<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 September 30, 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 November 10, 1997 there were 3,696,913 shares of the issuer's common stock
issued and outstanding.
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FIRST SAVINGS BANCORP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page Number
---------------------
<S> <C> <C> <C>
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
</TABLE>
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FIRST SAVINGS BANCORP, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
------------------------------------
1997 1997
------------------------------------
<S> <C> <C>
($ in thousands)
ASSETS
Cash and due from banks $ 2,791 $ 2,801
Interest bearing deposits with banks 6,995 6,301
Securities at market value 78,853 82,187
Securities at amortized cost (market
values - $6,453 at September 30, 1997;
$6,672 at June 30, 1997) 6,394 6,572
Loans receivable (net of allowance for loan
losses of $604 at September 30,
and June 30, 1997) 196,288 192,238
Premises and equipment 1,973 1,968
Accrued interest receivable 1,555 1,836
Prepaid expenses and other assets 466 314
------------------------------------
TOTAL $ 295,315 $ 294,217
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits 206,438 204,317
Borrowed funds 18,000 20,000
Accrued expenses and other liabilities 2,928 2,705
------------------------------------
Total liabilities 227,366 227,022
------------------------------------
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,
3,686,510 shares issued and outstanding at
September 30, 1997; 3,679,185 at June 30, 1997 35,344 35,237
Unearned compensation related to ESOP note payable (261) (293)
Net unrealized gain on securities available for sale 425 281
Retained earnings 32,441 31,970
------------------------------------
Total shareholders' equity 67,949 67,195
------------------------------------
TOTAL $ 295,315 $ 294,217
====================================
</TABLE>
See notes to consolidated financial statements
3
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FIRST SAVINGS BANCORP, INC.
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CONSOLIDATED STATEMENTS OF INCOME (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------------
1997 1996
------------------------------------
($ in thousands except per share data)
<S> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest on loans receivable $ 3,947 $ 3,637
Interest on mortgage-backed securities 130 55
Interest on investment securities 1,377 1,016
Dividends on investment securities 35 35
Other 108 52
------------------------------------
Total interest income 5,597 4,795
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INTEREST EXPENSE:
Interest on deposits 2,488 2,304
Interest on borrowings 305 6
------------------------------------
Total interest expense 2,793 2,310
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Net interest income 2,804 2,485
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Provision for loan losses
Net interest income after provision
for loan losses 2,804 2,485
------------------------------------
NONINTEREST INCOME:
Fees and service charges 118 88
Income from real estate operations 2 3
Rent on safe deposit boxes 2 2
Other, net 1 1
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Total noninterest income, net 123 94
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GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and fringe benefits 522 552
Occupancy and building 49 56
Federal insurance premiums 33 1,265
Computer services 105 68
Other 198 164
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Total general and administrative expenses 907 2,105
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INCOME BEFORE INCOME TAXES 2,020 474
INCOME TAXES 744 173
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NET INCOME $ 1,276 $ 301
====================================
EARNINGS PER SHARE DATA:
NET INCOME $ 0.32 $ 0.08
====================================
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 3,984,737 3,974,368
====================================
</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>
Three Months Ended
September 30,
------------------------------------
($ in thousands) 1997 1996
------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,276 $ 301
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 24 32
Issuance of ESOP shares 69 61
Net amortization on investments 48 126
Loan origination fees and costs deferred,
net of current amortization (14)
Changes in:
Other assets 129 570
Other liabilities 83 1,115
------------------------------------
Net cash provided by operating activities 1,615 2,205
------------------------------------
INVESTING ACTIVITIES:
Net increase in interest-bearing deposits
with banks 3,510
Proceeds from maturities of investments 5,500 1,700
Purchase of investment securities (2,000)
Principal repayments on mortgage-backed securities 182 271
Loan originations net of principal repayments (4,036) (4,972)
Purchase of premises and equipment (29) (17)
------------------------------------
Net cash used in investing activities 3,127 (3,018)
------------------------------------
FINANCING ACTIVITIES:
Net increase in deposits 2,121 4,966
Net decrease in borrowed funds (2,000) (18)
Cash dividends paid (740) (936)
Exercise of stock options 71
------------------------------------
Net cash (used in) provided by financing
activities (548) 4,012
------------------------------------
INCREASE IN CASH AND DUE FROM BANKS 4,194 3,199
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 2,801 4,718
------------------------------------
CASH AND DUE FROM BANKS, END OF PERIOD $ 6,995 $ 7,917
====================================
SUPPLEMENTAL DISCLOSURES:
- -------------------------
Cash paid for:
Interest on deposits $ 2,468 $ 2,617
Interest on borrowed funds 332 6
Income taxes 310 27
</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 and Accounting Policies: The accompanying
----------------------------------------------
consolidated financial statements include the accounts of First Savings
Bancorp, Inc., ("First Savings"), First Savings Bank of Moore County,
Inc., SSB (the "Bank") and its wholly-owned subsidiary (the "Bank").
All significant intercompany balances and transactions have been
eliminated in consolidation.
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 month period ended September
30, 1997 is not necessarily indicative of the results of operations
that may be expected for the year ending June 30, 1998. 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, 1997.
3. 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 month
period ended September 30, 1997 and 1996 were 3,984,737 and 3,974,368,
respectively.
4. 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 September 30, 1997, 76,500 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 $295.3 million at September 30, 1997 compared
to $294.2 million at June 30, 1997. The increase was primarily related to a 2.1%
increase in net loans. Net loans increased from $192.2 million at June 30, 1997
to $196.3 million at September 30, 1997. The favorable rate environment and
strong marketing programs continue to fuel the loan growth. First Savings' total
securities decreased slightly due primarily to principal repayments on
mortgage-backed securities and maturing securities. Increased deposits and
maturing investments supported the loan growth.
Deposits increased by $2.1 million to $206.4 million at September 30, 1997 from
$204.3 million at June 30, 1997 and shareholders' equity increased to $67.9
million at September 30, 1997 from $67.2 million at June 30, 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 September 30, 1997, liquid assets (cash and cash equivalents, and
marketable investment securities, less pledged investments) were approximately
$88.0 million, which represents 42.6% 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. At September 30, 1997, this liquidity ratio,
based on North Carolina regulations, was 29.8% Management considers current
liquidity levels to be adequate to meet First Savings' foreseeable needs.
MANAGEMENT'S DISCUSSION AND ANALYSIS
At September 30, 1997, outstanding mortgage loan commitments and available home
equity line of credit balances were $19.6 million, available credit card line of
credit balances were $3.5 million and the undisbursed portion of construction
loans was $8.5 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
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1997
Total Capital (to Risk Weighted Assets: (greater than
Consolidated $68,128 50.88% $10,712 or equal to) 8.0% n/a n/a
(greater than (greater than
First Savings Bank of Moore Co., Inc., SSB $51,317 38.07% $10,706 or equal to) 8.0% $13,382 or equal to) 10.0%
Tier 1 Capital (to Risk Weighted Assets): (greater than
Consolidated $67,524 50.43% $5,356 or equal to) 4.0% n/a n/a
(greater than (greater than
First Savings Bank of Moore Co., Inc., SSB $50,349 37.62% $5,353 or equal to) 4.0% $8,030 or equal to) 6.0%
Tier 1 Capital (to Average Assets): (greater than
Consolidated $67,524 22.95% $11,796 or equal to) 4.0% n/a n/a
(greater than (greater than
First Savings Bank of Moore Co., Inc., SSB $50,349 17.77% $11,334 or equal to) 4.0% $14,168 or equal to) 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, 1997, the Bank's capital ratio under the North Carolina
requirements was 17.92%.
At September 30, 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 Sept.30,
1997 and 1996
Net income was $1,276,000 for the three month period ended September 30, 1997,
representing an increase of $975,000 from the same period of the prior year.
Excluding the nonrecurring charge associated with the special SAIF assessment in
fiscal 1996, the increase in core earnings was approximately $269,000 or 27%.
The increase in core earnings was primarily a result of a 13% increase in net
interest income and higher levels of noninterest income.
General and administrative expenses decreased significantly from $2.1 million
for the quarter ended September 30, 1996 to $907,000 for the quarter ended
September 30, 1997. The decrease was due primarily to the special SAIF
assessment of approximately $1.2 million in 1996.
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 quarter ended September 30, 1996, First Savings recorded a charge to
earnings of approximately $1,159,000 relating to the special SAIF assessment.
9
<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.
FIRST SAVINGS BANCORP, INC.
/s/ William E. Samuels, Jr.
- ----------------- -------------------------------
Date William E. Samuels, Jr.
President
/s/ Timothy S. Maples
- ----------------- -------------------------------
Date Timothy S. Maples
Controller/ Principal Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,791
<INT-BEARING-DEPOSITS> 6,995
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 78,853
<INVESTMENTS-CARRYING> 6,394
<INVESTMENTS-MARKET> 6,453
<LOANS> 195,684
<ALLOWANCE> 604
<TOTAL-ASSETS> 295,315
<DEPOSITS> 206,438
<SHORT-TERM> 8,000
<LIABILITIES-OTHER> 2,928
<LONG-TERM> 10,000
0
0
<COMMON> 35,344
<OTHER-SE> 32,605
<TOTAL-LIABILITIES-AND-EQUITY> 295,315
<INTEREST-LOAN> 3,947
<INTEREST-INVEST> 1,542
<INTEREST-OTHER> 108
<INTEREST-TOTAL> 5,597
<INTEREST-DEPOSIT> 2,488
<INTEREST-EXPENSE> 2,793
<INTEREST-INCOME-NET> 2,804
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 907
<INCOME-PRETAX> 2,020
<INCOME-PRE-EXTRAORDINARY> 2,020
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,276
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
<YIELD-ACTUAL> 3.85
<LOANS-NON> 861
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 861
<ALLOWANCE-OPEN> 604
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 604
<ALLOWANCE-DOMESTIC> 203
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 401
</TABLE>
