<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 JUNE 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 AUGUST 11, 1997.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES NO X
--- ---
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FNB BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
(UNAUDITED) (AUDITED)
--------- --------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents:
Cash $ 450,635 $ 342,680
Federal Funds Sold 4,840,000 7,930,000
------------ ------------
5,290,635 8,272,680
------------ ------------
Securities 1,353,957 344,190
Loans Receivable 8,893,022 2,043,972
Less Allowance for loan loss (85,969) (20,000)
------------ ------------
Loans, Net 8,807,053 2,023,972
Premises and equipment 804,633 734,443
Accrued Interest Receivable 84,735 11,180
Other Assets 354,527 346,436
------------ ------------
Total Assets $ 16,695,540 $ 11,732,901
------------ ------------
LIABILITIES
Deposits:
Non-interest bearing transaction accounts $ 1,879,397 $ 1,125,050
Interest bearing transaction accounts 2,282,914 1,234,402
Savings 1,794,810 550,717
Time deposits $100,000 and over 1,428,831 798,765
Other time deposits 2,980,866 2,095,431
------------ ------------
10,366,818 5,804,365
Repurchase Agreements 515,223 0
Accrued Interest Payable 107,752 20,213
Other Liabilities 32,808 13,997
------------ ------------
Total Liabilities 11,022,601 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) (445,542) (224,15)
------------ ------------
Total Stockholders' equity 5,672,939 5,894,326
------------ ------------
Total Liabilities and Stockholders' equity $ 16,695,540 $ 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 JUNE 30
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 190,075 $ 0
Investment securities, taxable 19,205 0
Federal funds sold 79,046 0
--------- ---------
Total Interest Income 288,326 0
--------- ---------
INTEREST EXPENSE
Time deposits $100,000 and over 18,539 0
Other deposits 65,014 0
Repurchase Agreements 6,082 0
Short term Borrowings 0 6,097
--------- ---------
Total Interest Expense 89,635 6,097
--------- ---------
NET INTEREST INCOME 198,691 (6,097)
Provision for loan loss 39,000 0
--------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 159,691 (6,097)
--------- ---------
OTHER INCOME
Service charges on deposit accounts 5,821 0
Other service charges, commissions and fees 20,100 0
Rental Income 2,472 0
--------- ---------
25,921 0
--------- ---------
OTHER EXPENSE
Salaries and employee benefits 149,990 27,037
Furniture and equipment 41,705 0
Other operating expense 78,824 31,465
--------- ---------
270,519 58,502
--------- ---------
INCOME (LOSS) BEFORE TAXES (82,435) (64,599)
INCOME TAX EXPENSE (BENEFIT) 0 0
--------- ---------
NET INCOME (LOSS) $ (82,435) $ (64,599)
PER SHARE
Average shares outstanding 616,338 --
Net income (loss) $ (.13) --
</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 SIX MONTHS ENDED JUNE 30
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 305,450 $ 0
Investment securities, taxable 31,603 0
Federal funds sold 168,169 0
--------- ---------
Total Interest Income 505,222 0
--------- ---------
INTEREST EXPENSE
Time deposits $100,000 and over 32,731 0
Other deposits 113,821 0
Repurchase Agreements 10,960 0
Short term Borrowings 0 9,469
--------- ---------
Total Interest Expense 157,512 9,469
--------- ---------
NET INTEREST INCOME 347,710 (9,469)
Provision for loan loss 69,000 0
--------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 278,710 (9,469)
--------- ---------
OTHER INCOME
Service charges on deposit accounts 10,167 0
Other service charges, commissions and fees 36,701 0
Rental Income 4,944 0
--------- ---------
51,812 0
--------- ---------
OTHER EXPENSE
Salaries and employee benefits 311,152 46,659
Furniture and equipment 87,708 0
Other operating expense 153,049 57,288
--------- ---------
551,909 103,947
--------- ---------
INCOME (LOSS) BEFORE TAXES (221,387) (113,416)
INCOME TAX EXPENSE (BENEFIT) 0 0
--------- ---------
NET INCOME (LOSS) $(221,387) $(113,416)
PER SHARE
Average shares outstanding 616,338 --
Net income (loss) $ (.36) --
See Accompanying Notes to Financial Statements
</TABLE>
-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 JUNE 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 (221,387) (221,387)
--------- -------- ------------ ----------- ------------
BALANCE, JUNE 30, 1997 616,338 $ 6,163 $ 6,112,318 $ (445,542) $ 5,672,939
</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 JUNE 30
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (221,387) $(113,416)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Provision for loan losses 69,000 0
Depreciation 42,457 0
Accretion and premium amortization (5,634) 0
Increase in interest receivable (73,555) 0
Increase in interest payable 87,539 0
Increase in other assets (8,091) (48,120)
Increase in other liabilities 18,811 276,233
---------- ---------
Net cash used by operating activities (90,860) 114,697
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase securities held to maturity (1,354,133) 0
Maturity of securities held to maturity 350,000 0
Net increase in loans made to customers (6,852,081) 0
Purchase premises and equipment (112,647) (129,427)
---------- ---------
Net cash used by investing activities (7,968,861) (129,427)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, interest bearing
transaction accounts and savings accounts 1,657,847 0
Net increase in time deposits 2,904,606 0
Net increase (decrease) in Repurchase Agreements 515,223 0
---------- ---------
Net cash provided by financing activities 5,077,676 0
---------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,982,045) (14,730)
---------- ---------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,272,680 18,898
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,290,65 $ 4,168
</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 June 30, 1997 compared to December 31, 1996, and the results of operations
for the three months ended June 30, 1997 compared to the three months ended June
30, 1996 as well as the six months ended June 30, 1997 compared to the six
months ended June 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 June 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 six month period ended June 30, 1997 was
$347,710. The interest rate spread was 4.48% at June 30, 1997. Net interest
income for the three month period ended June 30, 1997 was $198,691.
-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 June 30, 1997, the provision
charged to expense was $39,000. For the six months ended June 30, 1997, the
provision charged to expense was $69,000, and the allowance for loan losses was
$85,969 as of June 30, 1997, or .97% 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 to the
allowance will not be required.
Non-Interest Income
Non-interest income for the three months ended June 30, 1997 was
$28,393. Non-interest income for the six months ended June 30, 1997 was $51,812,
$10,167 of which was a result of deposit account service charges and account
maintenance fees, and $36,701 of which represented other service charges,
including NSF and overdraft fees.
Non-Interest Expense
Non-interest expense for the three month period ended June 30, 1997 was
$270,519. Non-interest expense for the six month period ended June 30, 1997 was
$551,909. Salaries and employee benefits comprise $149,990 and $311,152,
respectively, of this amount. Depreciation of furniture and equipment accounted
for $21,554 and $42,453, respectively, of this amount.
ASSETS AND LIABILITIES
During the first six months of 1997, total assets increased $4,962,639
or 42% when compared to December 31, 1996. The primary growth in assets was in
loans with an increase of 335% since December 31, 1996. Total liabilities
increased $5,184,026 or 89% when compared to December 31, 1996. Within the
deposit area, savings accounts increased 226%, interest bearing transaction
accounts increased 85%, and time deposits increased 52%. 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. 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 June 30, 1997 and
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- -------------
<S> <C> <C>
Commercial and Industrial $2,047,449 $ 420,485
Commercial Real Estate 2,525,721 632,273
Consumer 2,750,082 633,814
Consumer Real Estate 1,569,770 357,400
---------- ---------
$8,893,022 $2,043,972
Allowance for loan loss, December 31, 1996 $ 20,000
Provision 69,000
Charge-offs 3,031
Allowance for loan loss, June 30, 1997 $ 85,969
Gross loans outstanding, December 31, 1996 $2,043,972
Gross loans outstanding, June 30, 1997 $8,893,022
Allowance for loan losses to loans outstanding, December
31, 1996 .98%
----------
Allowance for loan losses to loans outstanding, June 30,
1997 .97%
----------
</TABLE>
Deposits
Balances within the major deposit categories as of June 30, 1997 and
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Non-interest bearing demand deposits $ 1,879,397 $1,125,050
Interest bearing demand deposits 2,282,914 1,234,402
Savings deposits 1,794,810 550,717
Certificates of deposit 4,409,697 2,894,196
----------- ----------
$10,366,818 $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 82% at June 30,
1997 and 35% at December 31, 1996.
Capital Resources
Total shareholders' equity decreased $221,387 to $5,672,939 at June
30, 1997. The decrease is attributable to losses for 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
-9-
<PAGE> 10
separated into Tier 1 capital (essentially common shareholders' equity less
intangible assets) and Tier 2 capital (essentially the 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 weighing 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 summarizes the Company's risk-based capital at
June 30, 1997: (amounts in thousands)
Shareholders' equity $ 5,673
Less: intangibles 235
-----
Tier 1 capital $ 5,438
Plus: allowance for loan losses(1) 86
-----
Total Capital $ 5,524
Risk-Weighted assets $ 10,437
------
Risk based capital ratios
Tier 1 52.10%
-----
Total capital 52.93%
-----
Leverage ratio 33.52%
(1) limited to 1.25% of risk-weighted assets
-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 - 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 June 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: August 11, 1997 By: /s/ V. Stephen Moss
--------------------
V. Stephen Moss
President and Chief Executive Officer
-12-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FNB
BANCSHARES, INC. UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 450,635
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,840,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,353,957
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 8,893,022
<ALLOWANCE> (85,969)
<TOTAL-ASSETS> 16,695,540
<DEPOSITS> 10,366,818
<SHORT-TERM> 0
<LIABILITIES-OTHER> 32,808
<LONG-TERM> 0
0
0
<COMMON> 6,613
<OTHER-SE> 5,666,776
<TOTAL-LIABILITIES-AND-EQUITY> 16,695,540
<INTEREST-LOAN> 305,450
<INTEREST-INVEST> 31,603
<INTEREST-OTHER> 168,169
<INTEREST-TOTAL> 505,222
<INTEREST-DEPOSIT> 146,552
<INTEREST-EXPENSE> 157,512
<INTEREST-INCOME-NET> 347,710
<LOAN-LOSSES> 69,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 551,909
<INCOME-PRETAX> (221,387)
<INCOME-PRE-EXTRAORDINARY> (221,387)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (221,387)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
<YIELD-ACTUAL> 7.24
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 20,000
<CHARGE-OFFS> 3,031
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 85,969
<ALLOWANCE-DOMESTIC> 85,969
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
