<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 026730
-----------------------
First Savings Financial Corp.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 561928110
- ------------------------------- ------------------------------------
(State or other juristiction of (I.R.S. Employer Identification No.)
incorporation or organization)
501 South Main Street, Reidsville, North Carolina 27320
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(910) 342-4251
--------------------------------------------------------
(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 13 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of May 14, 1997, 986,321 shares of the registrant's common stock, no
par value, were outstanding.
This Form 10-QSB has 17 pages.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST SAVINGS FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------------- ---------------
(unaudited)
Assets
<S> <C> <C>
Cash and due from banks $ 247,303 255,891
Interest-bearing deposits in other financial institution 287,348 561,269
Investment securities:
Held to maturity (market value of $979,335 and $988,195
at March 31, 1997 and December 31, 1996, respectively 1,000,330 1,000,351
Available for sale, at market value (cost of $13,658,339 and
$16,673,527 at March 31, 1997 and December 31, 1996,
respectively) 13,398,405 16,557,015
Mortgage-backed securities available for sale (cost of $601,924
and $605,164 at March 31, 1997 and December 31, 1996,
respectively) 595,581 599,346
Loans receivable (net of allowance for loan losses of $357,825
and $299,825 at March 31, 1997 and December 31, 1996,
respectively) (note 3) 32,474,255 32,789,901
Accrued interest receivable 305,260 385,494
Federal Home Loan Bank stock, at cost 412,800 412,800
Premises and equipment, net 99,385 101,584
Other assets 747,384 563,314
---------------- ---------------
Total assets $ 49,568,051 53,226,965
================ ===============
Liabilities and Stockholders' Equity
Deposit accounts $ 39,642,040 43,066,580
Other liabilities 800,249 763,525
---------------- ---------------
Total liabilities 40,442,289 43,830,105
---------------- ---------------
ESOP stock subject to put option (note 4) 329,863 382,400
---------------- ---------------
Stockholders' equity (notes 5 and 7):
Preferred stock, no par value, 5,000,000 shares
authorized; none outstanding
Common stock, no par value, 20,000,000 shares
authorized; 986,321 shares issued and outstanding
at March 31, 1997 and December 31, 1996 4,728,867 4,727,234
Retained earnings, substantially restricted 4,587,428 4,733,711
Net unrealized losses on securities (175,743) (80,730)
Deferred stock awards (344,653) (365,755)
---------------- ---------------
Total stockholders' equity 8,795,899 9,014,460
---------------- ---------------
Commitments
Total liabilities and stockholders' equity $ 49,568,051 53,226,965
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FIRST SAVINGS FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Income (Loss)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
------------- -------------
<S> <C> <C>
Interest income:
Loans receivable $ 612,369 595,685
Mortgage-backed securities 8,323 10,020
Investment securities 248,243 363,599
Interest-bearing balances in other banks 6,337 23,670
Stock in the Federal Home Loan Bank 7,380 7,442
------------- -------------
Total interest income 882,652 1,000,416
Interest expense on deposit accounts 522,484 629,440
------------- -------------
Net interest income 360,168 370,976
Provision for loan losses (note 3) 58,000 7,500
------------- -------------
Net interest income after provision for loan loss 302,168 363,476
------------- -------------
Noninterest income (loss):
Net loss on investment securities available for sale (14,059) --
Other 64,605 7,206
------------- -------------
Total noninterest income 50,546 7,206
------------- -------------
Noninterest expense:
Compensation, payroll taxes, and fringe benefits 196,570 205,664
Occupancy and equipment 10,694 11,221
Federal and other insurance premiums 14,340 40,865
Data processing fees 14,845 15,795
Advertising 2,085 2,359
Professional fees 47,738 32,397
Other expenses 42,944 60,657
------------- -------------
Total noninterest expense 329,216 368,958
------------- -------------
Income before income taxes 23,498 1,724
Income tax expense 3,400 26,200
------------- -------------
Net income (loss) 20,098 (24,476)
Change in fair value of ESOP shares subject to put option (note 4) (68,434) 10,490
------------- -------------
Net income (loss) available to common shareholders $ 88,532 (34,966)
============= =============
Net income (loss) available to common shareholders
per share (note 6) $ 0.09 (0.04)
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FIRST SAVINGS FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Three months ended March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Net unrealized Deferred Total
Common Retained losses on Stock Stockholders'
Stock Income securities Awards Equity
------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 4,727,234 4,733,711 (80,730) (365,755) 9,014,460
Net income - 20,098 - - 20,098
Common stock of ESOP 1,633 - - - 1,633
Change in fair value of ESOP shares
subject to put option - 68,434 - - 68,434
Amortization of deferred
stock awards - - - 21,102 21,102
Net unrealized losses on securities - - (95,013) - (95,013)
Dividend paid ($.25 per common
share) - (234,815) - - (234,815)
------------- ------------ ------------ ------------ -------------
Balance at March 31, 1997 $ 4,728,867 4,587,428 (175,743) (344,653) 8,795,899
============= ============ ============ ============ =============
Balance at December 31, 1995 $ 5,659,804 5,202,642 128,978 - 10,991,424
Net loss - (24,476) - - (24,476)
Common stock of ESOP 9,435 - - - 9,435
Change in fair value of ESOP shares
subject to put option - (10,490) - - (10,490)
Net unrealized losses on securities - - (250,056) - (250,056)
------------- ------------ ------------ ------------ -------------
Balance at March 31, 1996 $ 5,669,239 5,167,676 (121,078) - 10,715,837
============= ============ ============ ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
FIRST SAVINGS FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 20,098 (24,476)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Provision for loan losses 58,000 7,500
Amortization, net 13,188 (9,859)
Depreciation 3,880 3,971
Compensation expense on ESOP shares 17,530 79,418
Amortization expense on deferred stock
awards 21,102 -
Net loss on securities available for sale 14,059 -
Deferred loan origination costs, net (5,201) (5,150)
Deferred income taxes (59,100) 6,500
Decrease (increase in accrued interest
receivable 80,234 (2,570)
Decrease (increase) in other assets (76,020) 50,697
Increase (decrease) in other liabilities 36,724 (32,504)
---------- ----------
Net cash provided by operating
activities 124,494 73,527
---------- ----------
Cash flows from investing activities:
Purchases of investment securities held
to maturity - (500,000)
Proceeds from maturities and issuer
calls of investment securities held
to maturity - 2,500,000
Purchases of investment securities
available for sale - (3,980,357)
Proceeds from sale of investment
securities available for sale 2,985,941 499,141
Proceeds from maturities and issuer
calls of investment securities
available for sale - 500,000
Principal collected on mortgage-backed
securities available for sale 2,191 2,826
Net decrease (increase) in loans
receivable 265,901 (333,606)
Purchases of premises and equipment (1,681) (1,016)
---------- ----------
Net cash provided by (used in)
investing activities 3,252,352 (1,313,012)
---------- ----------
Cash flows from financing activities:
Dividends paid (234,815) -
Net increase (decrease) in deposits (3,424,540) 94,119
---------- ----------
Net cash provided by (used in)
financing activities (3,659,355) 94,119
---------- ----------
Net decrease in cash and cash
equivalents (282,509) (1,145,366)
Cash and cash equivalents at beginning of
period 817,160 1,978,675
---------- ----------
Cash and cash equivalents at end of period $ 534,651 833,309
========== ==========
</TABLE>
5
<PAGE>
FIRST SAVINGS FINANCIAL CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash paid during the period for:
Interest $ 527,732 643,842
=========== ===========
Income taxes $ 41,300 25,500
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
FIRST SAVINGS FINANCIAL CORP. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
(1) Basis of Presentation
---------------------
The consolidated financial statements include the accounts of First
Savings Financial Corp. and its wholly-owned subsidiary, First
Savings Bank of Rockingham County, Inc., SSB ("First Savings")
(collectively referred to as "the Company"). All intercompany
transactions and balances are eliminated in consolidation.
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts of assets
and liabilities at the date of the financial statements, as well as
the amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
All adjustments considered necessary for a fair presentation of the
results for the interim periods presented have been included (such
adjustments are normal and recurring in nature). Operating results
for the three month period ended March 31, 1997, are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1997.
(2) Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks and interest-bearing balances in other
financial institutions. Generally, cash and cash equivalents are
considered to have maturities of three months or less.
(3) Allowance for Loan Losses
-------------------------
The following summarizes the activity in the allowance for loan losses
for the three months ended March 31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Balance at the beginning of the period $ 299,825 259,466
Provision for loan losses 58,000 7,500
Charge-offs - -
Recoveries - 32,859
---------- ----------
Net recoveries - 32,859
---------- ----------
Balance at the end of the period $ 357,825 299,825
========== ==========
</TABLE>
7
<PAGE>
FIRST SAVINGS FINANCIAL CORP. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
(4) Employee Stock Ownership Plan ("ESOP")
-------------------------------------
First Savings has an ESOP which purchased 75,870 shares or 8% of the
common stock issued in the Conversion. Contributions to the ESOP are
made by First Savings on a discretionary basis, and are allocated
among ESOP participants on the basis of relative compensation in the
year of allocation. Benefits will vest in full upon five years of
service with credit given for years of service prior to the
Conversion.
The ESOP has been funded by a loan from First Savings Financial Corp. in
the amount of $758,700. The loan is secured by the shares of stock
purchased by the ESOP and is not guaranteed by First Savings.
Principal and interest payments on this loan are funded primarily
from discretionary contributions by First Savings. Dividends, if any,
paid on shares held by the ESOP may also be used to reduce the loan.
The number of ESOP shares released and allocated to participants each
year is determined by a formula based on current year principal and
interest payments made on the ESOP loan and total future payments to
be made.
The Company records compensation expense for shares released to employees
as a result of contributions by the Company or dividends paid on
unreleased shares in the ESOP equal to the fair value of the shares.
The Company recorded ESOP related compensation expense of
approximately $17,530 for the three months ended March 31, 1997. At
March 31, 1997, 28,808 shares have been released and allocated to
participants, 47,062 shares are unreleased and 6,447 shares are
committed to be released in September 1997. The fair value of the
pro-rata number of the committed shares which were earned during the
three months ended March 31, 1997 (1,590 shares) has been expensed in
1997. Committed shares of 1,784 were earned and expensed during 1996.
The remaining 3,073 shares committed to be released in September
1997, with a fair value of approximately $31,500 at March 31, 1997,
will be expensed over the second and third quarter of 1997.
The common stock held by the ESOP has a "put option" feature since the
common stock of the Company is not "publicly traded" as defined. The
"put option" feature permits the participants to sell their common
shares obtained from the ESOP to the Company at the current fair
market value during the option periods. Accordingly, the common stock
of the ESOP and related amount of unearned ESOP shares are recorded
outside stockholders' equity. An adjustment has been recorded to
retained earnings to reflect the earned ESOP shares at fair value as
of March 31, 1997. The fair value of the unearned ESOP shares is
$447,802 at March 31, 1997.
(5) Stock Option and Management Recognition Plans
---------------------------------------------
The Board of Directors of the Company has adopted a Stock Option Plan for
employees and directors which was approved by the stockholders at the
annual meeting on April 18, 1996. Under the terms of the plan, 94,838
shares of the Company's common stock were granted to employees and
directors on April 19, 1996. Such options have an option exercise
price of $11.125, which was the fair market value of the common stock
on
8
<PAGE>
FIRST SAVINGS FINANCIAL CORP. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
April 19, 1996. Such stock options have a term of 10 years and a
vesting schedule which provides that 20% of the options granted will
vest on the first anniversary of the effective date of the
establishment of the Stock Option Plan and 20% will vest on each
subsequent anniversary date, so that the options will be completely
vested at the end of the five years after the date of the grant.
The Board of Directors of the Company has also approved a Management
Recognition Plan (the "MRP") for directors and employees. The MRP was
approved by the stockholders at the annual meeting on April 18, 1996.
Under the terms of the plan, 37,935 shares of common stock were
awarded to directors and employees as of April 19, 1996. The shares
awarded pursuant to the MRP have a vesting schedule which provides
that 20% of the shares awarded will automatically vest on the first
anniversary of the effective date of the establishment of the MRP and
20% will vest on each subsequent anniversary date, so the shares will
be completely vested at the end of five years after the date of
award. Compensation expense related to the MRP was $21,102 for the
three months ended March 31, 1997.
(6) Income (Loss) per share
-----------------------
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Net income (loss) for the period ended $ 20,098 (24,476)
Change in fair value of ESOP shares subject to put option (68,434) 10,490
-------- --------
Net income (loss) available to common shareholders $ 88,532 (34,966)
======== ========
Weighted average number of shares outstanding 939,259 887,204
======== ========
Income (loss) per share $ 0.09 (0.04)
==== ====
</TABLE>
(7) Dividends
---------
The Company paid a $.25 per share dividend in March 1997, totaling
$234,815.
(8) Proposed Merger
---------------
The Company received an acquisition proposal to merge with and into First
Citizens BancShares, Inc. ("BancShares") and entered into a
definitive agreement with BancShares on April 2, 1997. BancShares is
a bank holding company headquartered in Raleigh, North Carolina with
assets of approximately $8 billion at December 31, 1996. Under the
terms of the proposal, each outstanding share of the Company would be
converted into the right to receive $10.75 in cash. If an agreement
is reached, the merger is expected to be finalized in the fall of
1997 and is subject to a number of conditions, including approval by
regulatory authorities and the stockholders of the Company.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
First Savings Financial Corp. was incorporated under North Carolina law in April
1995 for the purpose of acquiring and holding all of the outstanding capital
stock of First Savings Bank of Rockingham County, Inc., SSB ("First Savings") to
be issued in connection with the conversion of First Savings from mutual to
stock ownership.
On September 22, 1995, First Savings completed its conversion from a North
Carolina-chartered mutual savings bank to a North Carolina-chartered stock
savings bank (the "Conversion") and First Savings Financial Corp. issued and
sold 948,386 shares of common stock (no par value) to certain depositors of
First Savings. Total proceeds of $9,483,860 were reduced by Conversion expenses
of $509,728. First Savings Financial Corp. retained 50% of the net Conversion
proceeds after deducting the proceeds of the loan to the First Savings Bank of
Rockingham County, Inc., SSB Employee Stock Ownership Plan (the "ESOP") and paid
the balance to First Savings in exchange for all of the common stock of First
Savings issued in the Conversion.
First Savings Financial Corp. does not have any significant assets other than
the shares of First Savings' capital stock acquired in the Conversion, the loan
receivable held with respect to its loan to the ESOP and its portion of the net
proceeds from the Conversion, and does not have any significant liabilities.
Cash flows to First Savings Financial Corp. are dependent upon earnings from the
investment of its portion of net proceeds from the Conversion and any dividends
received from First Savings. Presently, there are no agreements or
understandings for expansion of First Savings Financial Corp.'s operations.
First Savings is primarily engaged in soliciting deposit accounts from the
general public, making mortgage loans to finance the acquisition and
construction of residential dwellings and making limited types of consumer
loans. First Savings' results of operations depend primarily on net interest
income, which is the difference between interest income from interest-earning
assets and interest expense on interest-bearing liabilities. First Savings'
operations are also affected by noninterest income, such as miscellaneous income
from loans, gains and losses from the sale of investment and mortgage-backed
securities and other sources of income. First Savings' principal operating
expenses, aside from interest expense, consist of compensation and employee
benefits, federal deposit insurance premiums, office occupancy costs, and other
general and administrative expenses.
The operations of First Savings and depository institutions in general are
significantly influenced by general economic conditions and by related monetary,
fiscal and other policies of depository institution regulatory agencies,
including the Federal Reserve, the Federal Deposit Insurance Corporation (the
"FDIC") and the North Carolina Administrator of Savings Institutions (the
"Administrator"). Deposit flows and costs of funds are influenced by interest
rates on competing investments and general market rates of interest. Lending
activities are affected by the demand for financing of real estate and other
types of loans, which in turn are affected by the interest rates at which such
financing may be offered and other factors affecting local demand and
availability of funds.
10
<PAGE>
First Savings Financial Corp. and First Savings conduct their business through
their office at 501 South Main Street, Reidsville, North Carolina. First
Savings' primary market area is Rockingham County in North Carolina.
First Savings Financial Corp. and First Savings are collectively referred to as
"the Company".
Comparison of the Results of Operations for the Three Month Periods Ended
March 31, 1997 and 1996
Summary
- -------
Net income (loss) for the three months ended March 31, 1997 was $20,098 as
compared to ($24,476) for the three months ended March 31, 1996. The increase in
net income of $44,574 is due to an increase in noninterest income of $43,340, a
decrease in federal and other insurance premiums of $26,525, a decrease in other
expense of $17,713 and a decrease in income tax expense of $22,800. Offsetting
these effects was a decrease in net interest income of $10,808, an increase in
the provision for loan losses of $50,500, and an increase in professional fees
of $15,341.
Net interest income
- -------------------
Net interest income for the three months ended March 31, 1997 was $360,168, a
decrease of $10,808 or 2.9% when compared to net interest income of $370,976 for
the three months ended March 31, 1996. The net yield on interest-earning assets
for the three months ended March 31, 1997 was 2.87% compared to 2.57% in 1996.
Total interest income decreased to $882,652 for the three months ended March 31,
1997 from $1,000,416 for the comparable period in 1996. The decrease in interest
income is principally due to an decrease in the average volume of investment
securities. For the three months ended March 31, 1997, the average balance of
investment securities was $15,983,000 compared to $25,056,000 for the same
period in 1996. This decrease is due to the Company using proceeds from
maturities and sales of investment securities to fund loan growth, dividend
payments and daily operations during 1996 and first quarter 1997. This decrease
was partially offset by an increase in the average rate earned on investment
securities to 6.21% for the three months ended March 31, 1997 compared to 5.80%
for the same period in 1996. This increase is attributable to the Company
maintaining an investment portfolio with relatively short maturities, which
benefited the Company as interest rates increased during 1996 and the Company
selling its lower yielding investments in 1996 and first quarter 1997.
The decrease in investment interest income was partially offset by an increase
in loan interest income to $612,369 for the three months ended March 31, 1997
from $595,685 for the same period in 1996. This increase is primarily due to an
increase in the average volume of loans of $2.6 million. The average rate earned
on loans decreased 42 basis points to 7.47% for the three months ended March 31,
1997 as compared to 7.89% for the same period in 1996. The Company attributes
this change to an overall lack of loan demand in its primary market area, a
trend which could continue in the future.
11
<PAGE>
Total interest expense decreased $106,956 or 17.0% to $522,484 for the three
months ended March 31, 1997 from $629,440 for the comparable period in 1996.
This decrease in interest expense is due to a decrease in the average volume of
certificate of deposit accounts of $5.3 million. The decrease in average volume
is primarily due to competitive pressures in the marketplace. The average rate
paid on certificates of deposit accounts decreased 24 basis points to 5.37% in
1996 from 5.61% in 1996.
Provision for loan losses
- -------------------------
During the three months ended March 31, 1997, First Savings recorded a provision
for loan losses of $58,000, compared to $7,500 for the same period in 1996.
During the three months ended March 31, 1997, First Savings had no charge-offs
and no recoveries as compared to no charge-offs and a $32,859 recovery during
the same period in 1996. The 1996 recovery related to the 1995 charge-off. The
increase in the provision for loan losses is due to an increase in nonperforming
loans. Nonperforming loans, which consists of loans not accruing interest, as a
percentage of total loans were 1.18%, .05% and .78% at March 31, 1997, December
31, 1996 and March 31, 1996, respectively.
Noninterest income
- ------------------
Noninterest income increased to $50,546 for the three months ended March 31,
1997 from $7,206 for the same period in 1996. The increase is due to a $58,000
increase in the cash surrender value of the Company's life insurance policies on
directors. This increase was partially offset by a net loss of $14,059 on the
sale of investment securities available for sale.
Noninterest expense
- -------------------
Noninterest expense decreased to $329,216 for the three months ended March 31,
1997 from $368,958 for the same period in 1996. Federal and other insurance
premiums decreased $26,525 due to the lower assessment rate for insurance of
deposits by the Savings Association Insurance Fund following its
recapitalization in the fourth quarter of 1996. Other expenses decreased $17,713
due to decreases in various expense accounts in anticipation of the proposed
merger. These decreases were partially offset by an increase in professional
fees of approximately $15,000 mainly due to professional fees incurred in
connection with the proposed merger.
Income taxes
- ------------
Income tax expense for the three months ended March 31, 1997 was $3,400 as
compared to $26,200 for the same period in 1996. The effective income tax rate
of 14.5% for the three months ended March 31, 1997 is due to the $58,000
increase in cash surrender value being deductible for tax purposes. Income tax
expense for 1996 was impacted by the nondeductibility of a significant portion
of the expense related to the ESOP. The portion of the expense related to the
additional principal payment on the ESOP loan in June 1996 from the proceeds
received on the ESOP shares from the December 1995 dividend is nondeductible for
tax purposes.
12
<PAGE>
Comparison of Financial Condition at March 31, 1997 and December 31, 1996
Total assets decreased by $3.6 million or 6.9% from $53.2 million at December
31, 1996 to $49.6 million on at March 31, 1997.
Loans receivable decreased slightly from $32.8 million at December 31, 1996 to
$32.5 million at March 31, 1997. First Savings' ability to expand its lending
base and the size of its loan portfolio continues to be constrained by the lack
of strong loan demand and competitive pressures in its primary lending market.
Deposits decreased $3.5 million or 8.0% to $39.6 million at March 31, 1997 from
$43.1 million at December 31, 1996. The decrease is primarily due to the
competitive pressures in the marketplace for deposits.
Stockholders' equity decreased from $9.0 million at December 31, 1996 to $8.8
million at March 31, 1997, with the decrease due to an increase in the net
unrealized loss on securities of $95,013 and dividends paid of $.25 per share or
$234,815. This was partially offset by net income of $20,098 and a decrease in
the fair value of the earned ESOP shares of $68,434.
The common stock held by the ESOP has a "put option" feature since the common
stock of the Company is not publicly traded as defined in the ESOP. The "put
option" feature permits the participants to sell their common shares obtained
from the ESOP to the Company at the current fair market value during the option
periods. Accordingly, the common stock of the ESOP and the related amount of
unearned ESOP shares are recorded outside stockholders' equity. An adjustment of
$68,434 has been recorded to retained earnings to reflect the decrease in the
fair value of the earned ESOP shares as of March 31, 1997.
Asset Quality
Nonperforming assets, which consists of loans not accruing interest, were
$396,000 and $26,000 at March 31, 1997 and December 31, 1996, respectively. The
increase in nonperforming assets is mainly due to one loan totaling
approximately $226,000 on a single family residence. The Company does not
anticipate a loss on this loan. There was no real estate owned at March 31,1997
or December 31, 1996.
Management is currently unaware of any significant potential problem loans
except as noted above or any other concentrations of credit risk which exist in
the portfolio. At March 31, 1997 and December 31, 1995, there were no loans
considered impaired under Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan".
Regulatory Matters
Management is not presently aware of any current recommendation to the Company
by regulatory authorities which, if they were to be implemented, would have a
material effect on the Company's liquidity, capital resources or operations.
13
<PAGE>
Liquidity
First Savings' primary sources of internally generated funds are principal
repayments and payoffs of loans receivable, cash flow generated from operations,
repayments from mortgage-backed securities, maturing investments and increases
in deposits. External sources of funds include the ability to access advances
from the Federal Home Loan Bank of Atlanta.
As a North Carolina-chartered savings bank, First Savings must maintain liquid
assets equal to at least 10% of total assets. The computation of liquidity under
North Carolina regulations allows the inclusion of mortgage-backed securities
and investments with a readily marketable value, including investments with
maturities in excess of five years. First Savings' liquidity ratio at March 31,
1997, as computed under North Carolina regulations, was approximately 32%.
Impact of Inflation and Changing Prices
The consolidated financial statements and accompanying footnotes have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without consideration for changes in the relative purchasing
power of money over time due to inflation. The assets and liabilities of the
Company are primarily monetary in nature and changes in interest rates have a
greater impact on the Company's performance than do the effect of inflation.
Capital Resources
As a North Carolina-chartered savings bank, First Savings is subject to the
capital requirements of the FDIC and the Administrator. The FDIC requires First
Savings to maintain minimum ratios of Tier I capital to total risk-weighted
assets and total capital to risk-weighted assets of 4% and 8%, respectively. To
be "well capitalized," the FDIC requires ratios of Tier I capital to total
risk-weighted assets and total capital to risk-weighted assets of 6% and 10%,
respectively. Tier I capital consists of total stockholders' equity calculated
in accordance with generally accepted accounting principles less intangible
assets, and total capital is comprised of Tier I capital plus certain
adjustments, the only one of which is applicable to First Savings is the
allowance for loan losses. Risk-weighted assets reflect First Savings' on- and
off-balance sheet exposures after such exposures have been adjusted for their
relative risk levels using formulas set forth in FDIC regulations. First Savings
is also subject to a leverage capital requirement, which calls for a minimum
ratio of Tier I capital (as defined above) to quarterly average total assets of
3%, and a ratio of 5% to be "well capitalized." The Administrator requires a net
worth equal to at least 5% of assets. At March 31, 1997, First Savings was in
compliance with all of the aforementioned capital requirements.
Current Accounting Issues
In August 1996, the FASB issued Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"). SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities using a financial-components approach
that focuses on control of the asset or liability. It requires that an entity
recognize only
14
<PAGE>
assets it controls and liabilities it has incurred and should derecognize assets
only when control has been surrendered and derecognize liabilities only when
they have been extinguished. SFAS No. 125 if effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996, and is to be applied prospectively. The Company adopted this
statement on January 1, 1997 without any impact on its consolidated financial
statements.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share."
SFAS No. 128 establishes standards of 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 the 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. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997 and requires restatement of
all prior-period EPS data presented. The Company plans to adopt SFAS No. 128 in
1997 without any significant impact on its consolidated financial statements.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
There has been no submission of matters to a vote of shareholders during the
quarter ended March 31, 1997.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit (27) Financial Data Schedule
(b) Reports on Form 8-K
The Company filed three reports on Form 8-K during the quarter ended
March 31, 1997. The Form 8-K filed on February 19, 1997 announced that
the Company had received a proposal from First Citizens BancShares, Inc.,
Raleigh, North Carolina to acquire the Company by exchange of $10.75 in
cash for each of the Company's outstanding shares of common stock. The
Form 8-K filed on February 28, 1997 announced that the Company's Board of
Directors had found First Citizens' proposal agreeable and that the
parties would begin negotiation of a definitive agreement. The Form 8-K
filed on April 9, 1997 announced that the Company had entered into a
definitive agreement with First Citizens dated April 2, 1997.
16
<PAGE>
SIGNATURES
----------
Under 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 FINANCIAL CORP.
-----------------------------
(Registrant)
Date: May 14, 1997 By: /s/David S. Kemp
------------------------- --------------------------
David S. Kemp
(President)
Date: May 14, 1997 By: /s/Cynthia F. Teague
-------------------------- --------------------------
Cynthia F. Teague
(Vice President and principal
financial officer)
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 247,303
<INT-BEARING-DEPOSITS> 287,348
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,993,986
<INVESTMENTS-CARRYING> 1,000,330
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<LOANS> 32,474,255
<ALLOWANCE> 357,825
<TOTAL-ASSETS> 49,568,051
<DEPOSITS> 39,642,040
<SHORT-TERM> 0
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0
0
<COMMON> 4,728,867
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<EXPENSE-OTHER> 329,216
<INCOME-PRETAX> 23,498
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