<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
MARK ONE
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _________ TO _________
Commission File Number: 000-25128
First Sterling Banks, Inc.
--------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-2104977
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.
Post Office Box 2147
Marietta, Georgia 30061
(Address of principal executive officers)
770-499-2265
------------------------
(Issuer's Telephone Number)
Westside Financial Corporation
P. O. Box 2147
Marietta, GA 30061
(Former name, former address and former fiscal year)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of March 31, 1997 1,291,581
<PAGE>
FIRST STERLING BANKS, INC.
INDEX
PAGE NO.
Part I. Financial Information
Consolidated Balance Sheet March 31,1997 3
Consolidated Statements of Income Three
Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows--Three
Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
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PART I--FINANCIAL INFORMATION
FIRST STERLING BANKS, INC.
CONSOLIDATED BALANCE SHEET
March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and due from banks....................................... $ 5,927,616
Interest-bearing deposit in banks............................. 117,034
Investment securities:
Held to maturity (fair value $2,957,714)..................... 3,003,175
Available for sale, at estimated market value................ 20,807,605
Corporate securities......................................... 72,500
Federal funds sold............................................ 10,870,000
Loans......................................................... 88,350,657
Less allowance for loan losses................................ 1,107,448
Loans, net................................................. 87,243,209
Premises and equipment, net................................... 5,267,307
Other Real Estate Owned....................................... 505,552
Other assets.................................................. 1,661,540
-----------
Total assets............................................... $135,475,538
-----------
-----------
Liabilities and Stockholders' Equity
Deposits:
Demand....................................................... $19,026,867
Interest-bearing demand...................................... 31,029,238
Savings...................................................... 6,550,996
Certificates of deposit...................................... 63,180,380
-----------
Total deposits............................................. $119,787,481
Federal funds purchased and securities sold under agreement to
repurchase.................................................. 389,847
Accrued expenses.............................................. 875,714
Total liabilities.......................................... $121,053,042
-----------
Stockholders' equity
Common stock, 10,000,000 shares authorized; 1,291,581 shares
issued and outstanding..................................... 12,159,005
Retained earnings............................................ 3,377,305
Unrealized gain on investment securities, net of tax........ (79,939)
Less cost of 65,750 shares of treasury stock................ (1,033,875)
-----------
Total stockholders' equity................................. $14,422,496
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Total liabilities and stockholders equity.................. $135,475,538
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-----------
</TABLE>
3
<PAGE>
FIRST STERLING BANKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Interest income
Interest and fees on loans........................................ $ 2,220,090 $ 1,977,291
Interest on investment securities:
Taxable......................................................... 316,099 309,012
Nontaxable...................................................... 42,918 20,842
Interest on Federal funds sold.................................... 184,149 110,537
Interest on securities purchased under agreement to resell........ 11,922 1,089
Dividends on Corporate Securities................................. 2,983
Interest on interest-bearing deposits............................. 1,479 --
------------ ------------
Total interest income........................................... 2,779,640 2,418,771
Interest expense
Interest on deposits.............................................. 1,193,049 1,042,650
Interest on Federal funds purchased............................... -- --
Interest on securities sold under agreement to purchase........... 6,103 --
------------ ------------
Total interest expense.......................................... 1,199,152 1,042,650
Net interest income............................................. 1,580,488 1,376,121
Provision for loan losses.......................................... 90,000 32,000
------------ ------------
Net interest income after provision for loan losses............. 1,490,488 1,344,121
------------ ------------
Other operating income
Service charges on deposit accounts............................... 91,222 89,573
Gain on sale of loans............................................. 255,911 --
Other income...................................................... 54,881 32,974
------------ ------------
Total other income.............................................. 402,014 122,547
------------ ------------
Other operating expenses
Salaries and other employee benefits.............................. 662,144 480,050
Occupancy and equipment expenses.................................. 149,720 111,685
Stationery and supplies........................................... 22,301 17,857
FDIC assessments.................................................. 2,438 1,000
Audit and accounting.............................................. 18,583 20,587
Directors fees.................................................... 47,575 37,675
Other operating expense........................................... 228,243 231,400
Securities (gains) losses......................................... 600 --
Merger expense.................................................... -- --
------------ ------------
Total operating expenses....................................... 1,131,604 900,254
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Income before income taxes..................................... 760,898 566,414
Applicable income taxes............................................ 262,102 196,678
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Net Income..................................................... $ 498,796 $ 369,736
------------ ------------
------------ ------------
Net Income per share of common stock............................... $ 0.36 $ 0.27
------------ ------------
------------ ------------
Weighted average shares outstanding................................ 1,373,208 1,349,309
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Cash dividends per share of common stock........................... $ .075 $ .06
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</TABLE>
4
<PAGE>
FIRST STERLING BANKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................................................... $ 498,797 $ 369,736
----------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization...................................... 83,643 72,615
Provision for loan losses........................................... 90,000 32,000
Proceeds from sale of loans......................................... 1,376,961 263,000
Gain on sale of loans............................................... 255,911 --
(Increase) decrease in interest receivable......................... (56,362) 13,291
Increase (decrease) in interest payable............................ 26,694 (49,580)
Other prepaids, deferrals and accruals, net........................ (216,030) (555,546)
----------- -----------
Total adjustments............................................... 1,560,817 (224,220)
----------- -----------
Net cash provided by operating activities....................... 2,059,614 145,516
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from securities available for sale........................ 119,936 --
Proceeds from securities held to maturity.......................... 1,760,381 3,731,296
Purchase of investment securities................................ (3,123,079) (1,862,481)
Net decrease in Federal funds sold................................. 7,910,000 6,670,000
Net increase in loans............................................ (6,377,568) (2,038,331)
Acquisitions of other real estate................................ (310,552) --
Capital expenditures............................................... (15,280) (407,713)
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Net cash used in investing activities........................... (36,162) 6,092,771
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits........................................... (752,936) (6,348,329)
Net increase in securities sold under agreement to repurchase...... (216,048) --
Dividend payments................................................... (99,345) (35,178)
Purchase of Treasury Stock......................................... (618,875) --
Sale of common stock................................................ 16,800 --
----------- -----------
Net cash provided by financing activities........................ (1,670,404) (6,383,507)
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Net increase in cash and due from banks............................. $ 353,048 $ (145,220)
Cash and due from banks at beginning of year........................ 5,574,568 5,716,375
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Cash and due from banks at end of period............................ $ 5,927,616 $ 5,571,155
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</TABLE>
5
<PAGE>
FIRST STERLING BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods.
The results of operations for the three month period ended March 31,
1997 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2. MERGER AGREEMENT
On July 31, 1996 the merger of Eastside Holding Corporation with
Westside Financial Corporation was consummated, and Westside
financial changed its name to First Sterling Banks, Inc. accordingly,
the 1996 income and cash flow statements were restated to reflect the
combined entities.
During the third quarter, prior to the merger, the Company declared a
23% stock dividend payable to all shareholders of record July 30,
1996. The number of new shares issued was 134,781. In accordance with
Generally Accepted Accounting principles, prior period average shares
outstanding have been restated for the stock dividend.
Note 3. Accounting Standards Board SFAS No. 128.
The Financial Accounting Standards Board has issued SFAS No. 128,
Earnings Per Share. SFAS No.128 establishes standards for computing
and presenting earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. This Statement
simplifies the standards for computing earnings per share previously
found in APB Opinion No. 15, earnings per Share, and makes them
comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of
income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted
EPS computation. The effective date of this statement is for
financial statements issued for periods ending after December 15,
1997. The adoption of this Statement is not expected to have a
material effect on earnings per share.
6
<PAGE>
FIRST STERLING BANKS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
position and operating results of the Company and its bank
subsidiaries, Westside Bank & Trust Company and Eastside Bank & Trust
Company, during the periods included in the accompanying consolidated
financial statements.
FINANCIAL CONDITION
The Company's balance sheet has shrunk slightly since December 1996.
This decline was expected, and is attributable to a seasonal deposit
account in which the balance declined approximately $6,750,000 from
December 31, 1996. Core deposits have increased approximately
$6,000,000 or 5.37% since December 1996. Total loans have increased
5.52% or $4,624,918 since December 1996.
LIQUIDITY
As of March 31, 1997, the liquidity ratios of both banks, as
determined under guidelines established by regulatory authorities,
were satisfactory. The Banks primary sources of funds are increases
in deposits, loan repayments, sales and maturities of investment
securities and net income. In addition, Westside joined the Federal
Home Loan Bank in the first quarter of 1996 providing an alternative
source of funding and both banks maintain relationships with
correspondent banks which could provide funds on short notice, if
needed.
CAPITAL
At March 30, 1997, the capital ratios of the Company and the Banks
were adequate based on regulatory minimum capital requirements. The
minimum capital requirements for banks and bank holding companies
require a leverage capital to total assets ratio of at least 4%, core
capital to risk-weighted assets ratio of at least 4% and total
capital to risk-weighted assets of 8%. The following table reflects
the Banks compliance with regulatory capital requirements at March
31, 1997:
<TABLE>
<CAPTION>
WESTSIDE BANK EASTSIDE BANK
--------------- ---------------
<S> <C> <C>
Leverage capital ratio:........................................ 10.05% 11.03%
Risk based capital ratios:
Core capital................................................... 13.66% 13.89%
Total capital.................................................. 14.78% 14.88%
</TABLE>
7
<PAGE>
Results of Operations for the Three Months Ended March 31, 1997 and
1996
Net income for the quarter ended March 31, 1997 increased $129,060 or
34.91% over the same period in 1996. An increase in earning assets,
primarily loans, resulted in an increase in net interest income of
$204,367 or 14.85% over the same period in 1996. The first quarter
was very active in the sale of SBA loans, the resulting gains were
primarily responsible for an increase in other operating income of
$279,467 over the same period in 1996. Operating expenses increased
25.70% or $231,350 over the same period in 1996. Increased overhead
associated with opening a new branch attributed for much of this
increase.
The provision for loan losses increased $58,000 or 64% over the same
period in 1996. The increase in the provision was made at Eastside
Bank, to maintain what management felt was an adequate reserve,
following a chargeoff of approximately $73,000.
Salaries and employee benefits have increased 37.93% over the same
period in 1996. The major contributing factor being an increase in
the bonus accrual, based on the 1996 actual bonus and the addition of
a new branch by Westside Bank.
Occupancy expenses have increased in 34.06% or $38,035 as compared to
the same period in 1996. This increase in also due to the opening of
a branch office.
Directors fees have increased $9,000 over the same period in 1996.
Fees at Eastside Bank were increased for 1997 based on a competitive
market survey of other community banks in the area. In addition the
holding company began paying directors fees in the first quarter of
1997.
Other operating expenses were flat as compared to the same period in
1996.
Pre-tax income for the period ending March 31,1997 increased $203,484
or 35.92% over the same period in 1996. The increase in earnings is
attributable to the Banks continued growth and the increase in
earnings assets.
8
<PAGE>
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1997.
There are no exhibits to this report.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
FIRST STERLING BANKS, INC.
Date: May 8, 1997 By: \s\ Edward C. Milligan
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Edward C. Milligan, President
Date: May 8, 1997 By: \s\ Barbara J. Bond
--------------------- ---------------------------------
Barbara J. Bond, Treasurer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR PERIOD ENDING MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,927,616
<INT-BEARING-DEPOSITS> 117,034
<FED-FUNDS-SOLD> 10,870,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,807,605
<INVESTMENTS-CARRYING> 3,003,175
<INVESTMENTS-MARKET> 2,957,714
<LOANS> 88,350,657
<ALLOWANCE> 1,107,448
<TOTAL-ASSETS> 135,475,538
<DEPOSITS> 119,787,481
<SHORT-TERM> 389,847
<LIABILITIES-OTHER> 875,714
<LONG-TERM> 0
0
0
<COMMON> 12,159,005
<OTHER-SE> 3,377,305
<TOTAL-LIABILITIES-AND-EQUITY> 135,475,538
<INTEREST-LOAN> 2,220,090
<INTEREST-INVEST> 362,000
<INTEREST-OTHER> 197,550
<INTEREST-TOTAL> 2,779,640
<INTEREST-DEPOSIT> 1,193,049
<INTEREST-EXPENSE> 1,199,152
<INTEREST-INCOME-NET> 1,580,488
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> (600)
<EXPENSE-OTHER> 1,131,004
<INCOME-PRETAX> 760,898
<INCOME-PRE-EXTRAORDINARY> 760,898
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 498,796
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
