UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
OR
[ ] 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 333-87503
First National Bancshares, Inc.
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(Exact name of registrant as specified in its charter)
South Carolina 58-2466370
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(State of Incorporation) (I.R.S. Employer Identification No.)
451 E. St. John Street
Spartanburg, South Carolina 29302
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(Address of principal executive offices) (Zip Code)
864-948-9001
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(Telephone Number)
Not Applicable
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(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
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,200,000 shares outstanding on
August 1, 2000
Transitional Small Business Disclosure Format (check one): YES NO X
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<PAGE>
Index
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<S> <C>
Consolidated Balance Sheets - June 30, 2000 and December 31, 1999.............................3
Consolidated Statements of Operations - For the three months ended June 30, 2000
and six months ended June 30, 2000........................................................4
Consolidated Statement of Changes in Shareholders' Equity
Six months ended June 30, 20000...........................................................5
Consolidated Statement of Cash Flows - Six months ended June 30, 2000.........................6
Notes to Consolidated Financial Statements....................................................7-8
Item 2. Management's Discussion and Analysis of Financial Conditional and Results of Operations........8-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................10
Item 2. Changes in Securities and Use of Proceeds......................................................10
Item 3. Defaults Upon Senior Securities................................................................10
Item 4. Submission of Matters to a Vote of Security Holders.............................................10
Item 5. Other Information..............................................................................10
Item 6. Exhibits and Reports on Form 8-K................................................................10
(a) Exhibits......................................................................................10
(b) Reports on Form 8-K...........................................................................10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1999
Development stage
June 30, 2000 enterprise
(unaudited) (audited)
------------- ------------------
Assets
<S> <C> <C>
Cash and cash equivalents $ 703,997 $ 126,121
Federal funds sold 11,610,000 -
Investment securities - 11,197,367
Securities available for sale 3,267,248 -
Loans, net 11,667,733 -
Premises and equipment, net 1,294,603 41,720
Deferred stock offering costs - 80,980
Other 502,550 22,270
----------------- -----------------
Total assets $ 29,046,131 $ 11,468,458
================= =================
Liabilities and Shareholders' Equity
Liabilities:
Deposits $ 17,507,237 $ -
Line of credit - 390,000
Stock subscription deposits - 11,284,050
Accounts payable and accrued expenses 195,670 7,254
----------------- -----------------
Total liabilities $ 17,702,907 $ 11,681,304
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Commitments and contingencies
Shareholders' Equity:
Preferred stock, par value $.01 per share, 10,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, par value $.01 per share, 10,000,000 shares
authorized, 1,200,000 and 10 shares issued and outstanding 12,000 -
Additional paid-in capital 11,791,311 100
Retained earnings/(deficit) (460,087) (212,946)
------------------ ------------------
Total shareholders' equity $ 11,343,224 $ (212,846)
================= ==================
Total liabilities and shareholders' equity $ 29,046,131 $ 11,468,458
================= =================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Three months ended June Six months ended June
30, 2000 30, 2000
Interest income:
<S> <C> <C>
Loans $ 185,655 $ 186,439
Investment securities 37,025 163,922
Federal funds sold 178,935 212,226
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Total interest income 401,615 562,587
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Interest expense:
Line of credit - 6,481
Deposits 166,673 167,225
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Total interest expense 166,673 173,706
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Net interest income 234,942 388,881
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Provision for loan losses 103,660 117,856
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Net interest income after provision for loan losses 131,281 271,025
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Noninterest income
2,741 2,741
Noninterest expense:
Salaries and employee benefits 168,189 290,090
Professional fees 30,890 43,981
Data processing 12,928 19,480
Public relations 37,916 37,916
Occupancy and equipment expense 43,830 61,175
Telephone and supplies 19,033 26,305
Other 29,486 41,960
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Total noninterest expense 342,272 520,907
Loss before income taxes (208,250) (247,141)
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Provision for income taxes - -
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Net loss $ (208,250) $ (247,141)
===================== ==================
Basic loss per share .17 .21
Weighted average shares outstanding 1,200,000 1,200,000
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Consolidated Statement of Changes in Shareholders' Equity
For the six months ended June 30, 2000
(unaudited)
Additional Retained Total
Common Stock Paid-In Earnings/ Shareholders
Shares Amount Capital (Deficit) Equity
------ ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 10 $ -- $100 $ (212,946) $ (212,846)
Redemption of stock from organizer (10) (100) (100)
Proceeds from sale of stock, net of
offering costs of $196,689 1,200,000 12,000 11,791,311 11,803,311
Net loss (247,141) (247,141)
Balance at June 30, 2000 1,200,000 $ 12,000 $11,791,311 $ (460,087) $11,343,224
============= ============= =========== ============== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
For the six months ended June 30, 2000
(unaudited)
<S> <C>
Cash flows from operating activities:
Net income (loss) $ (247,141)
Adjustments to reconcile net loss to cash provided by operating activities:
Provision for loan losses 117,856
Depreciation 20,087
Discount accretion (128,848)
Changes in deferred and accrued amounts:
Prepaid expenses and other assets (69,300)
Accrued expenses and other liabilities 188,416
-----------------
Net cash used by operating activities $ (118,930)
Cash flows from investing activities:
Purchases of investment securities $ (34,269,732)
Proceeds from maturity of investment securities 45,594,000
Purchases of securities available for sale (3,265,301)
Net (increase) decrease in loans (11,785,589)
Net purchases of premises and equipment (1,272,970)
Purchase of investment in Federal Reserve Bank stock (330,000)
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Net cash provided by investing activities $ (5,329,592)
Cash flows from financing activities:
Proceeds from sale of stock, net of stock offering costs $ 519,261
Redemption of stock of organizer (100)
Repayment of line of credit (390,000)
Net increase in deposits 17,507,237
-----------------
Net cash provided by financing activities $ 17,636,398
Net increase in cash and cash equivalents $ 12,187,876
Cash and cash equivalents at beginning of period $ 126,121
-----------------
Cash and cash equivalents, end of period $ 12,313,997
=================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
June 30, 2000
Summary of Significant Accounting Policies and Activities
A summary of these policies is included in the 1999 Form 10K-SB filed
with the Securities and Exchange Commission and is incorporated herein by
reference.
Statement of Cash Flows
In accordance with the provisions of SFAS No. 95, "Statement of Cash
Flows", the Company considers cash and cash equivalents to be those amounts
included in the balance sheet captions "Cash and due from banks" and "Federal
funds sold." Cash paid for interest during the six months ended June 30, 2000
totaled $48,411.
Overview
First National Bancshares, Inc. ("the Company") was incorporated to
operate as a bank holding company pursuant to the Federal Bank Holding Company
Act of 1956 and the South Carolina Bank Holding Company Act, and to purchase
100% of the issued and outstanding stock of First National Bank of Spartanburg
("the Bank"), an association organized under the laws of the United States, to
conduct a general banking business in Spartanburg, South Carolina.
Until March 27, 2000, the Company engaged in organizational and
pre-opening activities necessary to obtain regulatory approvals and to prepare
its subsidiary, the Bank, to commence business as a financial institution. The
Bank is primarily engaged in the business of accepting demand deposits and
savings insured by the Federal Deposit Insurance Corporation, and providing
commercial, consumer and mortgage loans to the general public.
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of the Company and the Bank. All significant intercompany accounts and
transactions have been eliminated in consolidation. The accompanying unaudited
consolidated financial statements at June 30, 2000 and for the three and
six-month periods ending June 30, 2000 have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B of the Securities and Exchange Commission. Accordingly, they do
not include all information and footnotes required by GAAP for complete
financial statements. However, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included.
Operating results for the three and six-month periods ended June 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000 or for any other interim period. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Registration Statement on Form SB-2 and the Company's Annual
Report on Form 10K-SB for 1999 as filed with and declared effective by the
Securities and Exchange Commission.
Until the Bank opened for business on March 27, 2000, the Company was
accounted for as a development stage enterprise as defined by Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by Development
Stage Enterprises," as the Company devoted substantially all of its efforts to
establishing a new business. When the Bank opened on March 27, 2000, certain
reclassifications and adjustments were made to the financial statements to
reflect that the Company is now accounted for as an operating company.
<PAGE>
Basic Loss Per Share
Basic loss per share is computed by dividing net loss by weighted average
number of shares of common stock outstanding. Stock options outstanding are not
dilutive; therefore, only basic net loss per share is presented.
Stock Option Plan
On March 6, 2000, the Board of Directors of the Company adopted a stock
incentive plan for the benefit of the directors, officers, and employees of the
Company and the Bank. The Company's shareholders approved the plan at the annual
shareholders meeting on May 4, 2000. Under the plan, the Company may grant up to
180,000 shares of common stock options at an option price per share not less
than the fair market value on the date of grant. On March 27, 2000, the Company
granted options to purchase 90,000 shares to members of the Bank's senior
management group. These options expire 10 years from the grant date and are
subject to various vesting schedules. The Company has adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
The following is a discussion of the Company's financial condition as
of and for the period ended June 30, 2000. These comments should be read in
conjunction with the Company's condensed consolidated financial statements and
accompanying footnotes appearing in this report.
This report contains "forward-looking statements" relating to, without
limitation, future economic performance, plans and objectives of management for
future operations, and projections of revenues and other financial items that
are based on the beliefs of the Company's management, as well as assumptions
made by and information currently available to the Company's management. The
words "expect," "anticipate," and "believe," as well as similar expressions, are
intended to identify forward-looking statements. 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 (Registration Number
333-70589) as filed with and declared effective by the Securities and Exchange
Commission.
Financial Condition
At June 30, 2000, the Company had total assets of $29.0 million,
consisting principally of loans, net of loan loss allowance, of $11.7 million;
federal funds sold of $11.6 million; securities available for sale of $3.3
million; and property, at cost less accumulated depreciation, of $1.3 million.
At June 30, 2000, the Bank's loan portfolio consisted primarily of $8.0 million
of commercial real estate loans, $2.6 million of commercial business loans, and
$1.5 million of consumer and home equity loans. The Bank plans to continue to
decrease its investment portfolio and to increase its loan portfolio. The
primary source of funding the Bank's loan portfolio is the maturity of
investment securities and deposits that are acquired.
The Company's liabilities at June 30, 2000 were $17.7 million,
consisting principally of deposits of $17.5 million. The $17.5 million in
deposits consisted primarily of $13.8 million in certificates of deposit, $1.8
million of money market accounts and $1.6 million in checking accounts, of which
47% are business accounts.
Total shareholders' equity increased from ($212,846) at December 31,
1999 to $11.3 million at June 30, 2000. The Company currently expects that it
will have sufficient cash flow to fund ongoing operations and the Company does
not expect to raise any additional funds in the next 12 months.
Liquidity needs are met by the Company through scheduled maturities of
loans and investments on the asset side and through pricing policies on the
liability side for interest-bearing deposit accounts. The level of liquidity is
measured by the loan-to-deposit ratio, which was at 67% at June 30, 2000.
The Bank currently maintains a level of capitalization substantially in
excess of the minimum capital requirements set by the regulatory agencies.
Despite anticipated asset growth, management expects its capital ratios to
continue to be adequate for the next two to three years. However, no assurances
can be given in this regard, as rapid
<PAGE>
growth, deterioration in loan quality, and continued losses, or a combination of
these factors, could change the Company's capital position in a relatively short
period of time.
Results of Operations
The Company incurred a net loss of $247,141 for the six month period
ended June 30, 2000, or a net loss of $.21 per share based on the 1.2 million
shares outstanding as of June 30, 2000 compared to a net loss of $208,250 for
the three month period ended June 30, 2000. Prior to opening the Bank on March
27, 2000, the Company was involved in activities related to the organization of
First National Bancshares and First National Bank of Spartanburg including
obtaining the required regulatory approvals, hiring qualified personnel,
implementing operating procedures and taking other actions necessary for a
successful bank opening. These activities contributed to the loss incurred for
the six month period ended June 30, 2000. The Company incurred a total of
$402,480 in organizational expenses from inception (July 14, 1999) to the Bank's
opening date, of which $156,457 was incurred during the six month period ended
June 30, 2000. These costs were expensed when incurred in accordance with SOP
98-5, "Reporting on the Costs of Start-Up Activities."
Included in the loss of $247,141 for the six month period ended June
30, 2000 is a non-cash expense of $117,856 related to the provision for loan
loss. The loan loss reserve was $117,856 as of June 30, 2000 or 1.0% 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 future periods will not
exceed the allowance for loan losses or that additional allocations will not be
required. At June 30, 2000, there were no nonperforming loans and the Company
has had no net charge-offs since commencing operations.
The Bank incurred noninterest expense of $520,907 for the six month
period ended June 30, 2000, consisting primarily of $290,090 of salaries and
benefits. Noninterest expense for the three month period ended June 30, 2000,
totaled $342,272. This was primarily attributable to salaries and benefits of
$168,189.
Net interest income is the largest component of the Company's income
and was $388,881 for the six month period ended June 30, 2000. Interest income
for the six month period ended June 30, 2000 includes $147,517 earned on stock
subscription deposits received prior to opening the Bank. The remainder of
interest income for the six month period ended June 30, 2000 includes $186,439
on loans; and $228,631 on investments and federal funds sold. The higher level
of investment income resulted from the Bank's high level of liquidity as the
Bank began to originate loans. Interest expense for the six month period ended
June 30, 2000 includes $6,481 related to the line of credit the Company used to
fund organizational expenses incurred prior to opening the Bank. The remainder
of interest expense of $167,225 was related to deposit accounts.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company
is a party or of which any of their property is the subject.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders was held on May 4, 2000 to elect
five members to the Board of Directors and to consider a proposal to approve the
Company's 2000 stock incentive plan.
There were five members up for election to the Board of Directors.
The nominated directors were Mellnee G. Buchheit, Jerry L. Calvert, W. Russel
Floyd, William A. Hudson and Norman F. Pulliam.The number of votes for the
election of the directors was as follows: For Ms. Buchheit - 900,530; for Mr.
Calvert - 900,530; for Mr. Floyd - 900,530; for Mr. Hudson - 900,530; for Mr.
Pulliam - 900,530;withhold authority for Ms. Buchheit - 500; withhold authority
for Mr. Calvert - 500; withhold authority for Mr. Floyd - 500; and withhold
authority for Mr. Hudson - 500; withhold authority for Mr. Pulliam - 500; and
2,300 votes abstained from voting.
The shareholders of the Company approved the Company's 2000 stock
incentive plan. The number of votes for the approval of the Plan was 885,730.
The number of votes against the Plan was 10,200 and 7,400 abstained from voting.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
27.1 *Financial Data Schedule (for electronic filing purposes)
(b) Reports on Form 8-K
None.
*Filed herewith
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRST NATIONAL BANCSHARES, INC.
Date: August 10, 2000 By: /s/ Jerry L. Calvert
-------------------------------------
Jerry L. Calvert
Chief Executive Officer
Date: August 10, 2000 By: /s/ Kitty B. Payne
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Kitty B. Payne
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
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27.1 Financial Data Schedule (for electronic filing purposes).*
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* Filed herewith
