<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, 2000 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, 2000 there were 3,523,314 shares of the issuer's common stock
issued and outstanding.
<PAGE>
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 Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II OTHER INFORMATION
-----------------
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
2
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FIRST SAVINGS BANCORP, INC.
- ---------------------------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
---------------------------
2000 1999
----------------------------
($ in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,942 $ 3,753
Interest earning deposits with banks 120 3,085
Investment securities available for sale at fair value 52,028 54,846
Investment securities held to maturity at amortized cost
(fair values - $33,449 at March 31, 2000;
$36,154 at June 30, 1999) 34,504 36,708
Loans receivable (net of allowance for loan losses of $595
at March 31, 2000 and $596 at June 30, 1999) 229,766 208,678
Accrued interest receivable 1,657 1,730
Premises and equipment 2,256 2,340
Stock in the Federal Home Loan Bank of Atlanta, at cost 2,094 1,929
Prepaid expenses and other assets 968 164
---------------------------
TOTAL $ 327,335 $313,233
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits 230,668 226,651
Borrowed funds 30,500 20,000
Accrued expenses and other liabilities 2,470 2,354
---------------------------
Total liabilities 263,638 249,005
---------------------------
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,
3,521,514 shares issued and outstanding at March 31, 2000;
3,503,763 at June 30, 1999 32,633 33,018
(16)
Unearned compensation related to ESOP note payable 32,280 31,605
Retained earnings (1,216) (379)
Accumulated other comprehensive income (loss) ---------------------------
63,697 64,228
Total shareholders' equity ---------------------------
$ 327,335 $313,233
TOTAL ===========================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
FIRST SAVINGS BANCORP, INC.
- ---------------------------
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- ------------------------
2000 1999 2000 1999
--------- -------- -------- --------
($ in thousands except per share data)
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest on loans receivable $ 4,478 $ 4,117 $ 12,901 $ 12,511
Interest on mortgage-backed securities 538 211 1,655 599
Interest on investment securities 881 716 2,715 2,721
Dividends on investment securities 37 39 111 112
Other 25 173 98 300
--------------------------------- ------------------------
Total interest income 5,959 5,256 17,480 16,243
--------------------------------- ------------------------
INTEREST EXPENSE:
Interest on deposits 2,495 2,414 7,557 7,397
Interest on borrowings 441 1,023 257
--------------------------------- ------------------------
Total interest expense 2,936 2,414 8,580 7,654
--------------------------------- ------------------------
Net interest income 3,023 2,842 8,900 8,589
Provision for loan losses
--------------------------------- ------------------------
Net interest income after provision for loan losses 3,023 2,842 8,900 8,589
--------------------------------- ------------------------
NONINTEREST INCOME:
Fees and service charges 107 168 372 522
Income from real estate operations 2 2 6 6
Rent on safe deposit boxes 14 14 27 23
Other, net 12 2 40 5
--------------------------------- ------------------------
Total noninterest income, net 135 186 445 556
--------------------------------- ------------------------
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and fringe benefits 509 540 1,522 1,645
Occupancy and building 81 68 241 183
Federal insurance premiums 12 33 79 97
Computer services 107 152 348 341
Other 272 240 791 763
--------------------------------- ------------------------
Total general and administrative expenses 981 1,033 2,981 3,029
--------------------------------- ------------------------
INCOME BEFORE INCOME TAXES 2,177 1,995 6,364 6,116
INCOME TAX EXPENSE 781 734 2,287 2,250
--------------------------------- ------------------------
NET INCOME $ 1,396 $ 1,261 $ 4,077 $ 3,866
================================= ========================
NET INCOME PER COMMON SHARE:
Basic $ 0.40 $ 0.35 $ 1.17 $ 1.05
================================= ========================
Diluted $ 0.39 $ 0.33 $ 1.12 $ 0.97
================================= ========================
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 3,471,801 3,613,559 3,472,590 3,678,848
================================= ========================
Diluted 3,598,109 3,879,896 3,656,497 3,967,173
================================= ========================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
FIRST SAVINGS BANCORP, INC.
- ---------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------------
2000 1999
---------- ----------
($ in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,077 $ 3,866
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment 118 84
Issuance of ESOP shares 32 240
Net amortization on investments 115 152
Loan origination fees and costs deferred, net of current amortization 39 (25)
Changes in:
Other assets (104) 403
Other liabilities ( 84) (254)
-------------------
Net cash provided by operating activities 4,193 4,466
-------------------
INVESTING ACTIVITIES:
Net (increase) decrease in interest-earning deposits with banks 2,965 (14,749)
Purchases of available for sale investment securities (11,120) (32,000)
Proceeds from maturities and calls of:
Available for sale investment securities 12,600 51,000
Held to maturity investment securities 2,159 1 ,938
Loan originations net of repayments and net fees (21,127) 2,098
Purchase of premises and equipment (34) (443)
Purchases of stock in the Federal Home Loan Bank of Atlanta (165)
--------------------
Net cash provided by (used in) investing activities (14,722) 7,844
-------------------
FINANCING ACTIVITIES:
Net increase in deposits 4,017 14,222
Net increase (decrease) in borrowed funds 10,500 (20,000)
Net proceeds from exercise of stock options 340 324
Repurchases of common stock (1,496) (5,244)
Cash dividends paid (2,643) (2,770)
-------------------
Net cash provided by (used in) financing activities 10,718 (13,468)
-------------------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 189 (1,158)
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 3,753 3,825
-------------------
CASH AND DUE FROM BANKS, END OF PERIOD $ 3,942 $ 2,667
===================
SUPPLEMENTAL DISCLOSURES:
- -------------------------
Cash paid for:
Interest on deposits $ 7,573 $ 7,374
Interest on borrowed funds 951 332
Income taxes 2,341 2,246
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
FIRST SAVINGS BANCORP, INC.
- ---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation: The accompanying consolidated financial statements
----------------------
include the accounts of First Savings Bancorp, Inc. and its wholly-owned
subsidiary, First Savings Bank of Moore County, Inc., SSB (the "Bank"),
together referred to as "First Savings". 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 of
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, 2000 is not necessarily indicative of the
results of operations that may be expected for the year ending June 30,
2000. The organization and business of the Company, accounting policies
followed by the Company and other information are contained in the notes to
the consolidated financial statements filed as part of the company's annual
report on Form 10-K for the year ended June 30, 1999. This quarterly report
should be read in conjunction with such annual report.
3. Earnings Per Common Share: Basic and diluted earnings per share have been
--------------------------
computed based upon net income as presented in the accompanying statements
of operation divided by the weighted average number of common shares
outstanding or assumed to be outstanding as summarized below.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31 ,
------------------ ----------------
<S> <C> <C> <C> <C>
Weighted average number of common 2000 1999 2000 1999
--------- --------- --------- ---------
shares used in basic EPS 3,471,801 3,613,559 3,472,590 3,678,848
Effect of dilutive stock options 126,308 266,337 183,907 288,325
--------- --------- --------- ---------
Weighted average number of common
shares and dilutive potential common
shares used in diluted EPS 3,598,109 3,879,896 3,656,497 3,967,173
========= ========= ========= =========
</TABLE>
6
<PAGE>
FIRST SAVINGS BANCORP, INC.
- ---------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
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 5 branch offices located in Moore County.
Financial Condition
First Savings had total assets of $327.3 million at March 31, 2000, compared to
$313.2 million at June 30, 1999. The increase in assets was primarily
attributable to a 10.1% increase in net loans. Supported by increases in new
loan originations and a decrease in refinancing of loans, net loans increased
from $208.7 million at June 30, 1999 to $229.8 million at March 31, 2000.
Deposits increased to from $226.7 million at June 30, 1999 to $230.7 million at
March 31, 2000. Shareholders' equity decreased from $64.2 million at June 30,
1999 to $63.7 million at March 31, 2000 primarily as a result of an increase in
accumulated other comprehensive loss associated with investment securities
available for sale.
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, 2000, liquid assets (cash and cash equivalents, and marketable
investment securities, less pledged investments) were approximately $85.9
million, which represents 37.3% 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 March 31, 1999, this liquidity ratio, based
on North Carolina regulations, was 26.3% Management considers current liquidity
levels to be adequate to meet First Savings' foreseeable needs.
At March 31, 2000, outstanding mortgage loan commitments and available home
equity line of credit balances were $22.2 million, available credit card line of
credit balances were $3.9 million and the undisbursed portion of construction
loans was $12.5 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.
Forward Looking Statements
The discussion in Part 1 of this report contains statements that could be deemed
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 and the Private Securities Litigation Reform Act, which
statements are inherently subject to risks and uncertainties. Forward-looking
statements are statements are statements that include projections, predictions,
expectations or beliefs about future events or results or otherwise are not
statements of historical fact. Such statements are often characterized by the
use of qualifying words (and their derivatives) such as "expect," "believe,"
"estimate," "plan," "project," or other statements concerning opinions or
judgment of the Company and its management about future events. Factors that
could influence the accuracy of such forward-looking
7
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FIRST SAVINGS BANCORP, INC.
- ---------------------------
statements include, but are not limited to, the financial success or changing
strategies of the Company's customers, actions of government regulators, the
level of market interest rates, and general economic conditions, as well as
risks referred to hereafter in the section "Year 2000" of Management's
Discussion and Analysis of Financial Condition and Results of Operations.
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 December 31, 1997, 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 March 31, 2000
Total Capital (to Risk Weighted Assets:
Consolidated $65,508 37.97% $13,804 *8.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $64,442 37.50% $13,747 *8.0% $17,184 *10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $64,913 37.62% $ 6,751 *4.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $63,847 37.16% $ 6,873 *4.0% $10,310 *6.0%
Tier 1 Capital (to Average Assets):
Consolidated $64,913 19.64% $13,151 *4.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $63,847 19.36% $13,065 *4.0% $16,490 *5.0%
</TABLE>
* Greater than or equal to
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, 2000, the Bank's capital ratio under the North Carolina requirements
was 19.62%.
At March 31, 2000, First Savings and the Bank exceeded all capital
requirements.
8
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FIRST SAVINGS BANCORP, INC.
- ---------------------------
Comparison of Operating Results for the Three Months Ended December 31, 1999 and
1998
Net income for the three months ended March 31, 2000 was $1,396,000, compared to
$1,261,000 for the same period in 1999. Basic and diluted earnings per share for
the three months ended March 31, 2000 was $0.40 and $0.39, respectively,
compared to $0.35 and $0.33, respectively, for the same period of the prior
year. The increase in earnings was primarily due to an increase in net interest
income.
Net interest income for the quarter ended March 31, 2000 increased $181,000 due
primarily to an increase in the level of interest-earning assets. General and
administrative expenses decreased from $1,033,000 for the quarter ended March
31, 1999 to $981,000 for the quarter ended March 31, 2000 due primarily to a
decrease in expenses associated with computer services.
Comparison of Operating Results for the Nine Months Ended March 31, 2000 and
1999
Net income for the nine months ended March 31, 2000 was $4,077,000, compared to
$3,866,000 for the same period in 1999. Basic and diluted earnings per share for
the nine months ended March 31, 2000 was $1.17 and $1.12, respectively, compared
to $1.05 and $0.97, respectively, for the same period of the prior year. The
increase in earnings was primarily due to a decrease in general and
administrative expenses and an increase in net interest income.
Supported by strong loan growth, net interest income increased $311,000 from
$8,589,000, for the nine months ended March 31, 1999 to $8,900,000 for the same
period of the current year. Due to a decrease in loan fees associated with a
reduction in secondary loan originations and refinancing of existing loans,
noninterest income decreased from $556,000 for the nine months ended March 31,
1999 to $445,000 for the same period of 2000. General and administrative
expenses for the nine month period ended March 31, 2000 was $2,981,000 compared
to $3,029,000 for the same period of the prior year. The decrease was primarily
due to a reduction in compensation and fringe benefits associated with the
Employees Stock Ownership Plan.
9
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FIRST SAVINGS BANCORP, INC.
- ---------------------------
Year 2000
The Year 2000 issue has posed business risk to most business organizations,
including the Company. In response, the Company formed a Year 2000 project team,
consisting of senior officers within the Company's operations, information
systems, financial and management areas, to ensure that the Company attained
Year 2000 compliance. All date sensitive systems were evaluated for Year 2000
compliance, with complete upgrading and testing of systems completed well in
advance of the Year 2000 date change. The Company also developed contingency
plans for its computer processes, including the use of alternative systems and
the manual processing of certain critical operations. In addition, the Company
had undertaken extensive efforts to ensure that significant vendor and customer
relationships are Year 2000 compliant. The Company's management is pleased, but
not surprised, that business continued as normal without adverse impact to the
Company during the critical date change. In coming months, the Bank will
continue monitoring external entities to assure that they have not experienced
any Year 2000 problems that could impact their relationship with the Company. In
addition to the estimated costs of its Year 2000 compliance, the Company
routinely makes annual investments in technology in its efforts to improve
customer service and to efficiently manage its product and service delivery
systems. As anticipated, the costs associated with Year 2000 compliance were not
material to First Savings' financial condition or results of operations.
Merger Agreement
On December 15, 1999, First Bancorp ("First Bancorp"), First Savings Bancorp,
Inc. ("First Savings") and the wholly-owned banking subsidiaries of First
Bancorp and First Savings entered into a Merger Agreement (the "Merger
Agreement"), pursuant to which First Bancorp and First Savings will merge with
First Bancorp being the surviving company. In addition, the Merger Agreement
provides First Savings Bank of Moore County, Inc., SSB, First Savings' wholly-
owned savings bank subsidiary, and First Bank, First Bancorp's wholly-owned
banking subsidiary, will merge with First Bank being the surviving company. For
further information refer to First Savings' Form 8-K filed December 21, 1999 and
First Bancorp's Registration Statement on Form S-4 filed April 6, 2000 with the
Securities and Exchange Commission.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March
31, 2000
10
<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.
__________________________ ____________________________
Date John F. Burns
President
_________________________ _____________________________
Date Timothy S. Maples
Sr. Vice President/ Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-2000
<PERIOD-START> JAN-01-2000 JUL-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-2000
<CASH> 3,942 3,942
<INT-BEARING-DEPOSITS> 120 120
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 54,122 54,122
<INVESTMENTS-CARRYING> 34,504 34,504
<INVESTMENTS-MARKET> 0 0
<LOANS> 230,361 230,361
<ALLOWANCE> 595 595
<TOTAL-ASSETS> 327,335 327,335
<DEPOSITS> 230,668 230,668
<SHORT-TERM> 20,500 20,500
<LIABILITIES-OTHER> 2,470 2,470
<LONG-TERM> 10,000 10,000
0 0
0 0
<COMMON> 32,633 32,633
<OTHER-SE> 31,064 31,064
<TOTAL-LIABILITIES-AND-EQUITY> 327,335 327,335
<INTEREST-LOAN> 4,478 12,901
<INTEREST-INVEST> 1,456 4,481
<INTEREST-OTHER> 25 98
<INTEREST-TOTAL> 5,959 17,480
<INTEREST-DEPOSIT> 2,495 7,557
<INTEREST-EXPENSE> 2,936 8,580
<INTEREST-INCOME-NET> 3,023 8,900
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 981 2,981
<INCOME-PRETAX> 2,177 6,364
<INCOME-PRE-EXTRAORDINARY> 2,177 6,364
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,396 4,077
<EPS-BASIC> 0.40 1.17
<EPS-DILUTED> 0.39 1.12
<YIELD-ACTUAL> 3.69 3.80
<LOANS-NON> 770 770
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 596 596
<CHARGE-OFFS> 1 1
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 595 595
<ALLOWANCE-DOMESTIC> 372 372
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 723 723
</TABLE>
