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 September 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.
------------------------------------------------
(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
-------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
864-948-9001
--------------------------
(Telephone Number)
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
--
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 of common stock, $0.01 par value per share,
outstanding on November 1, 2000
Transitional Small Business Disclosure Format (check one): YES NO X
-- --
<PAGE>
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 2000 and
December 31, 1999................................................3
Consolidated Statements of Operations - For the three months ended
September 30, 2000 and nine months ended September 30, 2000......4
Consolidated Statement of Changes in Shareholders' Equity
Nine months ended September 30, 2000.............................5
Consolidated Statement of Cash Flows - Nine months ended
September 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.....................................................9
Item 2. Changes in Securities and Use of Proceeds.............................9
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
<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
September 30, 2000 December 31, 1999
(unaudited) Development stage
enterprise
(audited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 365,649 $ 126,121
Federal funds sold and resale agreements 9,990,000 -
Investment securities - 11,197,367
Securities available for sale 5,246,803 -
Loans, net 23,143,814 -
Premises and equipment, net 2,118,964 41,720
Deferred stock offering costs - 80,980
Other 610,814 22,270
-------------------- -----------------
Total assets $ 41,476,044 $ 11,468,458
==================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 29,903,281 $ -
Line of credit - 390,000
Stock subscription deposits - 11,284,050
Accounts payable and accrued expenses 413,860 7,254
------------------- -----------------
Total liabilities $ 30,317,141 $ 11,681,304
------------------ ------------------
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) (644,408) (212,946)
------------------- -----------------
Total shareholders' equity $ 11,158,903 $ (212,846)
=================== =================
Total liabilities and shareholders' equity $ 41,476,044 $ 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 Nine months ended
September 30, 2000 September 30, 2000
<S> <C> <C>
Interest income:
Loans $ 421,996 $ 608,435
Investment securities 79,464 243,387
Federal funds sold 236,234 448,460
---------- ----------
Total interest income 737,694 1,300,282
---------- ----------
Interest expense:
Line of credit - 6,481
Deposits 386,903 554,128
---------- ----------
Total interest expense 386,903 560,609
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Net interest income 350,791 739,673
---------- ----------
Provision for loan losses 139,558 257,414
---------- ----------
Net interest income after provision for loan losses 211,233 482,259
---------- ----------
Noninterest income 11,346 14,087
Noninterest expense:
Salaries and employee benefits 223,216 513,306
Professional fees 11,440 54,987
Data processing 14,381 30,878
Public relations 34,232 75,883
Occupancy and equipment expense 69,267 130,442
Telephone and supplies 14,741 41,045
Other 39,624 81,267
---------- ----------
Total noninterest expense 406,900 927,808
Loss before income taxes 184,321 431,462
---------- ----------
Provision for income taxes
- -
Net loss 184,321 431,462
---------- ----------
Basic loss per share .15 .36
Weighted average shares outstanding 1,200,000 1,200,000
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statement of Changes in Shareholders' Equity
For the nine months ended September 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 1,791,311 11,803,311
Net loss (431,462) (431,462)
Balance at September 30, 2000 1,200,000 $ 12,000 $11,791,311 $ (644,408) $11,158,903
============= =============== =========== ============== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
For the nine months ended September 30, 2000
(unaudited)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (431,462)
Adjustments to reconcile net loss to cash provided by operating activities:
Provision for loan losses 257,414
Depreciation 50,179
Discount accretion (139,276)
Changes in deferred and accrued amounts:
Prepaid expenses and other assets (173,764)
Accrued expenses and other liabilities 406,606
-----------
Net cash used by operating activities $ (30,303)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities $ (34,269,732)
Proceeds from maturity of investment securities 45,594,000
Proceeds from maturity of securities available for sale 9,159
Purchases of securities available for sale (5,243,587)
Net (increase) decrease in loans (23,401,228)
Net purchases of premises and equipment (2,127,423)
Purchase of investment in Federal Home Loan Bank stock
(3,800)
Purchase of investment in Federal Reserve Bank stock (330,000)
-----------
Net cash provided by investing activities $ (19,772,611)
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 29,903,281
------------
Net cash provided by financing activities $ 30,032,442
Net increase in cash and cash equivalents $ 10,229,528
Cash and cash equivalents at beginning of period $ 126,121
==================
Cash and cash equivalents, end of period $ 10,355,649
==================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
September 30,2000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
A summary of these policies is included in the Form 10-KSB filed with the
Securities and Exchange Commission on March 29, 2000 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 and resale agreements." Cash paid for interest during the nine months
ended September 30, 2000 totaled $188,517.
OVERVIEW
First National Bancshares, Inc. ("the Company") was incorporated on July
14, 1999 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 September 30, 2000 and for the three and
nine-month periods ending September 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 nine-month periods ended September
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 (Registration Number
333-87503) and the Company's Annual Report on Form 10-KSB for 1999 as filed with
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following is a discussion of our Company's financial condition as
of and for the three and nine months ended September 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 September 30, 2000, the Company had total assets of $41.5 million,
consisting principally of loans, net of loan loss allowance, of $23.1 million;
federal funds sold and resale agreements of $10.0 million; securities available
for sale of $5.2 million; and property, at cost less accumulated depreciation,
of $2.1 million. At September 30, 2000, the Bank's loan portfolio consisted
primarily of $14.0 million of commercial real estate loans, $4.9 million of
commercial business loans, and $4.5 million of consumer and home equity loans.
The Bank plans to decrease its federal funds sold balances in order 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 September 30, 2000 were $30.3 million,
consisting principally of deposits of $29.9 million. The $29.9 million in
deposits consisted primarily of $20.6 million in certificates of deposit, $4.7
million of money market and savings accounts and $4.6 million in checking
accounts, of which 54% are business accounts.
Total shareholders' equity increased from $(212,846) at December 31,
1999 to $11,158,903 at September 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
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 78% at September 30, 2000.
CAPITAL
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 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.
<PAGE>
RESULTS OF OPERATIONS
The Company incurred a net loss of $431,462 for the nine month period
ended September 30, 2000, or a net loss of $.36 per share based on the 1.2
million shares outstanding as of September 30, 2000 compared to a net loss of
$184,321 or $.15 per share for the three month period ended September 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 nine month period ended September 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 nine month period ended September 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 losses is a non-cash expense of $139,558 and $257,414,
respectively for the three and nine months ended September 30, 2000 related to
the provision for loan loss. The loan loss reserve was $257,414 as of September
30, 2000 or 1.1% 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 September 30, 2000, there
were no non performing loans and the Company has had no net charge-offs since
commencing operations.
Net interest income, the largest component of the Company's income, was
$350,791 and $739,673 respectively, for the three and nine months ended
September 30, 2000. Interest income for the nine months ended September 30, 2000
includes $147,517 earned on stock subscription deposits received prior to
opening the Bank. The remainder of interest income for the three and nine months
ended September 30, 2000 includes $421,996 and $608,435 on loans; and $315,698
and $544,330 on investments and federal funds sold. Interest expense for the
nine month period ended September 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 for the period of $554,128
was related to deposit accounts.
The Company's consolidated net interest margin for the three months
ended September 30, 2000 was 4.00% and its earning assets averaged $35.1
million. The net interest margin is calculated as annualized net interest income
divided by year-to-date average earning assets.
Average loans and investments for the three months ended September 30,
2000 were $16.1 million and $4.2 million, respectively. The average yields on
loans and investments for the three months ended September 30, 2000 were 10.48%
and 7.5%, respectively. The average balance of deposits for the three months
ended September 30, 2000 was $25.8 million and the weighted rate on deposits was
5.95%.
The Bank incurred noninterest expense of $927,808 for the nine month
period ended September 30, 2000, consisting primarily of $513,306 of salaries
and benefits and $130,442 of occupancy and equipment expense. Noninterest
expense for the three month period ended September 30, 2000 totaled $406,900.
This was primarily attributable to salaries and benefits of $223,216 and
occupancy and equipment expense of $69,267.
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
<PAGE>
ITEM 3. DEFAULTS UPON 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
(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: November 13, 2000 By: /s/ Jerry L. Calvert
--------------------------------
Jerry L. Calvert
Chief Executive Officer
Date: November 13, 2000 By: /s/ Kitty B. Payne
-------------------------------
Kitty B. Payne
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
27.1 Financial Data Schedule (for electronic filing purposes).*
Filed herewith
