's borrowers and depositors, pay
operating expenses, and meet regulatory liquidity requirements. Maturing
investments, loan and mortgage-backed security principal repayments, deposits
and income from operations are the main sources of liquidity. The Bank's
primary uses of liquidity are to fund loans and to make investments.
As of March 31, 1997, liquid assets (cash and cash equivalents, and marketable
investment securities) were approximately $80.0 million, which represents 39.5%
of deposits. As a North Carolina chartered savings bank, First Savings is
required to maintain liquid assets equal to at least 10.0% of its total assets.
For purposes of this requirement, liquid assets consist of cash and readily
marketable investments and mortgage-backed securities. At March 31, 1997, this
liquidity ratio, based on North Carolina regulations, was 29.5% Management
considers current liquidity levels to be adequate to meet First Savings'
foreseeable needs.
MANAGEMENT'S DISCUSSION AND ANALYSIS
At March 31, 1997, outstanding mortgage loan commitments and available home
equity line of credit balances were $16.0 million, available credit card line of
credit balances were $2.9 million and the undisbursed portion of construction
loans was $6.8 million. Funding for these commitments is expected to be
provided from deposits, loan and mortgage-backed securities principal
repayments, maturing investments and income generated from operations.
7
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FIRST SAVINGS BANCORP, INC.
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REGULATORY CAPITAL REQUIREMENTS
Federal banking regulations require that bank holding companies and their bank
subsidiaries meet various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on First
Savings' financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, First Savings must meet
specific capital guidelines that involve quantitative measures of First Savings
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. First Savings' capital amounts and
classification are also subject to qualitative judgements by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require First Savings to maintain minimum amounts and ratios of total and Tier 1
capital to risk-weighted assets, and of Tier 1 capital to average assets.
As of May 10, 1996, the most recent notification from the FDIC categorized the
Bank as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must maintain minimum
total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in
the table. There are no conditions or events since that notification that
management believes have changed the category.
ACTUAL CAPITAL AMOUNTS AND RATIOS FOR FIRST SAVINGS AND THE BANK
ARE PRESENTED IN THE TABLE BELOW:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ------ ------- ----------- ------- -----------
(GREATER OR (GREATER OR
EQUAL TO) EQUAL TO)
AS OF MARCH 31, 1997
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets:
Consolidated $67,299 55.17% $ 9,758 8.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $48,436 39.71% $ 9,758 8.0% $12,198 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $66,695 54.68% $ 4,879 4.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $47,832 39.21% $ 4,879 4.0% $ 7,319 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $66,695 24.84% $10,740 4.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $47,832 18.79% $10,180 4.0% $12,725 5.0%
</TABLE>
In addition to federal regulatory requirements, the Bank is subject to a North
Carolina savings bank capital requirement of at least 5% of total assets. At
March 31, 1997, the Bank's capital ratio under the North Carolina requirements
was 18.57%.
At March 31, 1997, First Savings and the Bank exceeded all capital requirements.
8
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FIRST SAVINGS BANCORP,INC.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
1996
Net income for the three months ended March 31, 1997 was $1,159,000 or $0.29 per
share, compared with $980,000 or $0.25 per share for the same period in 1996.
An increase in the net interest margin and a reduction in general and
administrative expenses were the primary factors for the increase in earnings.
Net interest income for the quarter ended March 31, 1997 increased $209,000
representing an increase of 8.8% from the corresponding period of the prior
year.
General and administrative expenses decreased from $960,000 for the quarter
ended March 31, 1996 to $857,000 for the quarter ended March 31, 1997 due
primarily to reductions in federal insurance premiums and compensation and
fringe benefits.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND
1996
Net income for the nine months ended March 31, 1997 was $2,636,000 or $0.66 per
share, compared to $2,902,000 or $0.73 per share for the same period in 1996.
The decrease in earnings of $266,000 was primarily due to an increase in general
and administrative expenses.
Net interest income increased $635,000 from $6,920,000 for the nine months ended
March 31, 1996 to $7,555,000 for the same period of the current year. The
increase was primarily due to lower costs of funds and higher yields on
interest-earning assets.
Led by fees and service charges, noninterest income increased $24,000 or 9.0%
from $266,000 for the nine month period ended March 31, 1996 to $290,000 for the
same period of the current year.
General and administrative expenses for the nine month period ended March 31,
1997 was $3,794,000 compared to $2,751,000 for the same period of the prior
year. The increase was primarily due to a nonrecurring SAIF Assessment of
$1,159,000 in the current year.
OTHER INFORMATION
As of September 30, 1996, legislation was passed requiring financial
institutions insured by the Savings Association Insurance Fund ("SAIF") to pay a
one time special assessment of 0.657% based on the March 31, 1995 deposit base.
For the nine month period ended March 31, 1997 First Savings recorded a charge
to earnings of approximately $1,159,000 relating to the special SAIF assessment.
9
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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.
FIRST SAVINGS BANCORP, INC.
March 9, 1997 /s/ William E. Samuels, Jr.
- ------------- ---------------------------------------
Date William E. Samuels, Jr.
President
May 9, 1997 /s/ Timothy S. Maples
- ------------- ---------------------------------------
Date Timothy S. Maples
Controller/Principal Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> JAN-01-1997 JUL-01-1996
<PERIOD-END> MAR-31-1997 MAR-31-1997
<CASH> 1,607 1,607
<INT-BEARING-DEPOSITS> 13,678 13,678
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 57,944 57,944
<INVESTMENTS-CARRYING> 6,788 6,788
<INVESTMENTS-MARKET> 6,796 6,796
<LOANS> 187,714 187,714
<ALLOWANCE> 604 604
<TOTAL-ASSETS> 271,121 271,121
<DEPOSITS> 202,335 202,335
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 2,076 2,076
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 35,593 35,593
<OTHER-SE> 31,117 31,117
<TOTAL-LIABILITIES-AND-EQUITY> 271,121 271,121
<INTEREST-LOAN> 3,750 11,092
<INTEREST-INVEST> 1,055 3,213
<INTEREST-OTHER> 143 307
<INTEREST-TOTAL> 4,948 14,612
<INTEREST-DEPOSIT> 2,377 7,044
<INTEREST-EXPENSE> 2,377 7,057
<INTEREST-INCOME-NET> 2,571 7,555
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 857 3,794
<INCOME-PRETAX> 1,815 4,051
<INCOME-PRE-EXTRAORDINARY> 1,815 4,051
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,159 2,636
<EPS-PRIMARY> 0.29 0.66
<EPS-DILUTED> 0.29 0.66
<YIELD-ACTUAL> 3.88 3.94
<LOANS-NON> 220 220
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 609 609
<CHARGE-OFFS> 5 5
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 165 165
<ALLOWANCE-DOMESTIC> 165 165
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 439 439
</TABLE>
