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FORM 10-Q/A
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
1ST NATIONAL BANCSHARES, INC.
(exact name of registrant as specified in its charter)
FLORIDA 06-1522028
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(Jurisdiction of Organization) I.R.S. Employer
Identification No.
5817 MANATEE AVENUE WEST, BRADENTON, FLORIDA 34209
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(Address of principal office) (Zip Code)
Registrant's telephone number, including area code: (813) 794-6969
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 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 of the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, par value $.10 per share 1,578,309 shares
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(class) Outstanding as of April 28, 2000
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FIRST NATIONAL BANK OF MANATEE
Index to Form 10-Q
For the quarter Ended March 31, 2000
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets,
March 31, 2000 and December 31, 1999 1
Condensed Consolidated Statements
of Income for the three months ended
March 31, 2000 and 1999 3
Condensed Consolidated Statements of
Cash Flows for the three months ended
March 31, 2000 and March 31, 1999 4
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 10
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults under Senior Securities 12
Item 4. Submission of Matters to a vote of Security Holders 12
Item 5. Other Information. 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST NATIONAL BANCSHARES, INC.
Consolidated Balance Sheet
Assets (000's)
March 31 December 31
2000 1999
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(Unaudited) **
Cash and Due from Banks 3,956 6,578
Interest Bearing Bank Balances 2,171 395
Federal Funds Sold 0 0
Investment Securities, 41,596 42,100
Unrecognized securities gains (1,582) (1,251)
Loans 130,356 122,007
Less allowance for credit losses (1,303) (1,254)
Deferred Loan Fees (earned) (46) (46)
Premises and Equip, Net 4,809 4,856
Accrued Interest Rec 976 964
Other Assets 849 586
Deferred Income Tax Charges 952 838
Other R.E. and other assets owned 30 29
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Total Assets $ 182,763 $ 175,802
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Liabilities and Stockholders' Equity
March 31 December 31
2000 1999
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Liabilities
Deposits
Demand, non-interest bearing 22,450 20,528
Demand int. bearing 20,986 19,088
Time (CD's, MM's, &
Savings Accounts) 115,099 112,568
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TOTAL DEPOSITS 158,535 152,184
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Repurchase Agreements 4,254 3,532
Capital Lease Obligation 494 505
Accrued Interest Payable 1,158 1,051
Accounts Payable and other Liabilities 528 455
Fed Funds Purchased and other
Short Term Borrowings 5,000 5,500
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TOTAL LIABILITIES 169,969 163,227
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Stockholders' Equity:
Common stock, par value $.10 per share;
Authorized 2,500,000 shares;
Issued and outstanding 1,578,309 shares 158 158
Capital Surplus 9,674 9,670
Unrecognized securities gains (987) (793)
Retained Earnings 3,949 3,540
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Net stockholder's equity 12,794 12,575
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Total Liab. & stkhldr's equity $ 182,763 $ 175,802
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FIRST NATIONAL BANK OF MANATEE
STATEMENT OF INCOME
FOR THE PERIOD JANUARY 1 THROUGH MARCH 31 (000'S)
2000 1999
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Interest Income:
Loans (excluding fees) 2,643 2,064
Loan Fees 41 18
Investment securities:
Taxable 486 571
Exempt from Federal Taxes 90 55
Interest Bearing Bank Balances 68 121
Federal funds sold 0 12
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Total Interest Income 3,328 2,841
Interest expense 1,671 1,440
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NET INTEREST INCOME 1,657 1,400
Provision for credit loss 50 35
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Net Interest Income
After Provision for Credit Losses 1,607 1,365
Other operating income:
Service charges on deposit accounts 97 99
Investment sec. gains 0 34
Trust Fees 127 97
Investment Sales Commissions 53 14
Other Income 119 70
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Total Other Operating Income 395 314
Other operating expenses:
Salaries and employee benefits 771 612
Occupancy expense of bank premises 138 127
Equipment expense 100 98
Other expenses 412 374
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Total Other operating expenses 1,421 1,211
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Profit Before Tax 582 468
Estimated State and Federal Income Taxes 173 157
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PROFIT AFTER TAX $ 409 $ 311
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STATEMENTS OF CASH FLOWS
(000'S)
MARCH 31
2000 1999
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OPERATING ACTIVITIES
Net Income 409 311
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation & leasehold amortization 55
Allowance for loan losses (net of charge offs) (49) (3)
Deferred income taxes (254) (90)
Decrease in accrued interest receivable (12) 46
Increase (decrease) in accrued interest payable 107 (98)
Increase (decrease) in accounts payable and
other liabilities 168 84
Decrease (increase) in other assets (4) (106)
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Net cash provided by operating activities 365 199
INVESTING ACTIVITIES
Proceeds from sales and maturities of investment
securities net of purchases 525 (6,904)
Loans originated, net of principal collections (8,348) (1,761)
Capital expenditures 47 25
Proceeds from sale of other R. E. and assets owned 0 0
Increase (decrease) in federal funds purchased (500) 0
Decrease (increase) in federal funds sold 0 (4,064)
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Net cash provided (used) by investing activities (8,276) (12,599)
FINANCING ACTIVITIES
Net increase (decrease) in demand deposits 3,819 2,900
Net increase (decrease) time deposits 2,532 8,319
Increase (decrease) in securities sold under
agreements to repurchase 721 1,440
Dividends paid 0 0
Proceeds from issuance of common stock 4 0
Retirement of common stock 0 0
Principal payments under capital lease obligation (11) (9)
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Net cash (used) provided by financing activities 7,065 12,650
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Net increase in cash and due from banks (846) 140
Cash and due from banks at beginning of year 6,973 4,355
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Cash and due from banks at end of quarter $ 6,127 $ 4,495
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SCHEDULE OF NON-CASH INVESTING ACTIVITIES
Loans transferred to other real estate owned $ 0 $ 0
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NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF FINANCIAL REPORTING
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with instructions to Form 10-Q and do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
normal and recurring adjustments necessary for fair presentation of such
financial statements have been included. For further information, refer to the
consolidated financial statements and the notes thereto included in the Bank's
annual report on Form 10-K for the year ended December 31, 1999.
Results for the three month period ended March 31, 2000, may not necessarily be
indicative of those to be expected for the entire year.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Overview.
1st National Bank & Trust (formerly First National Bank of Manatee)
(the Bank) commenced operations on July 18, 1986. The Bank's activities since
inception have consisted of accepting deposits, originating a variety of loans.
The Bank's first branch was opened on Anna Maria Island (5 miles west of the
main office) in October, 1994. The second branch was opened in May of 1996 on
State Road 64 (5 miles east of the main office). In January of 1997 year, the
bank opened its third branch on State Road 70 (8 miles southeast of the main
office). In December of 1997, the bank acquired a site at University Blvd. and
Lakewood Ranch Blvd. for a future branch. The bank also opened a Trust
Department in March of 1995. The Bank, as a local independent bank, follows a
philosophy of developing its equity and deposit base and focusing its lending
activities within its community. The Bank's underlying lending policy has been
and is anticipated to continue being directed toward better-than-normal credit
risks.
On January 1, 1999 the Bank was merged into First National Bancshares,
Inc., a Florida corporation (the Holding Company). The Holding Company was
formed specifically for the purpose of having the Bank merged into it. At the
time of the merger, the Holding Company had assets of $128,000 and a net worth
of ($55,000). The Holding Company is now a one bank holding company with no
other subsidiaries than the Bank. Therefore, there are no significant
adjustments from the financial information of the Bank to the consolidated
financial information for the Holding Company.
The following discussion and analysis is based on the Holding
Company's financial condition and results of operations for the period from
January 1, 2000 through March 31, 2000. This discussion and analysis should be
read in conjunction with the financial statement summaries of the Holding
Company, included elsewhere in this quarterly report.
Results of Operations.
Earnings in the first quarter of 2000 were up $98,000 or 32% compared
to earnings in the same period last year as direct result of net interest
income increasing by $257,000. This, combined with an $81,000 in non-interest
income, was offset by operating expenses that increased by $210,000. The
increase in overhead was due to growth of the Bank. The Bank's contribution of
$50,000 to loan loss reserve was $15,000 higher than last year and was due
solely to increased loan growth.
Net Interest Income. The major component of the Bank's earning capacity is net
interest income, which represents the difference or spread between interest
income on earning assets and interest bearing liabilities, primarily deposits.
The spread is considered positive when rate-sensitive assets exceed
rate-sensitive liabilities, and negative when rate-sensitive liabilities exceed
rate sensitive assets. Net interest income is also affected by changes in
interest rates earned and paid, and by
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changes in the volume of interest-earning assets and interest-bearing
liabilities. To the extent possible, the Bank follows a strategy intended to
insulate the Bank's interest rate spread from adverse changes in interest rates
by maintaining spreads through the adjustability of its earning assets and
interest-bearing liabilities. On March 31, 2000, the Bank's loan portfolio had
a high ratio of repriceability within one year.
The Bank had significant growth in its loan portfolio outstandings
when compared to last year and this has significantly increased net interest
income. Net interest income for three months in 2000 was $1,657,000 compared to
$1,400,000 in 1999.
Interest Earning Assets. Real estate related loans at March 31, 2000, accounted
for a majority of the bank's loan portfolio. Most of the mortgages are variable
rate loans and are adjustable each one to five years. Thus, volatile interest
rates can result in the real estate loans lagging market conditions. In 1999,
rates were initially stabile but began to rise in the second half of the year.
Despite this, the Bank was able to maintain its margins, largely through growth
of the portfolio.
The Bank's investment portfolio is concentrated primarily in U.S.
Government agencies and corporations. About 10% of the Bank's investment
portfolio re-prices in one year. The Bank's Available-for-Sale portfolio has a
market value of about $1,275,000 below book value.
Non-interest Earning Assets. Non-interest earning assets accounted for 6.3% of
total assets on March 31, 2000, and primarily consisted of cash and due from
banks, capitalized lease, equipment and branches, and accrued interest
receivable.
Funding Sources. The primary source of funds for the Bank's lending and
investment activities is deposits. At March 31, 2000 the Bank's total deposits
were $158.5 million plus $4.3 million in repurchase agreements. The Bank's
deposits are highly concentrated in interest-bearing accounts, which is typical
for the Bank's market area. The Bank has 13% of its deposits in NOW Accounts
and 73% of its deposits in Savings, MMA's and CD deposits. Despite a high
concentration of certificates of deposit, the Bank does not anticipate the
maturity of such certificates to affect the Bank's liquidity, as management
believes that the high concentration was primarily due to customer
relationships and not higher than market rates. The Bank is not in the practice
of paying above market rates on deposits.
Non-interest Income. The Bank's non-interest income for the three month period
ended March 31, 2000 and was $395,000 including $127,000 from its Trust
Department and $53,000 from its new Investment Sales subsidiary. Periodic
security transactions generate investment gains or losses and are primarily a
result of tax management considerations and liquidity requirements. The bank
had no security gains in 2000. The other significant items of non-interest
income represented service charges on deposit accounts and merchant credit card
account income.
Non-interest Expense. The Bank's non-interest expense for the three month
period ended March 31, 2000 was $1,421,000 including $771,000 of salaries and
employee benefits. The Bank's occupancy
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and equipment expenses for the period ended March 31, 2000 were $238,000.
Non-interest expense was up from $1,211,000 in 1999. The increase in expense is
primarily due to the Bank's increased staff to support the bank's growth and
the bank's expanded efforts in departments generating other operating income.
Allowance for Credit Losses. The allowance for credit losses is established
through a provision for credit losses charged to expenses. Loans are charged
against the allowance for credit losses when management believes that the
collectability of the principal is unlikely. The allowance is an amount that
management believes will be adequate to absorb losses inherent in existing
loans and commitments to extend credit based on evaluations of the
collectability and prior loan loss experience of loans and commitments to
extend credit. The evaluations take into consideration such factors as changes
in the nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, and current economic conditions that may
affect the borrowers' ability to pay.
An allowance for loan loss expense of $50,000 was charged to operating
expenses for the three month period ended March 31, 2000. The Bank had net
charge offs during this period of $511. The Bank has a total of $1,251,000
reserved for future loan losses.
Loans on which the accrual of interest has been discontinued are
designated as non-accrual loans. Accrual of interest on loans is discontinued
either when reasonable doubt exists as to the full, timely collection of
interest or when a loan becomes contractually past due by 90 days or more with
respect to interest or principal. When a loan is placed on non-accrual status,
all interest previously accrued but not collected is reversed against current
period interest income unless it is adequately secured. Income on such loans is
then recognized only to the extent that cash is received and the future
collection of principal is probable. Interest accruals are resumed on such
loans only when they are brought fully current with respect to interest and
principal and when in the judgment of management, the loans are estimated to be
fully collectible as to both principal and interest. The bank had no
non-accrual loans at March 31, 2000. Where appropriate, the Bank makes specific
reserves for future losses on non-performing loans. The Bank has no specific
reserves established at March 31, 2000.
The bank also has no other real estate owned at March 31,2000.
Capital Resources. In the normal course of business, the capital position of
the Bank is reviewed by management and regulatory authorities. The Comptroller
of the Currency has specified guidelines for purposes of evaluating a bank's
capital adequacy. Currently, banks must maintain a minimum primary capital
ratio of capital-to-assets of 4%. Primary capital includes the Bank's
stockholders' equity, subordinated debt, and the allowance for credit losses.
At March 31, 2000, the Bank's primary capital ratio was approximately 7.4%. In
1991, the Comptroller began evaluating banks' capital on a risk basis i.e. more
capital will be required for commercial loans than for residential real estate
loan and even less will be required for government bonds. The Comptroller will
require a minimum of an 8% capital ratio under this risk based method.
Currently the Bank has a risk based capital ratio in excess of 11.8%.
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Liquidity. Management of the Bank continually evaluates its liquidity position.
Management believes that the Bank's investment portfolio, when combined with
interest bearing bank balances and Fed Funds sold, provides adequate liquidity
to meet the Bank's needs. As noted in "Funding Sources" above, management
believes that the high concentration of time deposits is primarily due to
customer relationships and not to higher-than-market rates and, thus, do not
present any unusual liquidity risk. In addition, the bank has established
borrowing lines with correspondent banks, and with the Federal Home Loan Bank
to cover liquidity needs.
Impact of Inflation and Changing Prices. Unlike most industrial companies,
virtually all of the Bank's assets and liabilities are monetary in nature. As a
result, interest rates have a more significant impact on the Bank's performance
than do the effects of inflation. Interest rates do not necessarily move in the
same direction or with the same magnitude as the prices of goods and services,
since such prices are affected by inflation. In the current interest rate
environment, liquidity and the maturity structure of a financial institution's
assets and liabilities are also critical to the maintenance of acceptable
performance levels.
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QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Bank periodically performs asset/liability analysis to assess the
Bank's sensitivity to changing market conditions. The following information is
extracted from the Bank's 10-K which was filed with the Securities and Exchange
Commission (SEC) effective December 31, 1999.
The primary function of asset/liability management is to assure
adequate liquidity and maintain an appropriate balance between
interest-sensitive earning assets and interest-bearing liabilities. Liquidity
management involves the ability to meet the cash flow requirements of customers
who may be either depositors wanting to withdraw funds or borrowers needing
assurance that sufficient funds will be available to meet their credit needs.
Interest rate sensitivity management seeks to avoid fluctuating net interest
margins and to enhance consistent growth of net interest income through periods
of changing interest rates.
Marketable investment securities, particularly those of shorter
maturities, are a principal source of asset liquidity. Securities maturing or
expected to be called within one year or less amounted to $1,000,000 at
December 31, 1999 representing 3% of the investment securities portfolio, a
decrease from the 1998 amount of $17,000,000. This is due to the fact that 1998
had an unusual number of expected maturities and call dates move up as a result
of declining rates and the Bank sought to reduce its high liquidity.
The Bank moderates its liquidity needs by maintaining short term
borrowing lines with several regional banks. At year-end, the bank had lines of
credit established with other banking institutions totaling $21,000,000.
Brokered deposits are deposit instruments, such as certificates of
deposit, bank investment contracts and certain municipal investment contracts
that are issued through brokers who then offer and/or sell these deposit
instruments to one or more investors. The Bank does not currently purchase or
sell brokered deposits.
Maturities of time certificates of deposit and other time deposits of
$100,000 or more, outstanding at December 31, 1999, are summarized as follows:
Time Deposits
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(thousands of dollars)
3 months or less $ 5,560
Over 3 through 12 months 11,374
Over 12 through 36 months 6,143
Over 36 months 2,759
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Total $25,836
Interest rate sensitivity varies with different types of interest
earning assets and
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interest-bearing liabilities. Overnight federal funds, on which rates change
daily, and loans, which are tied to the prime rate, differ considerably from
long-term investment securities and fixed-rate loans. Similarly, time deposits
over $100,000 and money market accounts are much more interest rate sensitive
than passbook savings accounts. The shorter term interest rate sensitivities
are key to measuring the interest sensitivity gap, or excess interest-sensitive
earning assets over interest-bearing liabilities.
The following table shows the interest sensitivity gaps for four different time
intervals as of December 31, 1999. For the first year, interest-sensitive
assets exceed liabilities by $8,284,000. Over the following two years,
liabilities re-price faster than assets. The excess of interest-bearing
liabilities over interest-earning assets for the one-to-three year period is
primarily related to the longer maturities of CD's and NOW and MMA accounts
that are regarded as much less rate sensitive.
<TABLE>
<CAPTION>
As of December 31
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(thousands of dollars)
0-90 91-365 1-3 Over 3
Days Days Years Years
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest-sensitive assets $47,522 $52,127 $27,184 $33,863
Interest-sensitive liabilities 43,402 45,228 40,008 3,574
------- ------- ------- -------
Interest sensitivity gap 4,120 6,899 (12,824) 30,289
Cumulative gap $ 4,120 $11,019 ($1,805) $28,484
</TABLE>
The primary interest sensitive assets and liabilities in the one-year
maturity range are loans and time deposits. Trying to minimize this gap while
maintaining earnings is a continual challenge in a changing interest rate
environment and one of the objectives of the Bank's asset/liability management
strategy.
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Part II. Other Information
Item 1: Legal Proceedings Against the Bank - None.
Item 2: Changes in Securities and Use of Proceeds
In December of 1998, the shareholders of First National Bank of
Manatee voted to enter into a merger that would result in the Bank becoming a
wholly owned subsidiary of First National Bancshares, Inc., a bank holding
company. This merger took place on January 1, 1999 and the shareholders of the
Bank received two shares of Holding Company stock for each share of Bank stock.
As of April 28, 2000 there were 1,578,309 shares of Holding Company stock
outstanding.
Item 3: Defaults under Senior Securities - None
Item 4: Submission of Matters to a vote of Security Holders - None.
Item 5: Other Information - None
Item 6: Exhibits and Reports on Form 8-K
Exhibits
a) Plan of acquisition, reorganization, arrangement,
liquidation, or succession.
None
b) Articles of incorporation and by-laws.
1) A copy of the Amended and Restated Articles
of Incorporation of the Registrant is
included as Exhibit 3.A to the Registration
Statement.
2) A copy of the Bylaws of the Registrant is
included as Exhibit 3.B to this
Registration Statement.
c) Instruments defining the rights of securities
holders, including indentures.
None
d) Published report regarding matters submitted to vote
of security holders.
None
e) Exhibit 27 - Financial Data Schedule (for SEC use
only)*
* previously filed
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Date: October 13, 2000 FIRST NATIONAL BANCSHARES, INC.
/s/ Glen W. Fausset
--------------------------------
Glen W. Fausset
President and Director
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