<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 SEPTEMBER 30, 1997
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
- --- FOR THE TRANSITION PERIOD FROM TO
--------------- ----------------
COMMISSION FILE NO. 333-1546
FNB BANCSHARES, INC.
--------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
SOUTH CAROLINA 57-1033165
-------------- ----------
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
POST OFFICE BOX 1539, GAFFNEY, SOUTH CAROLINA 29342
---------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(864) 488-2265
--------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
--------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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
--- ---
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON EQUITY, AS OF THE LATEST PRACTICABLE DATE:
616,338 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, WERE ISSUED
AND OUTSTANDING AS OF OCTOBER 15, 1997.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES NO X
--- ---
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FNB BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash $ 768,524 $ 342,680
Certificates of Deposit 600,000 0
Federal Funds Sold 3,000,000 7,930,000
------------ ------------
4,368,524 8,272,680
Securities 1,356,267 344,190
Loans Receivable 11,524,233 2,043,972
Less Allowance for loan loss (124,969) (20,000)
------------ ------------
Loans, net 11,399,264 2,023,972
Premises and equipment 782,678 734,443
Accrued Interest Receivable 107,236 11,180
Other Assets 364,270 346,436
------------ ------------
Total Assets $ 18,378,239 $ 11,732,901
------------ ------------
LIABILITIES
Deposits:
Non-interest bearing transaction accounts $ 1,958,227 $ 1,125,050
Interest bearing transaction accounts 2,710,372 1,234,402
Savings 1,872,594 550,717
Time deposits $100,000 and over 2,142,714 798,765
Other time deposits 3,468,956 2,095,431
------------ ------------
$ 12,152,863 $ 5,804,365
Repurchase Agreements 494,740 0
Accrued Interest Payable 55,019 20,213
Other Liabilities 31,611 13,997
------------ ------------
Total Liabilities $ 12,734,233 $ 5,838,575
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 10,000,000
shares authorized and unissued
Common Stock, $.01 par value; 10,000,000
shares authorized; 616,338 shares issued 6,163 6,163
Capital surplus 6,112,318 6,112,318
Retained earnings (deficit) (474,475) (224,155)
------------ ------------
Total Stockholders' equity 5,644,006 5,894,326
------------ ------------
Total Liabilities and Stockholders' equity $ 18,378,239 $ 11,732,901
------------ ------------
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE> 3
PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
FNB BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $264,551 $ 0
Investment securities, taxable 33,273 0
Federal funds sold 63,733 88,240
-------- -------
Total Interest Income 361,557 88,240
-------- -------
INTEREST EXPENSE
Time deposits $100,000 and over 27,030 0
Other deposits 77,445 0
Repurchase agreements 7,040 0
Short term borrowings 0 6,233
-------- -------
Total Interest Expense 111,515 6,233
-------- -------
NET INTEREST INCOME 250,042 82,007
Provision for loan loss 39,000 0
-------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 211,042 82,007
-------- -------
OTHER INCOME
Service charges on deposit accounts 4,980 0
Other service charges, commissions and fees 12,737 0
Rental Income 2,472 0
-------- -------
20,189 0
-------- -------
OTHER EXPENSE
Salaries and employee benefits 134,646 60,160
Furniture and equipment 42,278 0
Other operating expense 83,240 15,890
-------- -------
260,164 76,050
-------- -------
INCOME (LOSS) BEFORE TAXES (28,933) (5,957)
INCOME TAX EXPENSE (BENEFIT) 0 0
-------- -------
NET INCOME (LOSS) $(28,933) $(5,957)
PER SHARE
Average shares outstanding 616,338 --
Net income (loss) $ (.05) --
</TABLE>
See Accompanying Notes to Financial Statements
3
<PAGE> 4
PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
FNB BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 570,001 $ 0
Investment securities, taxable 64,876 0
Federal funds sold 231,902 88,240
--------- ---------
Total Interest Income 866,779 88,240
--------- ---------
INTEREST EXPENSE
Time deposits $100,000 and over 59,761 0
Other deposits 191,266 0
Repurchase agreements 18,000 0
Short term borrowings 0 15,702
--------- ---------
Total Interest Expense 269,027 15,702
--------- ---------
NET INTEREST INCOME 597,752 72,538
Provision for loan loss 108,000 0
--------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 489,752 72,538
--------- ---------
OTHER INCOME
Service charges on deposit accounts 15,147 0
Other service charges, commissions and fees 49,438 0
Rental Income 7,416 0
--------- ---------
72,001 0
--------- ---------
OTHER EXPENSE
Salaries and employee benefits 445,798 109,708
Furniture and equipment 129,986 0
Other operating expense 236,289 70,289
--------- ---------
812,073 179,997
--------- ---------
INCOME (LOSS) BEFORE TAXES (250,320) (107,459)
INCOME TAX EXPENSE (BENEFIT) 0 0
--------- ---------
NET INCOME (LOSS) $(250,320) $(107,459)
PER SHARE
Average shares outstanding 616,338 --
Net income (loss) $ (.41) --
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE> 5
PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
FNB BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Retained
Common Stock Capital Earnings
Shares Amount Surplus (Deficit) Total
------- ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 616,338 $6,163 $6,112,318 $(224,155) $ 5,894,326
Net income (loss) 0 0 0 (250,320) (250,320)
------- ------ ---------- --------- -----------
BALANCE, SEPTEMBER 30, 1997 616,338 $6,163 $6,112,318 $(474,475) $ 5,644,006
</TABLE>
See Accompanying Notes to Financial Statements
5
<PAGE> 6
PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
FNB BANCSHARES, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
FROM DECEMBER 31 TO SEPTEMBER 30
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (250,320) $ (107,459)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Provision for loan losses 108,000 0
Depreciation 64,089 0
Accretion and premium amortization (4,855) 0
Increase in interest receivable (96,056) 0
Increase in interest payable 34,806 0
Increase in other assets (17,834) (86,431)
Increase in other liabilities 17,614 0
Decrease in other liabilities 0 (91,158)
------------ ----------
Net cash used by operating activities (144,556) (285,048)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase securities held to maturity (1,757,222) 0
Maturity of securities held to maturity 750,000 0
Net increase in loans made to customers (9,483,292) 0
Purchase premises and equipment (112,324) (176,583)
------------ ----------
Net cash used by investing activities (10,602,838) (176,583)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, interest bearing
transaction accounts and savings accounts 3,488,676 0
Net increase in time deposits 2,859,822 0
Sale of Stock 0 6,103,380
Net increase (decrease) in Repurchase Agreements 494,740 0
------------ ----------
Net cash provided by financing activities 6,843,238 6,103,380
------------ ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (3,904,156) 5,641,749
------------ ----------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,272,680 18,898
------------ ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,368,524 $5,660,647
</TABLE>
See Accompanying Notes to Financial Statements
6
<PAGE> 7
PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
FNB BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION AND CONSOLIDATION - FNB Bancshares, Inc., a bank holding company
(the "Company") and its subsidiary, First National Bank of the Carolinas (the
"Bank"), provide banking services to domestic markets principally in Cherokee
County, South Carolina. The Bank commenced operations on October 18, 1996. The
consolidated financial statements include the accounts of the parent company and
its wholly-owned subsidiary after elimination of all significant intercompany
balances and transactions.
BASIS OF PRESENTATION. The accompanying consolidated financial statements have
been prepared in accordance with the requirements for interim financial
statements and, accordingly, they are condensed and omit disclosures which would
substantially duplicate those contained in the most recent annual report to
shareholders. The financial statements for the interim periods are unaudited
and, in the opinion of management, include all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation. The financial
information as of December 31, 1996 has been derived from audited financial
statements as of that date. For further information, refer to the financial
statements and the notes included in FNB Bancshares, Inc.'s 1996 Annual Report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following is a discussion of the Company's financial condition as of
September 30, 1997 compared to December 31, 1996, and the results of operations
for the three months ended September 30, 1997 compared to the three months ended
September 30, 1996 as well as the nine months ended September 30, 1997 compared
to the nine months ended September 30, 1996. These comments should be read in
conjunction with the Company's condensed consolidated financial statements and
accompanying footnotes appearing in this report.
The following discussion contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements, and the Company's operating
performance each quarter is subject to various risks and uncertainties that are
discussed in detail in the Company's filings with the Securities and Exchange
Commission, including the "Risk Factors" section in the Company's Registration
Statement on Form S-1 (Registration Number 333-1546) as filed with and declared
effective by the Securities and Exchange Commission.
Results of Operations
The Company commenced operations on October 18, 1996. The 1996 expenses through
September 30, 1996 were a result of the start-up of the Company; therefore,
comparison of the 1996 to 1997 results is not meaningful.
Net Interest Income
Net interest income for the nine month period ended September 30, 1997 was
$597,752. The interest rate spread was 5.0% at September 30, 1997. Net interest
income for the three month period ended September 30, 1997 was $250,042.
7
<PAGE> 8
PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (CONTINUED)
Provision and Allowance for Loan Losses
The provision for loan losses is the charge to operating earnings that
management feels is necessary to maintain the allowance for possible loan losses
at an adequate level. For the three months ended September 30, 1997, the
provision charged to expense was $39,000. For the nine months ended September
30, 1997, the provision charged to expense was $108,000, and the allowance for
loan losses was $124,969 as of September 30, 1997, or 1.08% of gross loans. The
loan portfolio is periodically reviewed to evaluate the outstanding loans and to
measure both the performance of the portfolio and the adequacy of the allowance
for loan losses. This analysis includes a review of delinquency trends, actual
losses, and internal credit ratings. Management's judgment as to the adequacy of
the allowance is based upon a number of assumptions about future events which it
believes to be reasonable, but which may or may not be reasonable. However,
because of the inherent uncertainty of assumptions made during the evaluation
process, there can be no assurance that loan losses in future periods will not
exceed the allowance for loan losses or that additional allocations will not be
required.
Non-Interest Income
Non-interest income for the three months ended September 30, 1997 was $20,189.
Non-interest income for the nine months ended September 30, 1997 was $72,001.
$15,147 of the nine month amount was a result of deposit account service charges
and account maintenance fees, $49,438 was other service charges which include
NSF and overdraft fees.
Non-Interest Expense
Non-interest expense for the three month period ended September 30, 1997 was
$260,164. Non-interest expense for the nine month period ended September 30,
1997 was $812,073. Salaries and employee benefits comprise $134,646 and $445,798
respectively of this amount. Depreciation of furniture and equipment accounted
for $21,632 and $64,089 respectively of this amount.
ASSETS AND LIABILITIES
During the first nine months of 1997, total assets increased $6,645,338 or 57%
when compared to December 31, 1996. The primary growth in assets was in loans
with an increase of 463% since December 31, 1996. Total liabilities increased
$6,895,658 or 118% when compared to December 31, 1996. Within the deposit area,
savings accounts increased 240%, interest bearing transaction accounts increased
120%, and time deposits increased 94%. However, this tremendous growth rate is a
reflection of the fact that the Bank just opened for business on October 18,
1996, and the Company does not expect to maintain or duplicate this growth rate
in the long-term. The Company's management closely monitors and seeks to
maintain appropriate levels of interest earning assets and interest bearing
liabilities so that maturities of assets are such that adequate funds are
provided to meet customer withdrawals and demand. Management expects asset and
liability growth to continue at a rapid pace during the coming months, with the
growth tapering off to a slower, more deliberate and controllable pace over the
longer term, and believes capital should continue to be adequate.
8
<PAGE> 9
PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (CONTINUED)
Loans
Balances within the major loan categories as of September 30, 1997 and December
31, 1996 are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------- ----------
<S> <C> <C>
Commercial and Industrial $ 3,243,819 $ 420,485
Commercial Real Estate 2,901,388 632,273
Consumer 2,926,890 633,814
Consumer Real Estate 2,452,136 357,400
----------- ----------
$11,524,233 $2,043,972
Allowance for loan loss, December 31, 1996 $ 20,000
Provision 108,000
Charge-offs 3,031
Allowance for loan loss, September 30, 1997 $ 124,969
Gross loans outstanding, December 31, 1996 $11,524,233
Allowance for loan losses to loans
outstanding, December 31, 1996 .98%
-----------
Allowance for loan losses to loans
outstanding, September 30, 1997 1.08%
-----------
</TABLE>
Deposits
Balances within the major deposit categories as of September 30, 1997 and
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------- ----------
<S> <C> <C>
Non-interest bearing demand deposits $ 1,958,227 $1,125,050
Interest bearing demand deposits 2,710,372 1,234,402
Savings deposits 1,872,594 550,717
Certificates of deposit 5,611,670 2,894,196
----------- ----------
$12,152,863 $5,804,365
</TABLE>
Liquidity
Liquidity needs are met by the Company through scheduled maturities of loans and
investments on the asset side and through pricing policies on the liabilities
side for interest-bearing deposit accounts. The level of liquidity is measured
by the loan-to-total borrowed funds ratio which was 91% at September 30, 1997
and 35% at December 31, 1996.
Capital Resources
Total shareholders' equity decreased $250,320 to $5,644,006 at September 30,
1997. The decrease is attributable to losses for the period.
Bank holding companies and their banking subsidiaries are required by banking
regulators to meet certain minimum levels of capital adequacy which are
expressed in the form of certain ratios. Capital is separated into Tier 1
capital (essentially common shareholders' equity less intangible assets) and
Tier 2 capital (essentially the
9
<PAGE> 10
allowance for loan losses limited to 1.25% of risk weighted assets). The first
two ratios, which are based on the degree of credit risk in the Company's
assets, require the weighting of assets based on assigned risk factors and
include off-balance sheet items such as loan commitments and stand-by letters of
credit. The ratio of Tier 1 capital to risk-weighted assets must be at least 4%
and the ratio of total capital (Tier 1 capital plus Tier 2) to risk-weighted
assets must be at least 8%. The capital leverage ratio supplements the
risk-based capital guidelines. The leverage ratio is Tier 1 capital divided by
the adjusted quarterly average total assets. Banks and bank holding companies
are required to maintain a minimum leverage ratio of 3.0%.
The following table summaries the Company's risk-based capital at September 30,
1997: (amounts in thousands)
<TABLE>
<S> <C>
Shareholders' equity $ 5,644
Less: intangibles 169
-------
Tier 1 capital $ 5,475
Plus allowance for loan losses (1) 125
-------
Total Capital $ 5,600
Risk-Weighted assets $12,335
-------
Risk based capital ratios
Tier 1 44.39%
-------
Total capital 45.40%
-------
Leverage ratio 29.79%
-------
</TABLE>
(1) limited to 1.25% of risk-weighted assets
Regulatory Matters
The management of the Company is not aware of any current recommendations by
regulatory authorities which, if they were to be implemented, would have a
material effect on liquidity, capital resources, or operations.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
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
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended September 30, 1997.
11
<PAGE> 12
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.
FNB BANCSHARES, INC.
--------------------
(Registrant)
Date: November 12, 1997 By: /s/ V. Stephen Moss
-------------------------------------
V. Stephen Moss
President and Chief Executive Officer
12
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 768,524
<INT-BEARING-DEPOSITS> 2,710,372
<FED-FUNDS-SOLD> 3,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,356,267
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 11,524,233
<ALLOWANCE> (124,969)
<TOTAL-ASSETS> 18,378,239
<DEPOSITS> 12,152,863
<SHORT-TERM> 0
<LIABILITIES-OTHER> 581,370
<LONG-TERM> 0
0
0
<COMMON> 6,163
<OTHER-SE> 5,637,843
<TOTAL-LIABILITIES-AND-EQUITY> 18,378,239
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 866,779
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 269,027
<INTEREST-INCOME-NET> 597,752
<LOAN-LOSSES> 108,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 812,073
<INCOME-PRETAX> (250,320)
<INCOME-PRE-EXTRAORDINARY> (250,320)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (250,320)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
<YIELD-ACTUAL> 7.57
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 20,000
<CHARGE-OFFS> 3,031
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 124,969
<ALLOWANCE-DOMESTIC> 124,969
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
