<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 December 31, 1996 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 January 31, 1997, there were 3,689,000 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 10
SIGNATURES 11
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FIRST SAVINGS BANCORP, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------ --------
1996 1996
-------- --------
($ in thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents (including
interest-bearing deposits of $106 at
December 31, 1996; $713 at June 30, 1996) $ 7,131 $ 4,718
Certificates of deposit 7,000
Securities available for sale, at market value 61,534 67,998
Securities at amortized cost (market
values - $1,626 at December 31, 1996;
$3,016 at June 30, 1996) 1,548 2,965
Loans receivable (net of allowance for loan
losses of $609 at December 31, and June 30, 1996) 184,600 177,431
Premises and equipment 1,997 2,019
Accrued interest receivable 1,468 1,622
Prepaid expenses and other assets 610 233
-------- --------
TOTAL $265,888 $256,986
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
LIABILITIES:
Deposits: 196,699 187,424
ESOP note payable 392 422
Accrued expenses and other liabilities 2,299 2,329
-------- --------
Total liabilities 199,390 190,175
-------- --------
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, 3,689,000 shares issued
and outstanding 35,530 36,451
Unearned compensation related to ESOP note
payable (356) (422)
Net unrealized gain on securities available
for sale 328 -
Retained earnings 30,996 30,782
Total shareholders' equity 66,498 66,811
-------- --------
TOTAL $265,888 $256,986
======== ========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
FIRST SAVINGS BANCORP, INC.
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------- ------------------------
($ in thousands except per share data) 1996 1995 1996 1995
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest on loans receivable $ 3,706 $ 3,341 $ 7.343 $ 6,5577
Interest on mortgage-backed securities 28 78 83 161
Interest on investment securities 982 1,157 1,998 2,353
Dividends on investment securities 35 35 70 71
Other 113 33 165 91
---------- ---------- ---------- -----------
Total interest income 4,864 4,644 9,659 9,233
---------- ---------- ---------- -----------
INTEREST EXPENSE:
Interest on deposits 2,364 2,335 4,667 4,657
Interest on borrowings 6 9 12 16
---------- ---------- ---------- -----------
Total interest expense 2,370 2,344 4,679 4,673
---------- ---------- ---------- -----------
Net interest income 2,494 2,300 4,980 4,560
Provision for loan losses
Net interest income after provision
for loan losses 2,494 2,300 4,980 4,560
---------- ---------- ---------- -----------
NONINTEREST INCOME:
Fees and service charges 85 71 173 146
Income from real estate operations 2 3 5 5
Rent on safe deposit boxes 7 7 9 9
Other, net 1 1 2 5
---------- ---------- ---------- -----------
Total noninterest income, net 95 82 189 165
---------- ---------- ---------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and fringe benefits 509 479 1,061 968
Occupancy and building 51 55 108 113
Federal insurance premiums - 104 1,264 206
Computer services 71 67 139 137
Other 201 184 366 368
---------- ---------- ---------- -----------
Total general and administrative
expenses 832 889 2,938 1,792
---------- ---------- ---------- -----------
INCOME BEFORE INCOME TAXES 1,757 1,493 2,231 2,933
INCOME TAXES 586 518 759 1,011
---------- ---------- ---------- -----------
NET INCOME $ 1,171 975 $1,472 1,922
---------- ---------- ---------- -----------
EARNINGS PER SHARE DATA:
NET INCOME $ 0.30 0.24 0.37 0.48
========== ========== ========== ===========
AVERAGE COMMON EQUIVALENT SHARES 3,948,720 3,991,870 3,963,130 3,989,547
</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>
SIX MONTHS ENDED
DECEMBER 31,
------------------------
($ IN THOUSANDS) 1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,472 $ 1,922
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 57 60
Issuance of ESOP shares 118 119
Net amortization on investments 276 360
Loan origination fees and costs deferred,
net of current amortization 14 37
Changes in:
Other assets (223) 50
Other liabilities 116 (120)
------- -------
Net cash provided by operating activities 1,830 2,428
------- -------
INVESTING ACTIVITIES:
Purchase of certificates of deposits (7,000)
Proceeds from maturities of investments 6,700 3,000
Principal repayments on mortgage-backed
securities 1,404 595
Loan originations net of principal
repayments (7,183) (9,999)
Purchase of premises and equipment (35) (63)
------- -------
Net cash used in investing activities (6,114) (6,467)
------- -------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 9,275 2,417
Net increase (decrease) in borrowed funds (30) 2,470
Cash dividends paid (1,572) (1,513)
Repurchase of common stock (976) -
------- -------
Net cash provided by financing
activities 6,697 3,374
------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,413 (665)
------- -------
CASH AND CASH EQUIVALENTS BEGINNING OF
PERIOD 4,718 3,210
------- -------
CASH AND CASH EQUIVALENTS END OF PERIOD $7,131 $2,545
======= =======
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest on deposits $4,650 $4,635
Interest on borrowed funds 13 11
Income taxes 946 970
</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 six month periods ended December 31, 1996 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 were 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 six month periods ended December
31, 1996 and 1995 were 3,948,720 and 3,991,870, respectively and 3,963,130
and 3,989,547, 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 December 31, 1996 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 $265.9 million at December 31, 1996 compared
to $257.0 million at June 30, 1996. The increase was primarily related to a
4.0% increase in net loans. Net loans increased from $177.4 million at June 30,
1996 to $184.6 million at December 31, 1996. 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 and
certificates of deposit had a combined increase of $9.4 million. First Savings'
securities decreased $7.9 million or 11.1% to $63.1 million at December 31, 1996
from $71.0 million at June 30, 1995. The decrease in securities was related to
maturing securities and principal repayments on mortgage-backed securities.
Supporting the asset growth was an increase in deposits of 4.9% from $187.4
million at June 30, 1996 to $196.7 million at December 31, 1996.
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 December 31, 1996, liquid assets (cash and cash equivalents, and
marketable investment securities) were approximately $77.2 million, which
represents 39.2% 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 December
31, 1996, this liquidity ratio, based on North Carolina regulations, was 29.0%
Management considers current liquidity levels to be adequate to meet First
Savings' foreseeable needs.
MANAGEMENT'S DISCUSSION AND ANALYSIS
At December 31, 1996, outstanding mortgage loan commitments and available home
equity line of credit balances were $15.5 million, available credit card line of
credit balances were $2.8 million and the undisbursed portion of construction
loans was $4.4 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 PUPROSES ACTION PROVISIONS
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------- ----- ------ -----
(GREATER OR (GREATER OR
EQUAL TO) EQUAL TO)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total Capital (to Risk Weighted Assets:
Consolidated $66,779 56.45% $ 9,463 8.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $47,318 40.60% $ 9,324 8.0% $11,655 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $66,170 55.94% $ 4,731 4.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $46,709 40.08% $ 4,662 4.0% $ 6,993 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $66,170 25.01% $10,582 4.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $46,709 18.81% $ 9,932 4.0% $12,415 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
September 30, 1996, the Bank's capital ratio under the North Carolina
requirements was 19.09%.
At December 31, 1996, 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 DEC. 31, 1996 AND
1995
Net income for the three months ended December 31, 1996 was $1,171,000 or $0.30
per share, compared with $975,000 or $0.24 per share for the same period in
1995. Increases in the net interest margin and noninterest income and a
reduction in general and administrative expenses were the primary factors for
the increase in earnings.
Net interest income for the quarter ended December 31, 1996 increased $194,000
representing an increase of 8.4% for the corresponding period of the prior year.
Fueling the 15.8% increase in noninterest income was an increase in fees and
service charges of $14,000.
General and administrative expenses decreased from $889,000 for the quarter
ended December 31, 1995 to $832,000 for the quarter ended December 31, 1996 due
primarily to a refund of federal insurance premiums totaling $109,000.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND
1995
Net income for the six months ended December 31, 1996 was $1,472,000 or $0.37
per share, compared to $1,922,000 or $0.48 per share for the same period in
1995. The decrease in earnings of $450,000 was primarily due to an increase in
general and administrative expenses.
Net interest income increased $420,000 from $4,560,000 for the six months ended
December 31, 1995 to $4,980,000 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 14.5%
from $165,000 for the six month period ended December 31, 1995 to $189,000 for
the same period of the current year.
General and administrative expenses for the six month period ended December 31,
1996 was $2,938,000 compared to $1,792,000 for the same period of the prior
year. The increase was primarily due to a nonrecurring SAIF Assessment of
$1,159,000 in 1996.
9
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FIRST SAVINGS BANCORP, INC.
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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 three and six month periods ended December 31, 1996 First Savings
recorded a charge to earnings of approximately $1,159,000 relating to the
special SAIF assessment.
10
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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.
February 10, 1997 /s/ William E. Samuels, Jr.
----------------- ------------------------------
Date William E. Samuels, Jr.
President
February 10, 1997 /s/ Timothy S. Maples
----------------- ------------------------------
Date Timothy S. Maples
Controller/Principal Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> OCT-01-1996 JUL-01-1996
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 7,025 7,025
<INT-BEARING-DEPOSITS> 7,106 7,106
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 61,534 61,534
<INVESTMENTS-CARRYING> 1,548 1,548
<INVESTMENTS-MARKET> 1,626 1,626
<LOANS> 185,209 185,209
<ALLOWANCE> 609 609
<TOTAL-ASSETS> 265,888 265,888
<DEPOSITS> 196,699 196,699
<SHORT-TERM> 392 392
<LIABILITIES-OTHER> 2,299 2,299
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 35,530 35,530
<OTHER-SE> 30,968 30,968
<TOTAL-LIABILITIES-AND-EQUITY> 265,888 265,888
<INTEREST-LOAN> 3,706 7,343
<INTEREST-INVEST> 1,045 2,151
<INTEREST-OTHER> 113 165
<INTEREST-TOTAL> 4,864 9,659
<INTEREST-DEPOSIT> 2,364 4,667
<INTEREST-EXPENSE> 2,370 4,679
<INTEREST-INCOME-NET> 2,494 4,980
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 832 2,938
<INCOME-PRETAX> 1,757 2,231
<INCOME-PRE-EXTRAORDINARY> 1,757 2,231
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,171 1,472
<EPS-PRIMARY> 0.30 0.37
<EPS-DILUTED> 0.30 0.37
<YIELD-ACTUAL> 3.96 3.97
<LOANS-NON> 222 222
<LOANS-PAST> 21 21
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 222 222
<ALLOWANCE-OPEN> 609 609
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 165 165
<ALLOWANCE-DOMESTIC> 165 165
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 444 444
</TABLE>
