-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kd+vKLRuzlvApnqKJTTNn28DEg+ISLh7aT4msnwm78M8tyGbaSVBbQGS2ubVD9Ve ExRUm2cFKGh8knN6gO7B0w== 0000908834-97-000112.txt : 19970515 0000908834-97-000112.hdr.sgml : 19970515 ACCESSION NUMBER: 0000908834-97-000112 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST BANCORP /IN/ CENTRAL INDEX KEY: 0000840458 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 351775411 STATE OF INCORPORATION: IN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17915 FILM NUMBER: 97604458 BUSINESS ADDRESS: STREET 1: THIRD & BUSSERON STREETS CITY: VINCENNES STATE: IN ZIP: 47591 BUSINESS PHONE: 8128824528 MAIL ADDRESS: STREET 1: THIRD & BUSSERON STREET STREET 2: P O BOX 1417 CITY: VINCENNES STATE: IN ZIP: 47591 10-Q 1 FORM 10-Q FOR 1ST BANCORP FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (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 ( ) 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 0-17915 1ST BANCORP -------------------------------------------------------------- (Exact name of registrant as specified in its charter) Indiana 35-1775411 - -------------------------------------- ------------------------------------ (State of other jurisdiction of (I.R.S. Employer Identification Incorporation or organization) Number) 101 N. Third Street Vincennes, Indiana 47591 - -------------------------------------- ------------------------------------ (Address of principal executive office) (Zip Code) Registrant's telephone number, including are code: (812) 882-4528 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______________ As of April 23, 1997, there were 697,538 Shares of the Registrant's Common Stock issued and outstanding. 1ST BANCORP AND SUBSIDIARIES INDEX Page PART I. FINANCIAL INFORMATION: Number Item 1. Financial Statements Consolidated Condensed Statements of Financial Condition, March 31, 1997 and June 30, 1996 (Unaudited) 3 Consolidated Condensed Statements of Earnings, Three Months and Nine Months Ended March 31, 1997 and 1996 (Unaudited) 4 Consolidated Condensed Statements of Cash Flows, Nine Months Ended March 31, 1997 and 1996 (Unaudited) 5 Notes to Consolidated Condensed Financial Statements (Unaudited) 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-14 PART II. OTHER INFORMATION 15 SIGNATURES 16 1ST BANCORP AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION (Unaudited and in Thousands) March 31, June 30, 1997 1996 --------- --------- ASSETS Cash and cash equivalents: Interest bearing deposits $ 18,239 $ 24,689 Non-interest bearing deposits 369 410 --------- --------- Cash and cash equivalents 18,608 25,099 --------- --------- Trading account securities 1,973 -- Securities available for sale 9,509 10,499 Securities held to maturity (market value of $45,911 at March 31, 1997 and $42,184 at June 30, 1996) 47,072 43,624 Loans receivable, net 159,223 150,749 Loans held for sale 21,312 18,590 Accrued interest receivable: Securities 704 1,036 Loans 1,094 1,179 Stock in FHLB of Indianapolis, at cost 4,864 4,864 Office premises and equipment 3,236 2,950 Real estate owned 326 177 Prepaid expenses and other assets 5,169 4,716 --------- --------- TOTAL ASSETS $ 273,090 $ 263,483 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits $ 146,641 $ 137,148 Advances from FHLB and other borrowings 101,325 100,885 Advance payments by borrowers for taxes and insurance 644 492 Accrued interest payable on deposits 803 816 Accrued expenses and other liabilities 1,918 2,413 --------- --------- Total Liabilities $ 251,331 $ 241,754 --------- --------- Stockholders' Equity: Preferred stock, no par value; shares authorized of 2,000,000, none outstanding -- -- Common stock, $1 par value; shares authorized of 5,000,000; shares issued and outstanding of 697,538 at March 31, 1997 and 699,889 at June 30, 1996 $ 698 $ 667 Paid-in capital 2,631 2,747 Retained earnings, substantially restricted 18,636 18,560 Unrealized depreciation on securities (206) (245) --------- --------- Total Stockholders' Equity $ 21,759 $ 21,729 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 273,090 $ 263,483 ========= ========= See Notes to Consolidated Condensed Financial Statements. - 3 - 1ST BANCORP AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited and in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended March 31, March 31, --------------------- -------------------- 1997 1996 1997 1996 -------- -------- -------- -------- INTEREST INCOME: Loans $ 3,897 $ 3,811 $ 11,243 $ 12,221 Investment securities 970 762 2,826 2,985 Trading account securities 14 3 14 3 Other short-term investments and interest bearing deposits 149 187 464 625 -------- -------- -------- -------- Total Interest Income 5,030 4,763 14,547 15,834 -------- -------- -------- -------- INTEREST EXPENSE: Deposits 1,949 1,817 5,655 7,086 Short-term borrowings 18 22 43 78 FHLB advances and other borrowings 1,369 1,409 4,189 3,886 -------- -------- -------- -------- Total Interest Expense 3,336 3,248 9,887 11,050 -------- -------- -------- -------- NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 1,694 1,515 4,660 4,784 Provision for loan losses 84 15 170 60 -------- -------- -------- -------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,610 1,500 4,490 4,724 -------- -------- -------- -------- NON-INTEREST INCOME: Fees and service charges 101 66 273 213 Net loss on sales of investment securities available for sale and trading account investments (34) (42) (32) (164) Net gain on sales of loans 392 498 1,593 1,494 Net gain on sale of branch offices -- -- -- 7,274 Other 172 184 478 774 -------- -------- -------- -------- Total Non-Interest Income 631 706 2,312 9,591 -------- -------- -------- -------- NON-INTEREST EXPENSE: Compensation and employee benefits 1,010 906 2,995 3,146 Net occupancy 185 168 545 571 Federal insurance premiums 40 101 1,549 369 Other 472 468 1,616 1,566 -------- -------- -------- -------- Total Non-Interest Expense 1,707 1,643 6,705 5,652 -------- -------- -------- -------- Earnings Before Income Taxes 534 563 97 8,663 Income Taxes (6) 218 (188) 3,248 -------- -------- -------- -------- NET EARNINGS $ 540 $ 345 $ 285 $ 5,415 ======== ======== ======== ======== EARNINGS PER SHARE: $ 0.78 $ 0.50 $ 0.41 $ 7.70
See Notes to Consolidated Condensed Financial Statements - 4 - 1ST BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and in Thousands)
Nine Months Ended March 31, -------------------------- 1997 1996 --------- --------- Net Cash Flow From Operating Activities: Net earnings $ 285 $ 5,415 Adjustments to reconcile net cash provided by operating activities: Depreciation and amortization 241 256 Amortization of mortgage servicing rights 83 90 Gain on sale of loans (1,593) (1,494) Net change in trading account securities (1,973) -- Loss on sale of securities 32 164 Gain on sale of branches -- (7274) Net change in loans held for sale (2,722) (5,352) Provision for loan losses 170 60 Decrease in accrued interest receivable 417 726 Decrease (increase) in prepaid expenses and other assets (464) 1,081 Decrease in accrued expenses and other liabilities (534) (1,257) Undistributed loss of investment in limited partnership 95 227 --------- --------- NET CASH USED BY OPERATING ACTIVITIES (5,963) (7,358) --------- --------- Cash Flows From Investing Activities: Purchase of investment and mortgage-backed securities available for sale (20,982) (34,024) Proceeds from maturities, calls, repayment of principal and sales of investment and mortgage-backed securities available for sale 22,007 64,056 Purchase of investment and mortgage-backed securities (3,518) (33,266) Proceeds from maturities, calls, and repayment of principal of investment and mortgage-backed securities 59 19,670 Principal collected on loans, net of originations (7,207) (8,002) Purchases of life insurance policies (35) -- Purchases of stock of FHLB of Indianpolis -- (988) Purchases of office premises and equipment (494) (118) Proceeds from sale of office premises and equipment - branch sales -- 1,316 Proceeds from sale of loans - branch sales -- 28,875 Sale of deposits - branch sales -- (78,473) Other (149) 15 --------- --------- NET CASH USED BY INVESTING ACTIVITIES (10,319) (40,939) --------- --------- Cash Flows From Financing Activities: Net increase in deposits 9,493 14,620 Proceeds from FHLB advances and other borrowings 51,818 139,344 Repayment of FHLB advances and other borrowings (51,378) (110,890) Proceeds from issuance of common stock 116 123 Purchase and retirement of common stock (207) (181) Payment of dividends on common stock (203) (200) Increase (decrease) in advance payments by borrowers for taxes and insurance 152 (1,498 --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 9,791 41,318 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (6,491) (6,979) Cash and Cash Equivalents at Beginning of Period 25,099 17,332 --------- --------- Cash and Cash Equivalents at End of Period $ 18,608 $ 10,353 ========= =========
See Notes to Consolidated Condensed Financial Statements - 5 - Note 1. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary for a fair presentation. The results of operations for the interim periods are not necessarily indicative of the results which may be expected for an entire year. These financial statements are condensed and do not contain all disclosures required by generally accepted accounting principles which would be included in a complete set of financial statements. Note 2. Stock Dividend On November 22, 1996, the Board of Directors approved a 5% common stock dividend with a record date of December 27, 1996, and payment date of January 10, 1997. All share and per share data have been adjusted to reflect the 5% stock dividend. Note 3. Earnings Per Share Earnings per share have been computed on the basis of the weighted average number of common shares outstanding and the dilutive effect of stock options not exercised during the periods presented using the treasury stock method. The weighted average number of shares outstanding for use in the earnings per share computations was 697,159 and 699,118 for the three months ended and 700,147 and 702,179 for the nine months ended March 31, 1997 and 1996, respectively. Note 4. Stock Purchase Plans The Corporation maintains an Employee Stock Purchase Plan whereby full-time employees of First Federal Bank, a Federal Savings Bank (the "Bank") and First Financial Insurance Agency, Inc. can purchase the Corporation's common stock at a discount. The purchase price of the shares under this plan is 85% of the fair market value of such stock at the beginning or end of the offering period, whichever is lesser. A total of 15,750 authorized but unissued shares were reserved for issuance under this plan. No shares have been issued under this plan to date. Under a former plan, with identical terms as the exisiting plan, 13,781 authorized but unissued shares were reserved for issuance. A total of 3,749 shares were issued and purchased by employees in the first quarter of fiscal year 1997 for the fiscal 1996 plan year under the former plan. A total of 11,472 shares were issued under the former plan. Note 5. Stock Repurchase Plan In August 1996, the Board authorized the repurchase of up to 5% of the outstanding shares of common stock (703,638 shares were outstanding at the time), subject to market - 6 - conditions, over a two year period which expires in August 1998. During the quarter ended December 31, 1996, 7,383 shares of common stock were repurchased. These 7,383 shares represent the cumulative total purchased under this plan to date. Note 6. Savings Association Insurance Fund ("SAIF") Recapitalization On September 30, 1996, the federal government mandated an industry wide assessment to recapitalize the SAIF, which is a part of the Federal Deposit Insurance Corporation ("FDIC"). The special assessment was charged to savings associations with insured deposits by the SAIF. The assessment was calculated at 0.657% of insured deposits as of March 31, 1995. The Bank's portion of the assessment was $1,330,000 and is included in non-interest expense for the nine months ended March 31, 1997. Note 7. Branch Sales On December 16, 1995, 1ST BANCORP completed the sale of certain assets and certain liabilities (the "Branch Sales") of two of the Bank's full-service retail branch offices in Tipton and Kokomo, Indiana resulting in a pre-tax gain of $7,274,000. The transaction consisted of the sale of certain mortgage and consumer loans, office premises and equipment and certain deposit liabilities. Note 8. Reclassifications Certain amounts in the fiscal year 1996 consolidated financial statements have been reclassified to conform to the fiscal year 1997 presentation. - 7 - 1ST BANCORP AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (a) Financial Condition: Total assets increased by $9,607,000, or 3.65%, to $273,090,000 at March 31, 1997, compared to total assets of $263,483,000 at June 30, 1996. The increase is primarily attributable to increases in loans receivable and the investment securities portfolio. Cash and cash equivalents declined by $6,491,000, or 25.86%, to $18,608,000 at March 31, 1997, from $25,099,000 at June 30, 1996. At June 30, 1996, cash and cash equivalents were at above normal levels primarily due to a significant bulk sale of lower yielding conforming mortgage loans during the fourth quarter of fiscal year 1996. The decline in cash and cash equivalents was used to fund a portion of the increased loan and investment portfolio. Investment securities consist primarily of U.S. Agency securities. The majority of securities have either a "call" or "step-up" feature, which provides the Bank with flexibility under varying interest rate scenarios. In a falling interest rate environment, the securities with a "call" feature would be called by the issuer. The rates paid on the "step-up" securities increase after a period of time. Generally, the rates increase on the securities several times prior to maturity. The level of investment securities held to maturity (including mortgage-backed securities) increased by $3,448,000, or 7.90%, to $47,072,000, at March 31, 1997, from $43,624,000 at June 30, 1996. Investment securities available for sale (including mortgage-backed securities) declined by $990,000, or 9.43%, to $9,509,000 at March 31, 1997, from $10,499,000 at June 30, 1996. Trading account securities totaled $1,973,000 at March 31, 1997, compared with no trading account securities at June 30, 1996. Net loans receivable increased by $8,474,000, or 5.62%, to $159,223,000 at March 31, 1997, from $150,749,000 at June 30, 1996. The increase in net loans receivable is attributable to residential mortgage loan production. Growth occurred primarily in the non-conforming mortgage loan portfolios. Emphasis continues to be placed on increasing the non-conforming loan portfolio to further enhance the Bank's net interest margin. Loan production during the nine months ended March 31, 1997 decreased compared to the same period of the prior year. During the nine months ended March 31, 1997, the Bank funded $93.2 million of loans compared to $125.7 million of loans during the nine months ended March 31, 1996. Primarily responsible for the decrease in loan production was the decline in purchases of one-to-four family mortgage loans. The Bank purchased and funded $2.0 million in one-to-four family mortgage loans during the nine months ended March 31, 1997, compared with $21.9 million for the same period of the prior year. This occurred because of the Bank's decision to decrease the correspondent loan program due to pricing constraints. - 8 - 1ST BANCORP AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations During the nine months ended March 31, 1997, non-conforming mortgage lending constituted $57.6 million, or 61.8%, of total loans funded during the period. During the same nine month period, $29.4 million of non-conforming loans were sold on a non-recourse basis in the secondary market. The remainder of the loans are retained in portfolio to increase the net interest margin. Non-conforming loans, including those held for sale, increased to $64.8 million at March 31, 1997 compared to $39.9 million at June 30, 1996. Loans held for sale totaled $21,312,000 at March 31, 1997, an increase of $2,722,000, or 14.64%, from $18,590,000 at June 30, 1996. Primarily responsible for the change in the level of loans held for sale is the timing of the sale of bulk packages of non-conforming loans. At March 31, 1997, non-performing assets totaled $1,951,000, or .71% of total assets. This compares to $732,000 of non-performing assets, or .29% of total assets, at June 30, 1996. The increase in non-performing assets was primarily the result of one-to-four family mortgage loans becoming 90 days or more past due. Increased conforming loan and non-conforming loan delinquencies contributed to the increased non-performing assets. Management is actively monitoring the upward trend in non-performing assets. As a result of the increased delinquencies, mortgage loan collection personnel have been increased. In addition, the loan loss valuation allowance accounts have been actively increased to compensate for the increased level of non-performing assets. The table below sets forth the amounts and categories of 1ST BANCORP's non-performing assets (non-accrual loans and other non-performing assets) for the balance sheet dates presented. Loans are reviewed regularly and are generally placed on non-accrual status when they become contractually past due 90 days or more. March 31, June 30, 1997 1996 ---------- ----------- Non-performing assets: Non-accrual loans $1,625,000 $ 555,000 Other non-performing assets (1) 326,000 177,000 Restructured loans -- -- Total non-performing assets $1,951,000 $ 732,000 ---------- ---------- Non-performing assets to total assets 0.71% 0.29% - ----------------- (1) Certain assets acquired through foreclosures or deeds in lieu of foreclosure, which are included in the Consolidated Condensed Statement of Financial Condition as real estate owned. - 9 - 1ST BANCORP AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations During the nine months ended March 31, 1997, the Bank established, through operations, provisions for loan losses totaling $170,000. In addition, the Bank realized net charge-offs through its allowance for loan loss accounts of $71,000. The Bank's allowance for loan loss was $995,000 at March 31, 1997 and $896,000 at June 30, 1996. Prepaid expenses and other assets increased to $5,169,000 at March 31, 1997 from $4,716,000 at June 30, 1996. The increase was primarily attributable to the purchase of the book of business of an existing independent insurance agency during December 1996. The book of business was merged with the existing customer base of First Financial Insurance Agency, Inc. As a result of the acquisition, First Financial Insurance, Inc. opened a full service insurance office in Princeton, Indiana in addition to its existing full service office in Vincennes, Indiana. Total deposits increased by $9,493,000, or 6.92%, to $146,641,000 at March 31, 1997 from $137,148,000 at June 30, 1996. The increase in deposits was primarily the result of an increased use of brokered funds during the nine months ended March 31, 1997. The additional brokered deposits were used to fund on-going loan and investment operations. Advances from the Federal Home Loan Bank ("FHLB") and other borrowings increased slightly to $101,325,000 at March 31, 1997 from $100,885,000 at June 30, 1996. Accrued expenses and other liabilities decreased to $1,918,000 at March 31, 1997, from $2,413,000 at June 30, 1996. The decrease is primarily attributable to two items. First, accrued income tax payable decreased due to a lower level of earnings for the nine months ended March 31, 1997. The lower earnings were directly attributable to the SAIF assessment. The assessment expense was recognized during the first quarter of fiscal 1997 on a tax effected basis, and was paid during the second quarter of fiscal 1997. Second, the management incentive plan payable was distributed during the first quarter of fiscal year 1997 for the fiscal 1996 plan year. Offsetting the decrease from these items was an increased payable to the Federal Home Loan Mortgage Corporation ("FHLMC"). The increase was caused by an increased number of mortgage loan payoffs for loans that had been sold to FHLMC near the end of the quarter. (b) Results of Operations: During the three months ended March 31, 1997, 1ST BANCORP had net income of $540,000, or $0.78 per share, compared to net earnings of $345,000, or $0.50 per share, for the three months ended March 31, 1996. During the nine months ended March 31, 1997, 1ST BANCORP recorded net income of $285,000, or $0.41 per share, compared to net earnings of $5,415,000, or $7.70 per share, for the nine months ended March 31, 1996. - 10 - 1ST BANCORP AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations The lower level of net earnings for the nine months ended March 31, 1997 as compared to the nine months ended March 31, 1996 is attributable to two primary factors. The net earnings for the nine months ended March 31, 1997 included a one time pre-tax assessment of $1,330,000 for the recapitalization of the SAIF. The assessment was realized through earnings during the first quarter of fiscal year 1997. The net earnings for the nine months ended March 31, 1996 included a pre-tax gain of $7,274,000 from the Branch Sales. The gain from the Branch Sales was realized through earnings during the second quarter of fiscal year 1996. Net earnings for the three months ended March 31, 1997 and 1996, are more readily comparable. The net earnings increase for the quarter ended March 31, 1997 as compared with the same period of the previous year resulted from increased net interest income and a substantially reduced income tax expense, offset by increased net non-interest expense. Net interest income before provision for loan losses was $1,694,000 for the three months ended March 31, 1997, compared to $1,515,000 for the three months ended March 31, 1996. The net interest margin was 2.64% for the three months ended March 31, 1997 compared to 2.42% for the three months ended March 31, 1996. The increased level of net interest income was the result of the expanded net interest margin. The net interest margin was expanded primarily through the increased level of higher yielding non-conforming mortgage loans which have been retained in the loan portfolio. Also contributing to the increased net interest margin for the three months ended March 31, 1997 as compared with the same period of the previous year, was a slightly higher level of interest-earning assets and interest-bearing liabilities and a relatively stable cost of funds. Net interest income before provision for loan losses was $4,660,000 for the nine months ended March 31, 1997, compared to $4,784,000 for the nine months ended March 31, 1996. The net interest margin was 2.45% for the nine months ended March 31, 1997 compared to 2.33% for the nine months ended March 31, 1996. The lower level of net interest income for the nine months ended March 31, 1997 was attributable to a lower average level of interest-earning assets and interest-bearing liabilities which resulted from the Branch Sales during the second quarter of fiscal 1996. However, offsetting the decreased volume, the average excess of interest-earning assets over interest-bearing liabilities was greater during the nine months ended March 31, 1997 as compared to the same period of the prior year. This enabled the net interest margin as a percent of total assets to expand despite the lower actual net interest income. In addition, the Bank's continued emphasis on non-conforming loan originations, which typically are higher yielding than conforming loan products, has augmented the expansion of the net interest margin by enhancing the yield on interest-earning assets. This, combined with a slightly lower average cost of funds during the nine month period ended March 31, - 11 - 1ST BANCORP AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations 1997, has assisted in the expansion of the net interest margin as a percent of total assets. Non-interest income for the three months ended March 31, 1997 totaled $631,000 compared to $706,000 for the three months ended March 31, 1996. The lower level of non-interest income for the three months ended March 31, 1997 resulted primarily from a decreased gain on sale of loans because of fewer loan sales. Non-interest income for the nine months ended March 31, 1997 totaled $2,312,000 compared to $9,591,000 for the nine months ended March 31, 1996. The lower level of non-interest income for the nine months ended March 31, 1997 was attributable to the Branch Sales which occurred during fiscal year 1996. Fees and service charges totaled $101,000 and $273,000 for the three and nine months ended March 31, 1997 compared to $66,000 and $213,000 for the three and nine months ended March 31, 1996. The increased income for the three and nine month periods ended March 31, 1997 was attributable to increased mortgage servicing fees for loans serviced for others and increased prepayment fees for non-conforming mortgage loans. The net losses on the sale of investment securities available for sale and trading account investments totaled $34,000 and $32,000 for the three and nine months ended March 31, 1997, respectively, compared with net losses of $42,000 and $164,000 for the three and nine months ended March 31, 1996, respectively. The higher losses during the nine months ended March 31, 1996 resulted in large part from the sale of available for sale securities used to fund the sale of deposits that was a part of the Branch Sales. The sales and trading activity during 1997 has been in the normal course of business and largely driven by cash flow needs. The gain on sale of mortgage loans totaled $392,000 for the quarter ended March 31, 1997 compared to $498,000 for the quarter ended March 31, 1996. The decline in the gain on sale of loans for the three months ended March 31, 1997 resulted from a lower volume of conforming loan sales. The total volume of loans sold, conforming and non-conforming mortgage loans, declined for the three months ended March 31, 1997 to $16.5 million from $21.5 million for the quarter ended March 31, 1996. Lower conforming loan sales levels represented 96.7% of the overall lower volume of loan sales. The gain on sale of mortgage loans totaled $1,593,000 for the nine months ended March 31, 1997 compared to $1,494,000 for the nine months ended March 31, 1996. The total volume of mortgage loan sales declined for the nine months ended March 31, 1997 to $57.5 million from $72.3 million (excluding loans sold as part of the Branch Sales) for the same period of the prior year. However, non-conforming loan sales represented an increased percentage of the loans sold during the nine months ended March 31, 1997 as compared with the same period of the prior year which resulted in the increased gain on sale of loans. Nonconforming loan sales totaled $29.4 million for the nine months ended March 31, 1997 - 12 - 1ST BANCORP AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations compared with $14.8 million for the same period of the prior year. Non-conforming loans have been sold at higher gain levels compared with conforming loan sales due to pricing methodology differences (including loan origination fees collected) at the time the loans are originated. "Other" non-interest income remained relatively stable during the three months ended March 31, 1997 and totaled $172,000 compared with $184,000 during the three months ended March 31, 1996. "Other" non-interest income totaled $478,000 for the nine months ended March 31, 1997 compared to $774,000 for the nine months ended March 31, 1996. The lower level of "Other" non-interest income resulted from two primary factors. First, there were no sales of mortgage servicing rights during the nine months ended March 31, 1997 compared to a net gain of $237,000 on the sale of mortgage servicing rights during the nine months ended March 31, 1996. Second, service charges for deposit accounts declined during the nine months ended March 31, 1997 compared with the same period of the prior year. The decline was attributable to the reduction of retail deposit accounts which resulted from the Branch Sales. Non-interest expense totaled $1,707,000 for the three months ended March 31, 1997, compared to $1,643,000 for the three months ended March 31, 1996. Non-interest expense totaled $6,705,000 for the nine months ended March 31, 1997, compared to $5,652,000 for the nine months ended March 31, 1996. On September 30, 1996, the federal government mandated an industry wide assessment to recapitalize the SAIF, which is a part of the FDIC. The special assessment was charged to savings associations with insured deposits by the SAIF. The assessment was calculated at 0.657% of insured deposits as of March 31, 1995. The Bank's portion of the assessment was $1,330,000 and was included in non-interest expense for the first quarter of fiscal 1997 and paid during the second quarter of fiscal 1997. While the immediate effect on earnings of the one-time assessment is significant, future earnings will be augmented by lower deposit insurance premiums. The Bank began paying an assessment of 0.065% premium for insured deposits as of January 1, 1997, compared with the previous assessment rate of 0.23%. Federal insurance premium expense totaled $40,000 for the quarter ended March 31, 1997 compared to $101,000 for the quarter ended March 31, 1996. The lower expense resulted from a reduced assessment rate as mandated by the FDIC. The assessment to recapitalize the SAIF is directly responsible for the significant increase in non-interest expense for the nine months ended March 31, 1997. Federal insurance premium expense totaled $1,549,000 for the nine months ended March 31, 1997 compared to $369,000 the nine months ended March 31, 1996. Compensation and employee benefits expense totaled $1,010,000 for the three months ended March 31, 1997 compared to $906,000 for three months ended March 31, 1996. The higher level of compensation and employee benefits during the quarter ended March 31, 1997 resulted from increased staffing levels for the Bank's non-conforming loan origination operation and for First Financial Insurance Agency, Inc. Compensation and employee benefits expense totaled $2,995,000 for the nine months ended March 31, 1997 compared to $3,146,000 for nine months ended March 31, 1996. The lower level of compensation and employee benefit expense for the nine months ended March 31, 1997 was primarily due to lower expenses associated with the management incentive plan and the employee pension plan. - 13 - 1ST BANCORP AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations "Other" non-interest expense remained relatively stable for the three and nine month periods ended March 31, 1997 as compared with the same periods of the prior year. "Other" non-interest expense totaled $472,000 for the three months ended March 31, 1997 compared to $468,000 for the three months ended March 31, 1996. "Other" non-interest expense totaled $1,616,000 for the nine months ended March 31, 1997 compared to $1,566,000 for the nine months ended March 31, 1996. The Corporation realized an income tax benefit for the nine months ended March 31, 1997 of $188,000 compared to an income tax expense of $3,248,000 for nine months ended March 31, 1996. The income tax benefit for the nine months ended March 31, 1997 resulted from the recognition of income tax credits generated by an affordable housing limited partnership investment. (c) Capital Resources and Liquidity: The Corporation is subject to regulation as a savings and loan holding company by the Office of Thrift Supervision ("OTS"). First Federal Bank, A Federal Savings Bank, as a subsidiary of a savings and loan holding company, is subject to certain restrictions in its dealings with the Corporation. The Bank is also subject to the regulatory requirements applicable to a federal savings bank. Current capital regulations require savings institutions to have minimum tangible capital equal to 1.5% of total assets and a minimum 3% core capital ratio. Additionally, savings institutions are required to meet a risk-based capital ratio equal to 8.0% of risk-weighted assets. At March 31, 1997, the Bank met all current capital requirements. The following is a summary of the Bank's regulatory capital and capital requirements at March 31, 1997: Tangible Core Risk-Based Capital Capital Capital ----------- ----------- ----------- Regulatory Capital $22,522,000 $22,522,000 $23,031,000 Minimum Capital Requirement 4,101,000 8,201,000 11,747,000 ----------- ----------- ----------- Excess Capital $18,421,000 $14,321,000 $11,284,000 Regulatory Capital Ratio 8.24% 8.24% 15.69% Required Capital Ratio 1.50% 3.00% 8.00% During the quarter ended March 31, 1997, 1ST BANCORP paid a $0.10 cash dividend per share to shareholders. This is the eighteenth consecutive quarterly dividend 1ST BANCORP has paid to shareholders. Liquidity measures the Bank's ability to meet savings withdrawals and lending commitments. Management believes that liquidity is adequate to meet current requirements, including the funding of $31,515,000 in loan commitments and $1,562,000 of loans in process outstanding at March 31, 1997. The majority of these commitments are expected to be funded within the three month period ending June 30, 1997. At March 31, 1997, the Bank had $2,546,000 in outstanding commitments to sell mortgage loans and mortgage-backed securities. The Bank maintains liquidity of at least 5% of net withdrawable assets. The liquidity ratio at March 31, 1997 was 10.34%. There are no other known trends, events, or uncertainties, including current recommendations by regulatory authorities, that should have, or that are reasonably likely to have, a material effect on the liquidity, capital resources, or operations of 1ST BANCORP. - 14 - PART II. OTHER INFORMATION Item 1. Legal Proceedings. Neither 1ST BANCORP nor its subsidiaries is involved in any legal proceedings, other than routine proceedings occurring in the ordinary course of its business. Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to a vote of security holders during the quarter ended March 31, 1997. Item 6. Exhibits and Reports on Form 8-K a) The following exhibits are filed herewith: Exhibit 3a Certificate of Incorporation of Registrant (incorporated by reference to exhibit 3.1 to Registrant's Registration Statement on Form S-4, Registration No. 33-24587, filed September 28, 1988) Exhibit 3b Restated Code of By-Laws of Registrant (incorporated by reference to Exhibit 3b to Registrant's Form 10-K for the year ended June 30, 1994) Exhibit 27 Financial Data Schedule b) Reports on Form 8-K -- There were no reports on Form 8-K filed during the three months ended March 31, 1997. - 15 - 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. 1ST BANCORP Date: May 13, 1997 By: /s/ C. James McCormick -------------------------- C. James McCormick, Chairman and hief Executive Officer Date: May 13, 1997 By: /s/ Frank D. Baracani ---------------------------- Frank D. Baracani, President Date: May 13, 1997 By: /s/ Mary Lynn Stenftenagel --------------------------------- Mary Lynn Stenftenagel, Secretary-Treasurer and Chief Accounting Officer - 16 - EX-27 2 FDS FOR 1ST BANCORP
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1ST BANCORP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000840458 1ST BANCORP 1,000 U.S. Dollars 9-MOS JUN-30-1997 JAN-1-1997 MAR-31-1997 1.000 369 18,239 0 1,973 9,509 47,072 45,911 181,530 995 273,090 146,641 2,980 3,365 98,345 0 0 698 21,061 273,980 11,243 2,840 464 14,547 5,655 9,887 4,660 170 (32) 6,705 97 (188) 0 0 285 0.41 0.41 7.66 1,625 0 0 1,811 896 77 6 995 487 0 508
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