<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 MARCH 31, 1998
___ 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 MAY 11, 1998.
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>
MARCH 31, 1998 DECEMBER 31, 1997
(UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
ASSETS
- ------
Cash and Cash Equivalents:
Cash and due from Banks $ 950,823 $ 1,007,433
Federal Funds Sold 3,790,000 1,430,000
------------ ------------
4,740,823 2,437,433
Securities held to maturity 1,900,537 1,501,331
Time Deposits with other Banks 500,000 600,000
Loans Receivable 15,495,670 14,168,832
Less Allowance for loan loss (191,405) (152,614)
------------ ------------
Loans, net 15,304,265 14,016,218
Premises and equipment 754,565 760,843
Accrued Interest Receivable 142,173 122,499
Other Assets 412,919 481,984
------------ ------------
Total Assets $ 23,755,282 $ 19,920,308
LIABILITIES
- -----------
Deposits:
Noninterest bearing transaction accounts $ 2,269,158 $ 2,478,018
Interest bearing transaction accounts 3,019,302 2,532,105
Savings 2,357,734 1,358,378
Time deposits $100,000 and over 3,031,236 2,141,145
Other time deposits 6,816,140 5,050,222
------------ ------------
17,493,570 13,559,868
Securities sold under agreements to repurchase 401,023 424,413
Accrued Interest Payable 66,344 72,832
Other Liabilities 97,795 154,014
------------ ------------
Total Liabilities 18,058,732 14,211,127
------------ ------------
STOCKHOLDER'S 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) (421,931) (409,300)
------------ ------------
Total Stockholders' equity 5,696,550 5,709,181
------------ ------------
Total Liabilities and Stockholders' equity $ 23,755,282 $ 19,920,308
</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 MARCH 31
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 356,370 $ 115,375
Investment securities, taxable 26,834 12,398
Federal funds sold 50,243 89,123
Time Deposits with Other Banks 7,380 0
--------- ---------
Total Interest Income 440,827 216,896
--------- ---------
INTEREST EXPENSE
Time deposits $100,000 and over 38,481 14,192
Other deposits 114,852 48,807
Securities sold under agreement to repurchase 6,457 4,878
--------- ---------
Total Interest Expense 159,790 67,877
--------- ---------
NET INTEREST INCOME 281,037 149,019
Provision for loan loss 40,000 30,000
--------- ---------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 241,037 119,019
--------- ---------
OTHER INCOME
Service charges on deposit accounts 21,749 12,537
Other service charges, commissions and fees 11,633 10,882
--------- ---------
33,382 23,419
--------- ---------
OTHER EXPENSE
Salaries and employee benefits 145,158 159,457
Occupancy Expense 25,773 25,624
Furniture and equipment 24,850 20,379
Other operating expense 91,269 75,930
--------- ---------
287,050 281,390
--------- ---------
INCOME (LOSS) BEFORE TAXES (12,631) (138,952)
INCOME TAX EXPENSE (BENEFIT) 0 0
--------- ---------
NET INCOME (LOSS) $ (12,631) $(138,952)
PER SHARE
Average shares outstanding 616,338 616,338
Net income (loss) $ (.02) (.23)
</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 CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Retained
Common Stock Capital Earnings
Shares Amount Surplus (Deficit) Total
------------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 616,338 $ 6,163 $ 6,112,318 $(409,300) $5,709,181
Net income (loss) 0 0 0 (12,631) (12,631)
------- ------- ----------- --------- ----------
Balance, March 31, 1998 616,338 $ 6,163 $ 6,112,318 $(421,931) $5,696,550
</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 COMPREHENSIVE INCOME
FOR THE PERIOD ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
NET INCOME (LOSS) $ (12,631) $ (138,952)
Other comprehensive income,
net of tax 0 0
Total other comprehensive income 0 0
Comprehensive income (loss) $ (12,631) $ (138,952)
------- -----------
</TABLE>
See Accompanying Notes to Financial Statements
5
<PAGE> 6
PART I -FINANCIAL INFORMATION (CONTINUED)
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
FNB BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FROM DECEMBER 31 TO MARCH 31
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (12,631) $ (138,952)
Adjustments to reconcile net income (loss) to
Net cash provided by operating activities
Provision for loan losses 40,000 30,000
Depreciation 22,320 20,901
Accretion and premium amortization 356 (4,540)
Increase in interest receivable (19,674) (50,694)
Increase (decrease) in interest payable (6,488) 39,112
(Increase) decrease in other assets 69,065 (32,407)
Increase (decrease) in other liabilities (56,219) 10,678
----------- -----------
Net cash used by operating activities 36,729 (125,902)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase securities held to maturity (799,562) (1,001,125)
Maturity of securities held to maturity 400,000 0
Purchase Time Deposits (500,000) 0
Maturity of Time Deposits 600,000 0
Net increase in loans made to customers (1,328,047) (3,861,399)
Purchase premises and equipment (16,042) (110,555)
----------- -----------
Net cash used by investing activities (1,643,651) (4,973,079)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, interest bearing
transaction accounts and savings accounts 1,277,693 793,201
Net increase in time deposits 2,656,009 2,586,949
Net increase(decrease) in Repurchase Agreements (23,390) 651,921
----------- -----------
Net cash provided by financing activities 3,910,312 4,032,071
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,303,390 (1,066,910)
----------- -----------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,437,433 8,272,680
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,740,823 $ 7,205,770
</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, 1997 has been derived from audited financial
statements as of that date. Operating results for the three months ended March
31, 1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. For further information, refer to the
financial statements and the notes included in FNB Bancshares, Inc.'s 1997
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 March
31, 1998 compared to December 31, 1997, and the results of operations for the
three months ended March 31, 1998 compared to the three months ended March 31,
1997. The Bank completed its first full year of operations in 1997 and has grown
substantially since opening in October 1996. Comparisons of the Bank's results
for the periods presented should be made with an understanding of the Bank's
short history. The following discussion 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.
Net Interest Income
Net interest income for the three month period ended March 31, 1998 was $281,037
compared to $149,019 for the three month period ended March 31, 1997. The
interest rate spread was 5.0% at March 31, 1998 and 3.75% at March 31, 1997. The
increased income is primarily attributed to growth in the loan portfolio.
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 March 31, 1998, the provision
charged to expense was $40,000 compared to $30,000 charged to expense for the
three months ended March 31, 1997. The loan loss reserve was $191,405 as of
March 31, 1998, or 1.24% of gross loans, as compared to $152,614 as of December
31, 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 accurate. Because of the inherent uncertainty of
assumptions made during the evaluation process, there can be no assurance that
loan losses in the future periods will not exceed the allowance for loan losses
or that additional allocations will not be required.
Noninterest Income
Noninterest income for the three months ended March 31, 1998 was $33,382 as
compared to $23,419 for the three months ended March 31, 1997, reflecting
increased account activity associated with the increase in total deposits. For
the three months ended March 31, 1998, $21,749 of this amount was a result of
deposit account service charges, account maintenance fees, and NSF and overdraft
fees, and $11,633 was other miscellaneous service charges. For the three months
ended March 31, 1997, $12,537 of this amount was a result of deposit account
service charges, account maintenance fees, and NSF and overdraft fees, and
$10,882 was other miscellaneous service charges.
Noninterest Expense
Noninterest expense for the three month period ended March 31, 1998 was $287,050
as compared to $281,390 for the three month period ended March 31, 1997.
Salaries and employee benefits comprised $145,158 and $159,457, respectively, of
this amount. The decrease in salaries is primarily due to a reduction in full
time staff as well as the prior year amount including the fourth quarter 1996
payroll taxes. Depreciation of furniture and equipment accounted for $22,320 and
$20,901 for the periods ended March 31, 1998 and March 31, 1997, respectively.
8
<PAGE> 9
PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (CONTINUED)
ASSETS AND LIABILITIES
During the first three months of 1998, total assets increased $3,834,974, or
19%, when compared to December 31, 1997. The primary growth in assets was in
Federal Funds with an increase of 165% since December 31, 1997. Loans have
increased $1,326,838, or 9%, since December 31, 1997. Total liabilities
increased $3,847,605, or 27%, when compared to December 31, 1997. Within the
deposit area, savings accounts, which include money market accounts, increased
74%, interest bearing transaction accounts increased 19%, and time deposits
increased 37%. However, this growth rate is a reflection of the fact that the
Bank is relatively young, as it opened for business on October 18, 1996, and the
Company does not expect to maintain or duplicate this growth rate in the long
run. 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.
Loans
Balances within the major loan categories as of March 31, 1998 and December 31,
1997 are as follows:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Commercial and Industrial $ 4,242,893 $ 3,227,562
Real Estate - Construction 221,366 206,531
Real Estate - Other 6,931,298 6,724,721
Installment and consumer credit lines 4,100,113 4,010,018
--------- ---------
$15,495,670 $14,168,832
Allowance for loan loss, December 31, 1997 $ 152,614
Provision 40,000
Charge-offs 1,209
Allowance for loan loss, March 31, 1998 $ 191,405
Gross loans outstanding, December 31, 1997 $14,168,832
Gross loans outstanding, March 31, 1998 $15,495,670
Allowance for loan losses to loans
outstanding, December 31, 1997 1.08%
Allowance for loan losses to loans
outstanding, March 31, 1998 1.24%
-----
</TABLE>
Deposits
Balances within the major deposit categories as of March 31, 1998 and December
31, 1997 are as follows:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Noninterest bearing demand deposits $ 2,269,158 $ 2,478,018
Interest bearing demand deposits 3,019,302 2,532,105
Savings deposits 2,357,734 1,358,378
Time deposit $100,000 and over 3,031,236 2,141,145
Other time deposits 6,816,140 5,050,222
---------- ----------
$17,493,570 $13,559,868
</TABLE>
9
<PAGE> 10
PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (CONTINUED)
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 87% at March 31, 1998 and
101% at December 31, 1997.
Capital Resources
Total shareholders' equity decreased $12,631 to $5,696,550 at March 31, 1998.
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 in to 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 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 summarizes the Company's risk-based capital at
March 31, 1998:
(amounts in thousands)
<TABLE>
<S> <C>
Shareholders' equity $ 5,697
Less: intangibles 300
---
Tier 1 capital $ 5,397
Plus: allowance for loan losses (1) 191
---
Total Capital $ 5,588
Risk-Weighted assets $ 16,608
Risk based capital ratios
Tier 1 32.49%
Total capital 33.64%
Leverage ratio 24.48%
</TABLE>
(1) limited to 1.25% of risk-weighted assets
Regulatory Matters
The banking industry is heavily regulated, and from time to time additional
legislation is considered by Congress. The operations of the Company may be
affected by legislative changes and the policies of various regulatory
authorities. The Company is unable to predict the nature or the extent of the
effect on its business and earnings that fiscal or monetary policies, economic
control, or new federal or state legislation may have in the future.
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 March 31, 1998
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: May 12, 1998 By: /s/ V. Stephen Moss
----------------------------------
V. Stephen Moss
President and Chief Executive Officer
12
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 950,823
<INT-BEARING-DEPOSITS> 500,000
<FED-FUNDS-SOLD> 3,790,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 1,900,537
<LOANS> 15,495,670
<ALLOWANCE> 191,405
<TOTAL-ASSETS> 23,755,282
<DEPOSITS> 17,493,570
<SHORT-TERM> 0
<LIABILITIES-OTHER> 565,162
<LONG-TERM> 0
0
0
<COMMON> 6,163
<OTHER-SE> 5,690,387
<TOTAL-LIABILITIES-AND-EQUITY> 23,755,282
<INTEREST-LOAN> 356,370
<INTEREST-INVEST> 84,457
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 440,827
<INTEREST-DEPOSIT> 153,333
<INTEREST-EXPENSE> 159,790
<INTEREST-INCOME-NET> 281,037
<LOAN-LOSSES> 40,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 287,050
<INCOME-PRETAX> (12,631)
<INCOME-PRE-EXTRAORDINARY> (12,631)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,631)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
<YIELD-ACTUAL> 8.46
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 152,614
<CHARGE-OFFS> 1,209
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 191,405
<ALLOWANCE-DOMESTIC> 191,405
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
