<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, 1999 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, 2000 there were 3,462,889 shares of the issuer's common stock
issued and outstanding.
<PAGE>
FIRST SAVINGS BANCORP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page Number
---------------------
<S> <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 Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II OTHER INFORMATION
-----------------
Year 2000 10
Merger Agreement
SIGNATURES 11
</TABLE>
2
<PAGE>
FIRST SAVINGS BANCORP, INC.
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
------------------------
1999 1999
------------------------
($ in thousands)
ASSETS
<S> <C> <C>
Cash and due from banks $ 7,574 $ 3,753
Interest earning deposits with banks 201 3,085
Investment securities available for sale at fair value 56,786 54,846
Investment securities held to maturity at amortized cost
(fair values - $34,059 at December 31, 1999;
$36,154 at June 30, 1999) 35,119 36,708
Loans receivable (net of allowance for loan losses of $596
at December 31, and June 30, 1999) 223,465 208,678
Accrued interest receivable 1,913 1,730
Premises and equipment 2,296 2,340
Stock in the Federal Home Loan Bank of Atlanta,
at cost 1,929 1,929
Prepaid expenses and other assets 801 164
-----------------------
TOTAL $ 330,084 $ 313,233
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits 232,116 226,651
Borrowed funds 32,500 20,000
Accrued expenses and other liabilities 2,430 2,354
------------------------
Total liabilities 267,046 249,005
------------------------
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, 3,446,680 shares
issued and outstanding at December 31, 1999; 3,503,763 at June 30, 1999 32,415 33,018
Unearned compensation related to ESOP note payable (16)
Retained earnings 31,736 31,605
Accumulated other comprehensive income (loss) (1, 113) (379)
------------------------
Total shareholders' equity 63,038 64,228
------------------------
TOTAL $330,084 $313,233
=======================
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 , December 31,
-------------------------- --------------------------
1999 1998 1999 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
($ in thousands except per share data)
INTEREST AND DIVIDEND INCOME:
Interest on loans receivable $ 4,298 $ 4,169 $ 8,422 $ 8,393
Interest on mortgage-backed securities 552 215 1,117 388
Interest on investment securities 950 885 1,833 2,006
Dividends on investment securities 38 36 74 73
Other 28 102 73 127
-------------------------- --------------------------
Total interest income 5,866 5,407 11,519 10,987
-------------------------- --------------------------
INTEREST EXPENSE:
Interest on deposits 2,542 2,463 5,062 4,983
Interest on borrowings 365 67 582 257
-------------------------- --------------------------
Total interest expense 2,907 2,530 5,644 5,240
-------------------------- --------------------------
Net interest income 2,959 2,877 5,875 5,747
Provision for loan losses
-------------------------- --------------------------
Net interest income after provision for loan losses 2,959 2,877 5,875 5,747
-------------------------- --------------------------
NONINTEREST INCOME:
Fees and service charges 116 198 265 354
Income from real estate operations 2 2 4 4
Rent on safe deposit boxes 9 7 13 9
Other, net 13 2 27 3
-------------------------- --------------------------
Total noninterest income, net 140 209 309 370
-------------------------- --------------------------
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and fringe benefits 475 542 1,012 1,105
Occupancy and building 79 54 159 115
Federal insurance premiums 34 31 67 64
Computer services 125 100 241 189
Other 288 283 520 522
-------------------------- --------------------------
Total general and administrative expenses 1,001 1,010 1,999 1,995
-------------------------- --------------------------
INCOME BEFORE INCOME TAXES 2,098 2,076 4,185 4,122
INCOME TAXES 771 763 1,505 1,516
-------------------------- --------------------------
NET INCOME $ 1,327 $ 1,313 $ 2,680 $ 2,606
========================== ==========================
NET INCOME PER COMMON SHARE:
Basic $ 0.38 $ 0.35 $ 0.77 $ 0.70
========================== ==========================
Diluted $ 0.36 $ 0.33 $ 0.73 $ 0.65
========================== ==========================
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 3,494,102 3,711,147 3,678,848 3,717,555
========================== ==========================
Diluted 3,698,576 3,998,413 3,967,173 4,013,285
========================== ==========================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
FIRST SAVINGS BANCORP, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-------------------------
($ in thousands) 1999 1998
-------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,680 $ 2,606
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment 78 51
Issuance of ESOP shares 32 162
Net amortization on investments 107 102
Loan origination fees and costs deferred, net of current amortization 22 6
Changes in:
Other assets (247) 207
Other liabilities (104) (292)
-------------------------
Net cash provided by operating activities 2,568 2,842
-------------------------
INVESTING ACTIVITIES:
Net (increase) decrease in interest-earning deposits with banks 2,884 (3,090)
Purchases of available for sale investment securities (11,120) (17,000)
Proceeds from maturities and calls of:
Available for sale investment securities 8,000 37,000
Held to maturity investment securities 1,550 958
Loan originations net of repayments and net fees (14,809) (206)
Purchase of premises and equipment (34) (274)
-------------------------
Net cash provided by (used in) investing activities (13,529) 17,388
-------------------------
FINANCING ACTIVITIES:
Net increase in deposits 5,465 3,957
Net increase (decrease) in borrowed funds 12,500 (20,000)
Net proceeds from exercise of stock options 123 178
Repurchases of common stock (1,496) (1,130)
Cash dividends paid (1,810) (1,859)
-------------------------
Net cash provided by (used in) financing activities 14,782 (18,854)
-------------------------
INCREASE IN CASH AND DUE FROM BANKS 3,821 1,376
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD 3,753 3,825
-------------------------
CASH AND DUE FROM BANKS, END OF PERIOD $ 7,574 $ 5,201
=========================
SUPPLEMENTAL DISCLOSURES:
- ------------------------
Cash paid for:
Interest on deposits $ 5,030 $ 4,979
Interest on borrowed funds 519 312
Income taxes 1,545 1,536
</TABLE>
See notes to consolidated financial statements.
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 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, 1999 is not necessarily indicative of the results of
operations that may be expected for the year ending June 30, 2000. 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, 1999.
3. Earnings Per Common Share: Effective July 1,1997, First Savings Bank has
--------------------------
implemented Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share". This Statement simplifies the standards for computing
earnings per share previously found in Accounting Principles Board ("APB")
Opinion No. 15, Earnings per Share ("EPS"), and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS
with the presentation of basic EPS. It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the
numerator and the denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. Basic EPS excludes dilution
and is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15.
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 Six Months Ended
December 31, December 31
---------------------------- --------------------------
1999 1998 1999 1998
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average number of common
shares used in basic EPS 3,494,102 3,711,147 3,678,848 3,717,555
Effect of dilutive stock options 204,474 287,266 288,325 295,730
--------- --------- --------- ---------
Weighted average number of common
shares and dilutive potential common
shares used in diluted EPS 3,698,576 3,998,413 3,967,173 4,013,285
========= ========= ========= =========
</TABLE>
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.
6
<PAGE>
FIRST SAVINGS BANCORP, INC.
- --------------------------------------------------------------------------------
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 5 branch offices located in Moore County.
Financial Condition
First Savings had total assets of $330.1 million at December 31, 1999 compared
to $313.2 million at June 30, 1999. The increase in assets was primarily
attributable to a 7.1% increase in net loans. Net loans totaled $223.5 million
at December 31, 1999 compared to $208.7 million at June 30, 1999. An increase in
loan originations and a decrease in refinancing were factors contributing to the
loan growth. Supporting the loan growth were increases in deposits and borrowed
funds. Deposits and borrowed funds increased from 226.7 million and $20.0
million, respectively, at June 30, 1999 to 232.1 million and $32.5 million,
respectively, at December 31, 1999.
As a result of rising interest rates, accumulated other comprehensive loss
associated with investment securities available for sale increased from $379,000
at June 30, 1999 to $1.1 million at December 31, 1999.
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, 1999, liquid assets (cash and cash equivalents, and
marketable investment securities, less pledged investments) were approximately
$96.9 million, which represents 41.8% 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 December 31, 1999, this liquidity ratio,
based on North Carolina regulations, was 29.4% Management considers current
liquidity levels to be adequate to meet First Savings' foreseeable needs.
At December 31, 1999, outstanding mortgage loan commitments and available home
equity line of credit balances were $23.4 million, available credit card line of
credit balances were $3.8 million and the undisbursed portion of construction
loans was $10.7 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
<PAGE>
FIRST SAVINGS BANCORP, INC.
- ------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 December 31, 1999
Total Capital (to Risk Weighted Assets:
Consolidated $64,747 38.36% $13,501 *8.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $62,998 37.47% $13,451 *8.0% $16,814 *10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $64,151 38.01% $ 6,751 *4.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $62,402 37.11% $ 6,726 *4.0% $10,088 *6.0%
Tier 1 Capital (to Average Assets):
Consolidated $64,151 19.51% $13,151 *4.0% n/a n/a
First Savings Bank of Moore Co., Inc., SSB $62,402 19.04% $13,108 *4.0% $16,385 *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
December 31, 1999, the Bank's capital ratio under the North Carolina
requirements was 19.02%.
At December 31, 1999, First Savings and the Bank exceeded all capital
requirements.
* = more than or equal to
8
<PAGE>
FIRST SAVINGS BANCORP, INC.
- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
Comparison of Operating Results for the Three Months Ended December 31, 1999 and
1998
Net income for the three months ended December 31, 1999 was $1,327,000, compared
to $1,313,000 for the same period in 1998. Basic and diluted earnings per share
for the three months ended December 31, 1999 was $0.38 and $0.36, 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 increases in net interest
income.
Net interest income for the quarter ended December 31, 1999 increased $82,000.
Noninterest income decreased primarily as a result of a reduction in loan fees
associated with a slow down of secondary loan originations from the prior year.
General and administrative expenses totaled $1,001,000 and remained relatively
unchanged.
Comparison of Operating Results for the Six Months Ended December 31, 1999 and
1998
Net income for the six months ended December 31, 1999 was $2,680,000, compared
to $2,606,000 for the same period in 1998. Basic and diluted earnings per share
for the six months ended December 31, 1999 was $0.77 and $0.73, respectively,
compared to $0.70 and $0.65, 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 increased $128,000 from $5,747,000, for the six months ended
December 31, 1998 to $5,875,000 for the same period of the current year. The
increase was primarily due to higher levels of interest earning assets.
Noninterest income decreased $61,000, ,from $370,000 for the six months ended
December 31, 1998 to $309,000 for the current six month period. The decrease was
primarily due to a reduction in loan fees associated with secondary loan
originations. General and administrative expenses for the six month period ended
December 31, 1999 was $1,999,000 compared to $1,995,000 for the same period of
the prior year.
9
<PAGE>
OTHER INFORMATION
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 Form 8-K.
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 6-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-2000
<PERIOD-START> OCT-01-1999 JUL-01-1999
<PERIOD-END> DEC-31-1999 DEC-31-1999
<CASH> 7,574 7,574
<INT-BEARING-DEPOSITS> 201 201
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 58,715 58,715
<INVESTMENTS-CARRYING> 35,119 35,119
<INVESTMENTS-MARKET> 34,059 34,059
<LOANS> 224,061 224,061
<ALLOWANCE> 596 596
<TOTAL-ASSETS> 330,084 330,084
<DEPOSITS> 232,116 232,116
<SHORT-TERM> 22,500 22,500
<LIABILITIES-OTHER> 2,430 2,430
<LONG-TERM> 10,000 10,000
0 0
0 0
<COMMON> 32,415 32,415
<OTHER-SE> 30,623 30,623
<TOTAL-LIABILITIES-AND-EQUITY> 330,084 330,084
<INTEREST-LOAN> 4,298 8,422
<INTEREST-INVEST> 1,540 3,024
<INTEREST-OTHER> 28 73
<INTEREST-TOTAL> 5,866 11,519
<INTEREST-DEPOSIT> 2,542 5,062
<INTEREST-EXPENSE> 2,907 5,644
<INTEREST-INCOME-NET> 2,959 5,875
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 1,001 1,999
<INCOME-PRETAX> 2,098 4,185
<INCOME-PRE-EXTRAORDINARY> 2,098 4,185
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,327 2,680
<EPS-BASIC> 0.38 0.77
<EPS-DILUTED> 0.36 0.73
<YIELD-ACTUAL> 3.71 3.74
<LOANS-NON> 829 829
<LOANS-PAST> 5 5
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 596 596
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 596 596
<ALLOWANCE-DOMESTIC> 227 227
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 369 369
</TABLE>
