SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File No. 2-76198
FIRST NATIONAL BANKSHARES, INC.
(Exact name of Registrant as
specified in its charter)
LOUISIANA 72-0807084
(State of Incorporation) (I.R.S. Employer
Identification No.)
600 East Main Street, Houma, Louisiana 70360
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number) (504) 868-1660
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each Class which registered
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock ($2.50 par value)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the proceeding 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
Indicate by check mark if disclosure of delinquent filers
pursuant to item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
State the aggregate market value of voting stock held by
nonaffiliates of registrant as of March 19, 1996 -- Common --
$15,305,455
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of March 15, 1996.
Common Stock ($2.50 par value) -- 2,017,600 shares outstanding
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Annual
Shareholders Meeting to be held on May 14, 1996 are incorporated
into Part III hereof.
PART I
Item 1. Business
(a) General Development of Business
First National Bankshares, Inc. (the Company) is a bank
holding company which owns 100 percent of the voting shares of
First National Bank of Houma (First National).
The Company was incorporated as a Louisiana business
corporation in 1974 and remained dormant until July 31, 1982,
when it acquired all of the outstanding shares of First National
in exchange for 1,125,812 shares of the Company's stock. This
transaction was accounted for as a pooling of interests.
(b) Financial Information About Industry Segments
The Company and its subsidiaries are engaged only in
banking and bank-related businesses.
(c) Narrative Description of Business of the Company and
its Subsidiaries
The Company
The Company is a bank holding company within the meaning of
the Bank Holding Company Act of 1956, as amended (the Federal
Act), and is registered as such with the Board of Governors of
the Federal Reserve System (the Board). Under the Federal Act,
bank holding companies are prohibited, with certain exceptions,
from engaging in activities other than banking or managing or
controlling banks or furnishing services to or performing
services for their subsidiaries. The Federal Act authorizes the
Board, however, to permit bank holding companies to engage in
activities which the Board has determined to be so closely
related to banking or managing or controlling banks as to be a
proper incident thereto. In making these determinations, the
Board is required to consider whether the performance of such
activities by a bank holding company or its subsidiaries can
reasonably be expected to produce benefits to the public such as
greater convenience; to increase competition or to gain in
efficient use of resources; to result in decreased or unfair
competition; or to produce conflicts of interest or unsound
banking practices. The Company conducts all of its business
operations through its subsidiaries. The operations of the
Company's bank subsidiary and the Company's only bank-related
subsidiary are described below.
First National
First National was established in 1919 and is a "Full
Service" bank with its main office and two full service branches
in the City of Houma and two other branches within the confines
of the Parish of Terrebonne. First National serves the entire
parish as well as several adjacent sections of Lafourche Parish,
a combined area with a population of between 90,000 and 100,000.
First National offers complete banking services for
individuals, partnerships, corporations, municipalities and
others. These include checking, savings and interest-bearing
transaction accounts, business, real estate, interim
construction, personal and installment loans, collection
services, safe deposit facilities, individual and corporate
trust and agency services, and a number of special services.
First National, operating in Terrebonne Parish under a
national charter, competes with six other banks in its prime
trade area, Terrebonne Parish. In addition, three savings and
loan associations in Terrebonne Parish furnish non-bank
competition.
First National has a large number of customers acquired
over a period of many years and is not dependent upon a single
customer, or upon a few customers. The loss of any single
customer would not have a material adverse effect on First
National. First National's trade area is heavily concentrated
in the oil and gas industry, in particular, in oil and gas
support services. First National has a significant amount of
loans to and deposits from companies that operate in this
industry. Management of First National believes that the impact
of this concentration is significant but manageable, primarily
because these loans and deposits are distributed among a number
of different companies involved in various support services (see
Schedule III-A for further information regarding loan
concentration). There are no material seasonal factors that
would have any adverse effect on First National.
First Export Corporation
The Company's only other subsidiary is First Export
Corporation, a Louisiana corporation formed in 1983 for the
purpose of facilitating the export of goods manufactured in
Terrebonne Parish and the State of Louisiana. On June 30, 1989,
the Company decided to liquidate the assets of First Export and
place the corporation on inactive status. This decision was
based on the depressed conditions of the local economy and the
poor performance of First Export. The activities of First
Export were generally limited to fact finding and establishing
contacts with international traders and U.S. Government
officials.
Regulation
The operations of the Company and its subsidiaries are
subject to regulation by the Louisiana Commissioner of Financial
Institutions, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation (FDIC), and
the Office of the Comptroller of the Currency (OCC) under
applicable state and federal law. These statutes and regulations
relate to required reserves, investments, loans, mergers and
consolidations, issuance of securities, payment of dividends,
establishment of branches and other aspects of operations.
Payments of Dividends
The Company is a bank holding company and its ability to
fund dividend payments is dependent upon its ability to receive
funds from First National. Due to regulatory restrictions, the
Company and the Bank were not in a position to pay dividends
from 1987 through the third quarter of 1994. During 1994, the
Bank received permission from the OCC to transfer some of its
equity to the Company in the form of cash. In 1994, the Company
received permission from the Federal Reserve Bank of Atlanta to
use a portion of that cash to pay a dividend of 10 cents per
share. In 1995, the Company also received persmission from the
Federal Reserve Bank of Atlanta to pay dividends totaling 16
cents per share.
Borrowing by the Company
Federal law prohibits the Company from borrowing from First
National, unless the borrowing is secured by specified amounts
and types of collateral. Additionally, such secured loans are
generally limited to 10 percent of First National's capital and
surplus. Further, the Company and First National are prohibited
from engaging in certain tie-in arrangements in connection with
any extension of credit, lease or sale of property or furnishing
of services.
Support of First National
Under Federal Reserve Board policy, the Company is expected
to act as a source of financial strength to First National, its
bank subsidiary, and to commit resources to support First
National in circumstances in which First National might need
such outside support.
Annual Insurance Assessment
First National is subject to deposit insurance assessment
by the Federal Deposit Insurance Corporation. These assessments
had been rising in recent years. In 1994, the Bank realized a
decrease in the assessment due to the improved condition of
First National. In 1995, the Company experienced additional
lower assessments as a result of changes by the FDIC for well
capitalized financial institutions.
Miscellaneous
Federal and state law provide for the enforcement of any
pro rata assessment of stockholders of a bank to cover
impairment of capital stock by sale, to the extent necessary, of
the stock of any assessed stockholder failing to pay the
assessment. The Company, as the stockholder of First National,
is subject to these provisions.
The earnings of the Company's bank subsidiary and,
therefore, to a large extent the earnings of the Company, are
affected by the policies of the regulatory authorities,
including the Federal Reserve System, of which First National is
a member. An important function of the Federal Reserve System
is to regulate the national supply of bank credit. Among the
instruments used to do so are open market operations in U.S.
Government securities, changes in the discount rate of bank
borrowings, changes in reserve requirements against banks'
deposits, and limitations on interest rates which member banks
may pay on time and savings deposits. These instruments are
used in varying combinations to influence overall growth and
distribution of bank loans, investments and deposits, and their
use may also affect interest rates charged on loans or paid for
deposits.
The monetary policies of the Federal Reserve authorities
have had a significant effect on the operating results of
commercial banks in the past and are expected to continue to do
so in the future. The effect, if any, of such policies upon the
future business and income of the Company cannot be predicted
with accuracy.
Employees
As of December 31, 1995, the Company employed 95 full-time
and 34 part-time persons, or approximately 112 full-time
equivalent employees.
(d) Financial Information about Foreign and Domestic
Operations and
Export Sales
The Company has customers in many foreign countries but the
portion of revenue derived from these foreign customers is not
material to its overall revenues.
(e) Supplemental Statistical Information
The following Schedules I through VIII present summarized
statistical data of the Company and its subsidiaries.
SCHEDULE I-A
Distribution of Average Assets, Liabilities and
Shareholders' Equity for the Periods Indicated
For Years ended December 31,
(In thousands)
1995 1994 1993
ASSETS:
Cash and due from
financial institutions $ 6,606 $ 6,854 $ 6,940
Taxable securities 73,115 82,116 78,897
Non-taxable securities 653 666 1,253
Interest-bearing deposits
with other banks 7,245 1,853 2
Net loans (1) 104,855 86,337 86,214
Allowance for possible
loan losses (2,788) (2,793) (2,724)
Federal funds sold and
securities purchased under
agreements to resell 831 4,287 5,688
Other assets 14,229 13,184 12,203
TOTAL ASSETS $204,746 $192,504 $188,473
LIABILITIES AND SHAREHOLDERS' EQUITY:
Non interest-bearing
deposits $ 28,245 $ 27,193 $ 25,972
Interest bearing deposits 158,441 149,655 149,577
Total deposits 186,686 176,848 175,549
Funds purchased and
securities sold under
agreements to repurchase 1,644 3,125 2,315
Other liabilities 1,199 1,192 1,531
Total liabilities 189,529 181,165 179,395
Shareholders' Equity 15,217 11,339 9,078
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $204,746 $192,504 $188,473
(1) Gross loans and discounts, net of unearned income.
SCHEDULE I-B
Average Amount Outstanding for Major Categories
of Interest-Earning Assets and Interest-Bearing
Liabilities for the Periods Indicated
For Years Ended December 31,
(In thousands)
1995 1994 1993
ASSETS:
Loans (1)(2) $104,855 $ 86,337 $ 86,214
Federal funds sold and
securities purchased under
agreements to resell 831 4,287 5,688
Taxable securities 73,115 82,116 78,897
Non-taxable securities 653 666 1,253
Interest-bearing deposits
with other banks 7,245 1,853 2
TOTAL INTEREST-
EARNING ASSETS $186,699 $175,259 $172,054
LIABILITIES:
Savings and negotiable
interest-bearing deposits $ 77,666 $ 83,931 $ 85,750
Time deposits 80,775 65,724 63,827
Funds purchased and
securities sold under
agreements to repurchase 1,644 3,125 2,315
TOTAL INTEREST-
BEARING LIABILITIES $160,085 $152,780 $151,892
(1) Net of unearned income.
(2) Includes nonaccrual loans.
SCHEDULE I-C
Interest Earned or Paid on the Major Categories
of Interest-Earning Assets and Interest-Bearing
Liabilities for the Periods Indicated
For Years Ended December 31,
(In thousands)
1995 1994 1993
Interest Earned On:
Loans $ 9,853 $ 8,000 $ 7,535
Federal funds sold and
securities purchased
under agreements to
resell 48 159 172
Taxable securities 4,949 4,939 4,569
Non-taxable securities 58 56 46
Interest-bearing deposits
with other banks 419 103 -0-
Total interest
earned (1) $15,327 $13,257 $12,322
Interest Paid On:
Savings and negotiable
interest-bearing deposits $ 1,736 $ 1,854 $ 2,074
Time deposits 4,306 2,814 2,650
Funds purchased and
securities sold under
agreements to repurchase 68 105 61
Total interest paid $ 6,110 $ 4,773 $ 4,785
(1) Applicable nontaxable securities yields have not been
calculated on a tax-equivalent basis as the effect is not
significant.
SCHEDULE I-D
Average Interest Rate Earned or Paid for Major
Categories of Interest-Earning Assets and
Interest-Bearing Liabilities for the Periods Indicated
For Years Ended December 31,
1995 1994 1993
Average Rate Earned On:
Loans 9.40% 9.27% 8.74%
Federal funds sold and
securities purchased
under agreements to
resell 5.78% 3.71% 3.02%
Taxable securities 6.77% 6.01% 5.79%
Non-taxable securities 8.88% 8.41% 3.67%
Interest-bearing deposits
with other banks 5.78% 5.56% 0.00%
Total (weighted
average rate) (1) 8.21% 7.56% 7.16%
Average Rate Paid On:
Savings and negotiable
interest-bearing deposits 2.24% 2.21% 2.42%
Time deposits 5.33% 4.28% 4.15%
Funds purchased and
securities sold under
agreements to repurchase 4.14% 3.36% 2.63%
Total (weighted
average rate) 3.82% 3.12% 3.15%
(1) Applicable nontaxable securities yields have not been
calculated on a tax-equivalent basis as the effect is not
significant.
SCHEDULE I-E
Net Interest Earnings and Net Yield
on Interest-Earning Assets
Years ended December 31,
(In thousands except percentage data)
1995 1994 1993
Total interest income (1) $15,327 $13,257 $12,322
Total interest expense 6,110 4,773 4,785
Net Interest earnings $ 9,217 $ 8,484 $ 7,537
Net yield on interest-
earning assets 4.94% 4.84% 4.38%
(1) Applicable nontaxable securities yields have not been
calculated on a tax-equivalent basis as the effect is not
significant.
SCHEDULE I-F
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
(In thousands)
Current Prior Increase
year year (decrease)
1995
INTEREST
INCOME: (1)
Loans $ 9,853 $ 8,000 $ 1,853
Federal funds
sold and
securities
purchased
under
agreements
to resell 48 159 (111)
Taxable
securities 4,949 4,939 10
Non-taxable
securities 58 56 2
Other
Investments 419 103 316
Total $15,327 $13,257 $ 2,070
INTEREST EXPENSE:
Savings and
negotiable
interest-
bearing
deposits $ 1,736 $ 1,854 $ (118)
Time deposits 4,306 2,814 1,492
Funds purchased
and securities
sold under
agreements to
repurchase 68 105 (37)
Total $ 6,110 $ 4,773 $ 1,337
Attributable to
Rate/
Volume Rate volume
1995
INTEREST
INCOME: (1)
Loans $ 1,716 $ 113 $ 24
Federal funds
sold and
securities
purchased
under
agreements
to resell (128) 89 (72)
Taxable
securities (541) 619 (68)
Non-taxable
securities (1) 3 -0-
Other
Investments 300 4 12
Total $ 1,346 $ 828 $ (104)
INTEREST EXPENSE:
Savings and
negotiable
interest-
bearing
deposits $ (138) $ 22 $ (2)
Time deposits 644 690 158
Funds purchased
and securities
sold under
agreements to
repurchase (50) 24 (11)
Total $ 456 $ 736 $ 145
Current Prior Increase
year year (decrease)
1994
INTEREST
INCOME: (1)
Loans $ 8,000 $ 7,535 $ 465
Federal funds
sold and
securities
purchased
under
agreements
to resell 159 172 (13)
Taxable
securities 4,939 4,569 370
Non-taxable
securities 56 46 10
Other
Investments 103 -0- 103
Total $13,257 $12,322 $ 935
INTEREST EXPENSE:
Savings and
negotiable
interest-
bearing
deposits $ 1,854 $ 2,074 $ (220)
Time deposits 2,814 2,650 164
Funds purchased
and securities
sold under
agreements to
repurchase 105 61 44
Total $ 4,773 $ 4,785 $ (12)
(1) All interest earned is reported on a taxable equivalent
basis using a tax rate of 34 percent in 1995 and 1994.
Attributable to
Rate/
Volume Rate volume
1994
INTEREST
INCOME: (1)
Loans $ 11 $ 454 $ -0-
Federal funds
sold and
securities
purchased
under
agreements
to resell (42) 39 (10)
Taxable
securities 186 176 8
Non-taxable
securities (22) 59 (27)
Other
Investments -0- -0- 103
Total $ 133 $ 728 $ 74
INTEREST EXPENSE:
Savings and
negotiable
interest-
bearing
deposits $ (44) (180) $ 4
Time deposits 79 83 2
Funds purchased
and securities
sold under
agreements to
repurchase 21 17 6
Total $ 56 $ (80) $ 12
(1) Applicable nontaxable securities yields have not been
calculated on a tax-equivalent basis as the effect is not
significant.
SCHEDULE II-A
Securities Portfolio
Book and Market values of securities at the dates indicated
December 31,
(In thousands)
1995 1994 1993
Book Market Book Market Book Market
Value Value Value Value Value Value
U.S. Treasury
Securities $14,230 $14,230 $ 6,038 $ 6,015 $ 328 $ 335
U.S. Government
Agencies 55,077 54,702 53,074 49,990 71,748 71,874
U.S. Government
Agency
Mortgage-Backed
Securities 4,335 4,335 5,090 5,083 10,769 11,155
State and
Municipal
Obligations 520 569 673 622 864 800
Other
Securities (1) 3,104 3,104 3,064 3,052 3,232 3,239
Total $77,266 $76,940 $67,939 $64,762 $86,941 $87,403
NOTE: The Company at December 31, 1995, 1994 and 1993 did not
own any debt securities, with a book value greater than 10% of
equity, issued by a state of the U.S. and its political
subdivisions or agencies which are payable from and secured by
the same source of revenue or taxing authority.
(1) At December 31, 1995, the Company held a collateralized
mortgage obligation issued by Merrill Lynch Capital Market with
a book value of $1,992,000 and a market value of $1,899,000.
SCHEDULE II-B
Maturity of Securities at December 31, 1995
and Weighted Average Yields of Such Securities
Maturity
(In thousands except percentage data)
After one
Within but within
one year five years
HELD-TO-MATURITY Amount Yield Amount Yield
U.S. treasury
securities $ -0- 0.00% $ -0- 0.00%
U.S. government
agencies -0- 0.00% 5,970 3.83%
State and municipal
obligations -0- 0.00% -0- 0.00%
Other
securities (3) -0- 0.00% -0- 0.00%
Total $ -0- 0.00% $5,970 3.83%
After five
but within After
ten years ten years
HELD-TO-MATURITY Amount Yield Amount Yield
U.S. treasury
securities $ -0- 0.00% $ -0- 0.00%
U.S. government
agencies 2,569 3.49% 1,592 2.74%
State and municipal
obligations -0- 0.00% 520 8.25%
Other
securities (3) -0- 0.00% -0- 0.00%
Total $2,569 3.49% $2,112 4.10%
Total
HELD-TO-MATURITY Amount Yield
U.S. treasury
securities $ -0- 0.00%
U.S. government
agencies 10,131 3.57%
State and municipal
obligations 520 8.25%
Other
securities (3) -0- 0.00%
Total $10,651 3.80%
Mortgage-backed
securities $ -0- 0.00%
Total Amortized
Cost $10,651 3.80%
After one
Within but within
one year five years
AVAILABLE-FOR-SALE Amount Yield Amount Yield
U.S. treasury
securities $5,982 6.36% $ 8,003 7.22%
U.S. government
agencies 993 0.00% 4,980 6.08%
State and municipal
obligations -0- 0.00% -0- 0.00%
Other
securities (3) -0- 0.00% -0- 0.00%
Total $6,975 0.00% $12,983 6.78%
After five
but within After
ten years ten years
AVAILABLE-FOR-SALE Amount Yield Amount Yield
U.S. treasury
securities $ -0- 0.00% $ -0- 0.00%
U.S. government
agencies 1,659 6.67% 37,860 6.47%
State and municipal
obligations -0- 0.00% -0- 0.00%
Other
securities (3) -0- 0.00% 3,195 6.40%
Total $1,659 6.67% $41,055 6.46%
Total
AVAILABLE-FOR-SALE Amount Yield
U.S. treasury
securities $13,985 6.85%
U.S. government
agencies 45,492 6.41%
State and municipal
obligations -0- 0.00%
Other
securities (3) 3,195 6.40%
Total $62,672 6.51%
Mortgage-backed
securities $ 4,211 7.79%
Total Amortized
Cost $66,883 6.59%
NOTE: The weighted average yields are calculated on the basis
of the amortized cost and effective yields weighted for the
scheduled maturity of each security.
(1) The Company's collateralized mortgage obligations consisted
of pool certificates issued and/or guaranteed by U.S. Government
Agencies. $22,578,000 are variable rate securities. These
securities are subject to prepayments.
(2) At December 31, 1995, other U.S. government obligations
included ownership interests in pools of residential mortgages
guaranteed by U.S. government agencies and corporations. The
average contractual life of pools owned by the Company was 18
years at December 31, 1995; however, the underlying mortgages
are subject to significant prepayments, primarily when the
contractual interest rate exceeds the current market rate on
similar mortgages.
(3) At December 31, 1995, other securities included $371,300 of
capital stock of the Federal Reserve Bank of Atlanta which
$371,300 has no stated maturity date and pays dividends at a
rate of 6 percent and $631,400 of capital stock of the Federal
Home Loan Bank of Dallas which has no stated maturity date and
pays dividends based upon the federal funds rate.
SCHEDULE III-A
Loan Portfolio
Loan by Type Outstanding (1)
December 31,
(In thousands)
1995 1994 1993 1992 1991
Commercial,
financial,
and agricul-
tural $ 46,201(2) $43,792 $43,378 $48,323 $44,468
Real estate-
construction 1,561 1,233 1,061 378 352
Real estate-
mortgage 14,466 13,049 12,009 13,658 13,681
Consumer 47,523 35,440 25,033 20,871 18,187
Other 225 149 1,137 136 1,082
Total loans $109,976 $93,663 $82,618 $83,366 $77,770
(1) No significant foreign debt outstanding.
(2) Includes loans to the following categories of borrowers,
all of which could be considered to be in the oil and gas
industry (in thousands):
Oil and gas production and related
service companies $12,953
Water transportation and related
companies 4,188
Total $17,141
Of the amounts shown on Schedule III-C, $1,205,000 of the
nonaccrual loans, and none of the renegotiated loans in 1995 relate to
borrowers included in the oil and gas industry.
SCHEDULE III-B
Maturities and Sensitivity to Changes in
Interest Rates as of December 31, 1995
Maturity
(In thousands)
Over one
One year through Over
or less 5 years 5 years Total
LOANS:
Commercial, financial
and agricultural $20,907 $20,434 $ 2,493 $43,834
Real estate-
construction 1,482 -0- 80 1,562
Real estate-mortgage 2,350 3,106 8,774 14,230
Consumer and other 6,152 25,374 15,677 47,203
TOTAL $30,891 $48,914 $27,024 $106,829
Loans with
pre-determined
interest rates $ 5,943 $46,249 $27,024 $ 79,216
Loans with floating
interest rates 24,948 2,665 -0- 27,613
TOTAL $30,891 $48,914 $27,024 $106,829
Normally, borrowers are expected to meet contract terms.
In some cases, borrowers are permitted to roll over obligations
after appropriate review of the credit quality and based
entirely on the borrower's ability and willingness to repay.
The data shown above is in a format which conforms with
reports to the bank regulatory agencies, and has not been
restated to reflect anticipated roll-overs which management does
not feel will be material. Unearned income is included in the
amounts shown above and nonaccruing loans are excluded.
SCHEDULE III-C
Nonperforming Loans
December 31,
(In thousands)
1995 1994 1993 1992 1991
Loans accounted for
on a nonaccrual
basis (1) $3,148 $2,037 $2,367 $1,736 $1,942
Loans which are
contractually past
due 90 or more
days as to interest
or principal payment,
but are not
included above 66 64 267 23 1
Loans the term of
which have been
renegotiated to
provide a reduction
or deferral of
interest or
principal because
of a deterioration
in the financial
position of the
borrower, but
are not included
above (2) 479 2,444 877 4,565 3,960
Total
Nonperforming
Loans $3,693 $4,545 $3,511 $6,324 $5,903
In addition to the nonperforming loans, the Company has
identified certain loans which, although currently performing,
have credit weaknesses such that doubt exists as to the
borrower's future ability to comply with present terms. At
December 31, 1995, these loans totaled approximately $436,000.
Loans were charged off as soon as the probability of a loss
is established. In management's opinion, all known losses had
been charged to the reserve as of December 31, 1995.
(1) Loans are transferred to a non-accrual status when payment
of principal or interest is past due 90 days or more, unless the
loan is both well secured and in the process of collection.
Once placed on a nonaccrual status, loans are not restored to
accruing status until all delinquent principal and/or interest
has been brought current or the loan becomes both well secured
and in the process of collection. The net effect of recording
income on nonaccrual loans on the cash basis was to reduce
interest income by approximately $188,000 in 1995.
(2) Foregone interest on loans whose interest rates were
renegotiated was $29,000 in 1995.
SCHEDULE IV-A
Summary of Loan Loss Experience
The following table summarizes averages of loan balances,
changes in the allowance for possible loan losses arising from
loans charged off and recoveries on loans previously charged
off, by loan category, and additions to the allowance which have
been charged to operating expense.
Years ended December 31,
(In thousands except percentage data)
1995 1994 1993 1992 1991
Average amount
of loans
outstanding (1) $104,855 $86,337 $86,214 $80,022 $72,321
Balance of
allowance for
possible loan
losses at the
beginning of
year $ 2,855 $ 2,835 $ 2,434 $ 2,490 $ 3,425
Loans charged
off: (2)
Commercial,
financial, &
agricultural 676 13 187 308 1,308
Real estate-
construction -0- -0- -0- -0- -0-
Real estate-
mortgage -0- 2 -0- -0- -0-
Consumer and
other 284 170 200 178 154
Total charged
off 960 185 387 486 1,462
Recoveries of
loans previously
charged off:
Commercial,
financial &
agricultural 163 648 696 267 476
Real estate-
mortgage 3 4 -0- 2 3
Consumer and
other 81 53 41 36 44
Total
recoveries 247 705 737 305 523
Net loans
charged off
(recovered) 713 (520) (350) 181 939
Provision charged
(credited) to
operating
expense -0- (500) 51 125 4
Balance of
allowance for
possible loan
losses at the
end of year $ 2,142 $ 2,855 $ 2,835 $ 2,434 $ 2,490
Ratio of net
charge-offs
(recoveries)
during period
to average loans
outstanding 0.68% (0.60)% (0.41)% 0.23% 1.30%
(1) Net of unearned income.
(2) Loans that are six months past due are considered bad debts
and are charged off unless they are well secured and in the
process of collection. When the probability of a loss is
established before a loan becomes six months past due, those
loans are charged off as soon as the probability of a loss is
established.
SCHEDULE IV-B
Allocation of the Allowance for Possible Loan Losses
Balance at December 31,
(in thousands)
1995 1994 1993
Percent Percent Percent
of Loans of Loans of Loans
to Total to Total to Total
Amount Loans Amount Loans Amount Loans
Commercial,
financial and
agricultural $ 614 42.0% $ 688 46.8% $1,097 52.5%
Real estate-
construction -0- 1.4% -0- 1.3% -0- 1.3%
Real estate-
mortgage 50 13.2% 109 13.9% 66 14.5%
Consumer 428 43.2% 340 37.8% 370 30.3%
Other -0- 0.2% 12 0.2% -0- 1.4%
Unallocated 1,050 N/A 1,706 N/A 1,302 N/A
TOTAL $2,142 100.0% $2,855 100.0% $2,835 100.0%
1992 1991
Percent Percent
of Loans of Loans
to Total to Total
Amount Loans Amount Loans
Commercial,
financial and
agricultural $1,206 58.0% $1,160 57.2%
Real estate-
construction -0- 0.5% 4 0.5%
Real estate-
mortgage 86 16.4% 113 17.6%
Consumer 210 25.0% 376 23.4%
Other -0- 0.1% 12 1.3%
Unallocated 932 N/A 825 N/A
TOTAL $2,434 100.0% $2,490 100.0%
A review is made of all large or known problem loans. An
estimate of the potential loss on these loans is made on an
individual loan basis and allocated to the respective category
of the allowance for possible an loan losses. Additionally, an
allocation is made to each category based upon the ratio of
historical and estimated future net charge-offs to average total
loans outstanding for the past two years and applied to the
remaining loan balances in each category.
SCHEDULE V
Deposits
Summary of Average Deposits and Their Yields
Years ended December 31,
(In thousands except for percentage data)
1995 1994 1993
Amount Rate Amount Rate Amount Rate
Demand
deposits in
domestic
offices $ 28,245 -- $ 27,193 -- $ 25,972 --
Savings and
negotiable
interest-
bearing
deposits
in domestic
offices 77,666 2.24% 83,931 2.21% 85,750 2.42%
Time deposits
in domestic
offices 80,775 5.33% 65,724 4.28% 63,827 4.15%
Total
deposits $186,686 3.24% $176,848 2.64% $175,549 2.69%
Certificates of deposit outstanding in amounts $100,000 or
more by the amount of time remaining until maturity as of
December 31, 1995, are as follows:
Time certificates
of deposit of
$100,000 or more
(In thousands)
Remaining maturity
3 Months or less $16,891
Over 3 through 6 months 4,265
Over 6 through 12 months 2,800
Over 12 months 2,483
Total $26,439
SCHEDULE VI
Return on Equity and Assets
The ratio of net earnings to average shareholders' equity
and average total assets and certain other ratios are presented
below.
Years ended December 31,
1995 1994 1993
Percentage of
net income to:
Average total assets 1.17% 3.05% 1.12%
Average shareholders'
equity 15.70% 50.94% 22.31%
Dividend payout ratio (1) 13.49% 3.44% --%
Percentage of average
shareholders' equity to
average total assets 7.43% 5.89% 4.82%
(1) No dividends were declared in 1993.
SCHEDULE VII
Short-Term Borrowings
Short-term borrowings include federal funds purchased from
other banks and securities sold under agreements to repurchase.
Statistical information regarding short-term borrowings is
presented below (in thousands):
1995 1994 1993
Amount outstanding at
December 31, $ 1,497 $3,334 $2,180
Weighted average interest
rate at December 31, 4.00% 4.00% 2.50%
Maximum outstanding at any
month-end during year $14,391 $7,034 $5,394
Average amount outstanding
during year $ 1,644 $3,125 $2,315
Weighted average interest
rate during year 4.14% 3.36% 2.63%
SCHEDULE VIII
Interest Sensitivity/Gap Analysis
Interest Rate Sensitivity Period
December 31, 1995
(in thousands)
0-3 4-12 1-5 Over 5
Months Months Years Years Total
ASSETS:
Loans $31,201 $10,978 $40,141 $24,509 $106,829
Investments 43,942 12,909 13,411 7,004 77,266
Other 11,055 -0- -0- -0- 11,055
Total Assets $86,198 $23,887 $53,552 $31,513 $195,150
FUNDING SOURCES:
Interest-
Bearing
Deposits $75,976 $30,531 $49,330 $14,318 $170,193
Short-Term
Funds 1,497 -0- -0- -0- 1,497
Long-Term Debt -0- -0- -0- -0- -0-
Total Funding
Sources $77,473 $30,531 $49,330 $14,318 $171,652
REPRICING/MATURITY GAP:
Period $ 8,725 $(6,644) $ 4,222 $17,195
Cumulative $ 8,725 $ 2,081 $ 6,303 $23,498
Period Gap/
Total Assets 4.5% (3.4)% 2.2% 8.8 %
Cumulative Gap/
Total Assets 4.5% 1.1 % 3.2% 12.0 %
Amounts stated include only fixed and variable rate instruments
that are still accruing interest. Variable rate instruments are
included in the next period in which they are subject to a
change in rate. The principal portion of scheduled payments on
fixed rate instruments are included in the periods in which they
become due or mature. Because changes in rates paid on
interest-bearing demand deposits have lagged behind changes in
rates on other instruments, only 50 percent of the balance of
interest-bearing demand deposits is included in the first period
and the remaining balance prorated to periods of one (1) year or
greater.
Item 2. Properties
The Company conducts its business activities from its
subsidiary bank's main office building and its branch locations.
The main office of First National is a four-story structure
located at 600 East Main Street, Houma, Louisiana in the
downtown business district, and First National's four (4)
branches are located at various locations in Terrebonne Parish.
First National owns its main office building, which
consists of approximately 90,000 square feet of office space.
First National presently occupies approximately 70,000 square
feet of the building. First National owns all of its four
branch sites consisting of approximately 10,400 square feet of
office space. First National leases parking spaces for some of
its employees and other facilities for bank related purposes.
In 1995, First National paid approximately $11,500 to lessors.
The Company owns no real estate in its own name.
Management considers all properties owned or leased to be
suitable and adequate for their intended purposes and considers
the leases to be fair and reasonable.
Item 3. Legal Proceedings
The Company and First National are parties to various legal
proceedings arising in the ordinary course of business. The
amount, if any, of ultimate liability with respect to such
matters cannot be determined. In the opinion of management
based upon the advice of legal counsel, the ultimate resolution
of these legal proceedings will not have a material adverse
effect on the Company's financial condition or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders
during the fourth quarter of 1995.
Executive Officers of Registrant
The principal executive officers of First National
Bankshares, Inc. and its principal subsidiary, First National
Bank of Houma as of January 1, 1995, are as follows:
Name Age Position and Office
Jerome H. Mire 50 President and Chief Executive
Officer First National
Bankshares, Inc. February 1991
to date. President and Chief
Executive Officer First
National Bank January 1991 to
date. President First National
Bank from April 1986 to
December 1990; Executive Vice
President First National Bank
in charge of the operations and
Financial Division from
January 1982 to April 1986.
Russell J. Blanchard 58 Comptroller First National
Bankshares, Inc. July 1984 to
date; Executive Vice President
and Cashier First National Bank
and head of Financial Division
February 1990 to date; Senior
Vice President and Cashier
First National Bank and head of
Financial Department January
1981 to February 1990.
Abel A. Caillouet, Jr. 46 Executive Vice President First
National Bank September 1987 to
date. Executive Vice President
and Credit Risk Manager First
National Bankshares, Inc.
August 1987 to May 1991; Senior
Vice President First National
Bank January 1981 to September
1987; Executive Vice President
American Bank in charge of
Banking Division February 1986
to December 1988.
Sharon T. Roppolo 51 Executive Vice President First
National Bank December 1989 to
date. Secretary-Treasurer
First National Bankshares, Inc.
from July 1982 to February
1989; Senior Vice President
First National Bank September
1982 to February 1989; Vice
President and Commercial Loan
Officer First National Bank
from April 1981 to September
1982; Secretary-Treasurer First
American Bancshares, Inc.
August 1984 to May 1989;
Executive Vice President
American Bank and in charge of
the Operations and Financial
Division from May 1986 to
December 1987; President
American Bank from December
1987 to May 1989.
Louis E. Routier, Jr. 49 Executive Vice President First
National Bank January 1981 to
date; Secretary to First
National Bank's Board of
Directors from January 1981 to
January 1995.
Peter T. Lemann 45 Executive Vice President First
National Bank November 1994 to
date; Senior Vice President
First National Bank April 1987
to November 1994; Vice
President First National Bank
January 1981 to April 1987;
Manager of Investments First
National Bank June 1980 to
January 1981.
PART II
Item 5. Market for Registrant's Common Stock and Related
Security Holder Matters
(a) Market Information
The Common Stock of First National Bankshares, Inc. had
been listed as an over-the-counter stock since February 20,
1984, with the brokerage firms of Legg Mason Wood Walker, Inc.
and Scharff & Jones, A Division of Morgan Keegan. Trading in the
stock was generally limited. Most sales of stock occurred
between shareholders or members of the families of shareholders.
On April 19, 1995, the Company's Common Stock began trading on
the American Stock Exchange (AMEX) under the symbol FNH. The
market prices listed below, for 1994 and the first quarter of
1995, are based on the sales prices as stated to the transfer
agent, which did not represent all sales. First National Bank
of Houma acts as registrar and transfer agent.
(b) Holders
The number of holders of record of each class of equity
securities of Registrant as of February 29, 1996, is as follows:
Number of
Title of Class Record Holders
Common Stock
$2.50 Par Value 1,564
(c) Market Price of and Dividends on Common Stock
The table below indicates the price range of and the
dividends declared on the Registrant's common stock for the past
two years.
YEAR QUARTER HIGH LOW DIVIDENDS PER SHARE
1995 Fourth $16.75 $14.00 $.06
Third $13.88 $ 9.06 $.05
Second $ 9.38 $ 7.00 $.05
First $ 5.00 $ 4.50 $--
1994 Fourth $4.50 $4.13 $.10
Third $4.50 $4.00 $--
Second $4.37 $3.75 $--
First $3.37 $3.25 $--
ITEM 6. SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31, 1995 1994 1993 1992 1991
(In Thousands, Except Number of Shares and Per Share Data)
Total Interest Income $15,327 $13,257 $12,322 $13,032 $ 15,164
Total Interest Expense 6,110 4,773 4,785 6,165 9,290
Net Interest Income 9,217 8,484 7,537 6,867 5,874
Provision (Credit) for
Possible Loan Losses _ (500) 51 125 4
Net Interest Income
After Provision for
Possible Loan Losses 9,217 8,984 7,486 6,742 5,870
Noninterest Income 1,796 1,654 1,636 1,629 1,598
Securities Gains (Losses) (3) (978) (73) 82 (64)
Noninterest Expense 7,404 7,759 7,512 7,333 7,324
Income Before Income Taxes
and Extraordinary Items 3,606 1,901 1,537 1,120 80
Provision (Credit) for
Income Taxes 1,213 (3,979) (241) 334 _
Extraordinary Item:
Income Tax Benefit of
Net Operating Loss
Carryforward _ _ _ 334 _
Cumulative Effect of
Change in Accounting
Principle _ _ 340 _ _
Net Income $ 2,393 $ 5,880 $ 2,118 $ 1,120 $ 80
Average Shares
Outstanding 2,017,600 2,017,600 2,017,600 2,017,600 2,017,600
Per Share Data:
Net Income $1.19 $2.91 $1.05 $.56 $.04
Cash Dividends Declared $0.16 $0.10 _ _ _
Selected Ratios:
Return on Total
Average Assets 1.17% 3.05% 1.12% .59% .04%
Return on Total Average
Shareholders' Equity 15.70% 50.94% 22.31% 14.61% 1.15%
Shareholders' Equity
to Total Assets 7.71% 7.07% 5.08% 3.93% 3.24%
Balance Sheet Totals:
Total Assets $220,489 $197,007 $197,732 $196,006 $196,742
Average Equity $ 15,217 $ 11,339 $ 9,078 $ 7,037 $ 6,125
Average Assets $204,746 $192,504 $188,473 $191,302 $197,612
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION & OVERVIEW
First National Bankshares, Inc. (the Company) is a bank holding
company based in Houma Louisiana operating a single active
wholly-owned subsidiary, First National Bank of Houma (First
National or the Bank). The Company is also the sole owner of an
inactive subsidiary, First Export Corporation. The Company's
business strategy is to provide quality, tailored financial
products and services to retail and commercial customers in the
southern parishes of Louisiana. The Company has established a
target market which includes all of what is traditionally
considered "South Louisiana" including all parishes of the State
surrounding, adjacent to and south of the City of Baton Rouge.
During 1995 the Company continued to focus on the financial
needs of South Louisiana and particularly Terrebonne Parish in
which the Company is domiciled. Through the utilization of five
full service locations and a wide range of financial products,
the Company has continued to meet the needs of its new and
existing customers. Total assets grew $23.5 million or 11.9%
during the year to $220,489,000 at December 31, 1995. Total
deposits grew 12.7% for the same period reflecting the continued
expansion of the Company's funding base.
The year 1995 was a very successful year for the Company with
consolidated net income of $2,393,000 or $1.19 per share of
common stock outstanding. The Company increased its dividend to
shareholders from $.10 per share in 1994 to $.16 per share in
1995, a 60% increase. Return on average assets declined to
1.17% in 1995 from 3.05% in 1994 due to the recognition of
certain income tax benefits from net operating loss carry
forwards which benefited 1993 and 1994 yet were not available in
1995.
Following is a more detailed discussion of the results of
operations and financial condition of the Company compared to
previous periods. The discussion concentrates on First National
since it contains the primary assets and liabilities of the
Company. Management's Discussion and Analysis should be read in
conjunction with the Company's Consolidated Financial Statements
and notes thereto, as well as other information presented
elsewhere herein.
RESULTS OF OPERATIONS
The Company reported net income of $2,393,000 in 1995, a
$3,487,000 or 59.3% decrease from the $5,880,000 reported in
1994, primarily due to the recognition of income tax benefits
from net operating loss carry forwards in 1994 that were not
available in 1995. Earnings per share declined to $1.19 per
share in 1995 from $2.91 in 1994. Income tax expense increased
$5,192,000 in 1995 to $1,213,000 on pretax earnings of
$3,606,000, an increase over a negative tax expense or tax
credit of $3,979,000 on pretax earnings of $1,901,000 in 1994.
The effective tax rate in 1995 of 33.6% compares to a negative
effective rate in 1994 of 209.3%. Income before income taxes
increased $1,705,000 in 1995 over 1994 or 89.7%. The increase
in income before income taxes in 1995 over 1994 was attributable
to several factors including an increase in net interest income
of $733,000, a non-recurring loss of $978,000 on security
transactions partially offset by a $500,000 negative loan loss
provision, both of which occurred in 1994 and a decline in
noninterest expense of $355,000 in 1995 over 1994.
The Company reported net income of $5,880,000 in 1994, a
$3,762,000 or 177.6% increase over the $2,118,000 reported in
1993, again primarily due to the recognition of income tax
benefits from net operating loss carryforwards. Earnings per
share before the cumulative effect of a change in accounting
principle increased from $.88 per share in 1993 to $2.91 in
1994. The Company revised its estimate of the valuation
allowance related to its deferred tax assets resulting in
certain income tax net operating loss benefits in 1994 which
were also partially recognized in 1993. A change in the method
of accounting for income taxes also resulted in a cumulative
change in accounting method for income taxes of years prior to
1993 resulting in a one time increase in net income of $340,000
in 1993. Income taxes declined to a negative $3,979,000 or a
negative 209.3% effective tax rate in 1994 from a negative
$241,000 or a negative 15.7% effective tax rate in 1993. Income
before income taxes increased $364,000 or 23.7% to $1,901,000 in
1994 compared to $1,537,000 in 1993. The increase was primarily
the result of increased net interest income, $8,484,000 in 1994
compared to $7,537,000 in 1993 or $947,000, a negative loan loss
provision of $500,000 in 1994 over a $51,000 provision in 1993,
a decline of $551,000, offset by the loss on sale of securities
in 1994 of $978,000 compared to a similar loss in 1993 of
$73,000, an increased loss of $905,000.
The following table presents for the periods indicated the
distribution of average assets, liabilities and shareholders'
equity as well as the total dollar amount of interest income
from average interest-earning assets and resultant yields, and
the dollar amounts of interest expense and average
interest-bearing liabilities, expressed in both dollars and
rates.
(In thousands, except yield information)
Year ended December 31,
1995 1994
Average Yield/ Average Yield/
Balance Rate Interest Balance Rate Interest
Assets:
Interest-earning assets:
Loans (1) (3) $104,855 9.40% $9,853 $86,337 9.27% $8,000
Investment
securities (2) 73,768 6.79 5,007 82,782 6.03 4,995
Federal funds sold
and other (4) 8,076 5.78 467 6,140 4.27 262
Total interest-
earning assets 186,699 8.21 15,327 175,259 7.56 13,257
Allowance for possible
loan losses (2,788) (2,793)
Nonearning assets:
Cash and due
from banks 6,606 6,854
Premises and
equipment, net 5,533 5,848
Accrued interest
receivable 1,787 1,368
Other assets 6,909 5,968
Total average assets $204,746 $192,504
Liabilities and
Shareholders' Equity:
Interest-bearing liabilities:
Transaction accounts $51,505 1.98% $1,022 $56,121 1.95% $1,097
Savings accounts 33,635 3.29 1,107 34,355 3.02 1,036
Certificates of
deposit 73,301 5.34 3,913 59,179 4.28 2,535
Short-term borrowings 1,644 4.14 68 3,125 3.36 105
Total interest-
bearing
liabilities 160,085 3.82 6,110 152,780 3.12 4,773
Noninterest-bearing liabilities:
Transaction accounts 28,245 27,193
Other liabilities 1,199 1,192
Total liabilities 189,529 181,165
Total shareholders'equity 15,217 11,339
Total average
liabilities and
shareholders'
equity $204,746 $192,504
Net Interest Income $9,217 $8,484
Interest income as
a percentage of
average earning assets 8.21% 7.56%
Interest expense as
a percentage of
average earning assets (3.27) (2.72)
Net Interest Margin 4.94% 4.84%
1993
Average Yield/
Balance Rate Interest
Assets:
Interest-earning assets:
Loans (1) (3) $86,214 8.74% $7,535
Investment
securities (2) 80,150 5.76 4,615
Federal funds sold
and other (4) 5,690 3.02 172
Total interest-
earning assets 172,054 7.16 12,322
Allowance for possible
loan losses (2,724)
Nonearning assets:
Cash and due
from banks 6,940
Premises and
equipment, net 6,004
Accrued interest
receivable 1,028
Other assets 5,171
Total average assets $188,473
Liabilities and
Shareholders' Equity:
Interest-bearing liabilities:
Transaction accounts $58,131 2.24% $1,300
Savings accounts 34,439 3.16 1,089
Certificates of
deposit 57,007 4.10 2,335
Short-term borrowings 2,315 2.63 61
Total interest-
bearing
liabilities 151,892 3.15 4,785
Noninterest-bearing liabilities:
Transaction accounts 25,972
Other liabilities 1,531
Total liabilities 179,395
Total shareholders'
equity 9,078
Total average
liabilities and
shareholders'
equity $188,473
Net Interest Income $7,537
Interest income as
a percentage of
average earning assets 7.16%
Interest expense as
a percentage of
average earning assets (2.78)
Net Interest Margin 4.38%
(1) Amount includes nonaccrual loans.
(2) Applicable nontaxable securities yields have not been
calculated on a taxable-equivalent basis as the effect is not
significant.
(3) Interest income includes net loan origination fees of
$84,000, $70,000 and $45,000 for the years ended December 31,
1995, 1994 and 1993, respectively.
(4) Includes interest-bearing balances with financial
institutions.
NET INTEREST INCOME
The Company's primary source of revenue is net interest income,
which is the difference between interest income received on
interest-earning assets and the interest expense paid on
interest-bearing liabilities. Net interest income before
provision for loan losses was $9,217,000 in 1995, an 8.6%
increase over 1994, and $8,484,000 in 1994, an increase of
$947,000 or 12.6% over 1993. Net interest income is affected by
changes in the amount and mix of interest-earning assets and
interest-bearing liabilities referred to as a "volume change."
It is also affected by changes in yields on interest-earning
assets and rates paid on interest-bearing deposits and
short-term borrowings referred to as a "rate change."
Net interest margin increased to 4.94% in 1995 compared to
4.84% in 1994 and 4.38% in 1993. The increase in net interest
margin in 1995 was primarily due to the net effect of (1) the
increased average balances, or volume increase, in
interest-earning assets reflecting the net benefit of the
Company's objective of increasing loan volumes while easing
dependence on investment securities, (2) the increased yields,
or rate increase, attained on interest-earning assets both by
individual category and in the aggregate, partially offset by
(3) an increased dependence on higher cost deposits. The
increase in net interest margin in 1994 over 1993 was due
primarily to the Company being slightly asset sensitive with
respect to assets and liabilities repricing during a period of
rising interest rates. The result was an increased rate change
on earning-asset yields with relative little change in either
the deposit funding volumes or rates.
A changing interest rate environment can have a significant
impact on the Company's net interest margin as measured against
average earning assets and its interest rate spread. Management
monitors its net interest margin by repricing its loans and
deposit products after giving effect to such factors as
competition and expected maturities in the loan, investment
securities and deposit portfolios.
PROVISION FOR POSSIBLE LOAN LOSSES
The Company maintains an allowance for possible loan losses at
a level management believes to be adequate to cover the inherent
risks of loss associated with its loan portfolio. The provision
for possible loan losses is charged against income and is
applied to the allowance for possible loan losses. There was no
provision for possible loan losses in 1995, a credit provision
of $500,000 in 1994 and a provision of $51,000 in 1993. The
credit provision for possible loan losses in 1994 was the result
of management's analysis that the balance of the allowance for
possible loan losses was more than adequate to cover any
potential loan losses. Net charge offs to average loans was .7%
in 1995, compared to net recoveries of .6% in 1994 and .4% in
1993. In 1994 and 1993 the Company was successful in making
substantial recoveries of loans charged off in prior periods.
NONINTEREST INCOME AND NONINTEREST EXPENSE
(In Thousands) 1995 1994 1993
Noninterest Income $1,796 $1,654 $1,636
Gains (Losses) on
Securities Transactions (3) (978) (73)
Total Noninterest Income $1,793 $ 676 $1,563
Noninterest Expense $7,404 $7,759 $7,512
Noninterest income before securities gains (losses) increased
$142,000 or 8.6% in 1995 as compared to 1994. This increase
reflects increased fees for trust services, commissions,
exchange and other fees.
The Company incurred losses on investment security transactions
totaling $978,000 in 1994. The majority of these losses,
$879,000 or 90.0%, occurred during the fourth quarter of the
year as a result of a decision by management to sell
approximately $15,000,000 of investment securities. The
securities' market values had declined noticeably due to their
particular terms and conditions including coupon interest rate,
maturity dates and interest rate repricing characteristics which
were incompatible with the significant rising interest rate
environment being experienced. Management reinvested the funds
obtained as a result of the sale in investment securities which
it believed to be less susceptible to market interest rate
fluctuations and therefore less exposed to losses.
The net investment security loss incurred in 1993 included a
loss of $421,000 on securities which were prepaying at a pace
greater than expected causing the Company to absorb the
premium paid for the investment securities over their respective
redemption values.
Noninterest expense in 1995 decreased approximately $355,000
when compared to 1994. The decrease was primarily the result of
an organizational restructuring process started in 1995 and the
recovery of expenses previously recorded attributable to
repossessed property resulting from lending activities and
problem loans. The Federal Deposit Insurance Corporation (FDIC)
insurance premiums decreased $210,000 in 1995 as a result of a
decision by the FDIC to reduce premiums for all well capitalized
insured financial institutions. This decrease was offset
somewhat by an increase of $158,000 in legal and professional
fees, the majority of which were associated with the
restructuring process.
Noninterest expense in 1994 increased approximately $247,000
when compared to 1993. The increase was the result of increases
in salaries, wages and benefits, insurance premiums and legal
and professional fees. Those increases were partially offset by
a reduction of $345,000 in costs associated with repossessed
property resulting from lending activities and problem loans.
NET INCOME
(In Thousands) 1995 1994 1993
Net Income Before
Income Taxes and
Cumulative Effect of
Change in Accounting
Principle $3,606 $ 1,901 $1,537
Income Tax Expense (Credit) 1,213 (3,979) (241)
Net Income Before
Cumulative Effect of
Change in Accounting
Principle 2,393 5,880 1,778
Cumulative Effect of
Change in Accounting
Principle _ _ 340
Net Income $2,393 $ 5,880 $2,118
Consolidated net income was $2,393,000 in 1995 as compared to
$5,880,000 in 1994. A $3,979,000 income tax asset credit in
1994 which resulted principally from the reduction of a
valuation allowance related to a deferred tax asset had a
significant impact on the net income of the Company. The
accounting for $978,000 in losses on security transactions and a
$500,000 credit provision to the allowance for possible loan
losses also impacted net income in 1994.
Net income before income taxes was $3,606,000 in 1995 as
compared to $1,901,000 in 1994, an improvement of $1,705,000.
Net income may be adversely impacted in 1996 and subsequent
years as a result of the expiration in the third quarter of 1995
of "teaser rates" on $5,857,000 of complex derivative financial
instruments in the Company's securities portfolio. Net income
may also be adversely impacted by interest rate caps pertaining
to these securities ranging from a low of 9.5 percent to a high
of 24 percent in the event that interest rates rise above
interest rate caps. See "Results of Operations - Net Interest
Income" and "Investment Securities."
BALANCE SHEET ANALYSIS
At December 31, 1995, average assets and average deposits
increased by approximately 6.4% and 5.6%, respectively, since
December 31, 1994. Average loans increased 21.5% during the
year reflecting improving economic conditions in the market
served by the Bank. Correspondingly, average investment
securities, Federal funds sold and interest-bearing deposits
with financial institutions decreased by 8.0% to 40.0% of
average total assets in 1995 compared to 46.2% of average total
assets in 1994.
At December 31, 1994, when compared to December 31, 1993,
average assets increased by 2.1%. Average deposits and average
loans generally remained unchanged. Average investment
securities, Federal funds sold and interest-bearing deposits
with financial institutions increased by 3.6% during 1994 when
compared to 1993.
LOAN PORTFOLIO
The Company offers a wide variety of lending products to both
commercial and consumer customers located within its target
market. The Company also purchases loans from other financial
institutions both within and outside of the target market area
to enhance earning-asset yields and diversify the total loan
portfolio. Interest rates charged for loans made by the Company
vary with the degree of risk, the size and maturity of loans,
the borrower's depository relationships with the Company and
prevailing market interest rates.
The Company has collateral management policies in place so that
lending of all types is on a basis which is consistent with
regulatory standards. Valuation analyses are utilized to take
into consideration the potentially adverse economic conditions
under which liquidation could occur. It is generally the
Company's policy, whenever possible, to fully collateralize all
loans with loan-to-value ratios determined on an individual loan
basis taking into account the financial stability of each
borrower and the value and type of the collateral. In addition
to real estate, other collateral accepted as security against
loans includes deposits, securities, accounts receivable,
inventories, equipment and other assets.
Loan portfolio diversification as to industry concentrations
and product types is an important consideration in managing the
overall loan portfolio. The Company's largest concentration of
loans to any single industry within the portfolio is from the
oil and gas related industry of 11.8% of total loans outstanding
at December 31, 1995, compared to 13.1% at December 31, 1994.
There were no other industry concentrations greater than 10% of
the total loan portfolio as of December 31, 1995, or December
31, 1994.
Commercial, financial, and agricultural loans, referred to
herein as commercial loans, totaled $46,201,000 (42.0%) and
$43,792,000 (46.8%) of the Company's total loans at December 31,
1995 and 1994, respectively. Commercial loans are diversified
medium-term financing for small- to medium-sized businesses and
professionals located in Southern Louisiana. The primary source
of loan repayment is the cash flow from the commercial
businesses, while the collateral represents a secondary source
of repayment.
Real estate construction and real estate mortgage loans,
referred to herein as real estate loans, are primarily for the
construction or purchasing of residential housing along with
additional extensions of credit for various purposes to
individuals secured by their personal residences. The Company's
real estate loan portfolio at December 31, 1995 and 1994,
totaled $16,027,000 and $14,282,000 or 14.6% and 15.3%,
respectively, of total loans. Historically, the Company has not
emphasized real estate loans. Included in real estate loans are
residential loans purchased from other financial institutions
totaling $1,058,000 (6.6%) of total real estate loans at
December 31, 1995, and $1,085,000 (7.6%) of total real estate
loans at December 31, 1994.
Consumer loans are extensions of credit made to individuals for
personal or consumer purposes and are generally repaid on a
periodic installment basis. Consumer loans, which exclude loans
secured by real estate, may be made on a secured or unsecured
basis depending on the purpose of the loan and the borrower's
personal credit history. Consumer loans comprised $47,523,000
or 43.2% and $35,440,000 or 37.8% of total loans as of December
31, 1995 and 1994, respectively. The Company believes consumer
loans are an important part of an overall loan portfolio
management strategy.
CREDIT RISK MANAGEMENT AND ASSET QUALITY
Management believes that the objective of a sound credit policy
is to extend quality loans on a diversified basis to customers
while controlling risk affecting shareholders and depositors.
The Loan Committee, made up of members of the Board of Directors
of the Bank, approve credit policy, review asset quality and
ensure compliance with credit policy. First National maintains
a loan review staff which examines the loan portfolio for
compliance with established standards. In addition, credit
underwriting guidelines are periodically reviewed and adjusted
to reflect current economic conditions.
The Company places a loan on nonaccrual status when one of the
following events occurs: any installment of principal or
interest is 90 days or more past due (unless well secured and in
the process of collection); management determines the ultimate
collection of principal or interest on a loan to be unlikely;
management deems a loan to be an in-substance foreclosure; the
Company takes possession of the collateral; or the terms of a
loan have been renegotiated to less than market rates due to a
serious weakening of the borrower's financial condition.
With respect to the Company's policy of placing loans 90 days
or more past due on nonaccrual status unless the loan is well
secured and in the process of collection, a loan is considered
in the process of collection if, based on a probable specific
event, management expects that the loan will be repaid or
brought current. When a loan is placed on nonaccrual status,
the Company's general policy is to reverse and charge against
current income previously accrued but unpaid interest, unless
the interest is deemed collectible. Income on such loans is
subsequently recognized only to the extent that cash is received
and future collection of principal is probable. Loans for which
collectability of the principal balance or interest is
considered doubtful by management are placed on nonaccrual
status prior to becoming 90 days delinquent.
The Company values its Other Real Estate or OREO properties or
Other Assets (for personal property collateral) at estimated net
realizable value based on appraisals generally performed at the
time the property is acquired. Management's objective is to
dispose of those properties in an expeditious time frame in an
effort to minimize holding costs, which may result in the
Company realizing less than book value. Possible variations in
real estate values may result in recognized gains or losses at
the time of selling the OREO property.
The Company's OREO balance of $992,000 or .5% of total assets
at December 31, 1995, represents a $569,000 increase over the
$423,000 or .2% of total assets at December 31, 1994. The
increase is primarily the result of foreclosure on real estate
collateral related to one borrower, the result of which added
$537,000 to OREO. This credit and OREO property is 80%
guaranteed by an agency of the Federal government.
Assets categorized as nonperforming at First National were as
follows:
(In Thousands) 1995 1994
Loans:
90 days or more past due,
but still accruing interest $ 66 $ 64
Renegotiated loans still accruing 479 2,444
Nonaccrual Loans 3,148 2,037
Total Nonperforming Loans 3,693 4,545
Other real estate, net of
allowance for possible losses 992 423
Total Nonperforming Assets $4,685 $4,968
Refer to Notes 1, 2 and 4 of the Consolidated Financial
Statements for further discussion and details regarding the
Company's nonperforming loans and recorded OREO as of December
31, 1995 and 1994.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
Management's determination of the allowance for possible loan
losses requires the use of estimates and assumptions related to
the risks inherent in the loan portfolio which management
believes are reasonable. Actual results could, however, differ
significantly from those estimates. In connection with the
determination of the allowance for possible loan losses,
management generally obtains independent appraisals for
significant collateral properties. Management believes its
current appraisal policies generally conform to Federal
regulatory guidelines.
An evaluation of the overall quality of the portfolio is
performed to determine the necessary level of the allowance for
possible loan losses. This evaluation takes into consideration
the classification of the loans and the application of loss
estimates to these classifications. The Company classifies
loans as pass, watch, special mention, substandard, doubtful, or
loss based on classification criteria believed by management to
be consistent with the criteria applied by the Bank's
regulators. These classifications and loss estimates take into
consideration all sources of repayment, underlying collateral,
the value of such collateral, and current and anticipated
economic conditions, trends, and uncertainties. The allowance
for possible loan losses reflects the results of these
estimates. Based on information available at December 31, 1995,
management believes the allowance for possible loan losses of
$2,142,000, which constituted 1.95% of total loans, is adequate
as an allowance against possible future losses. The allowance
for possible loan losses decreased $713,000 or 1.10% from the
3.05% of total loans at December 31, 1994. This decline was
primarily due to the increased size of the loan portfolio and
the absence of a need to provide for additional losses during
1995.
Refer to Notes 1, 2 and 4 of the Consolidated Financial
Statements for further discussion and details regarding the
Company's allowance for possible loan losses.
INVESTMENT SECURITIES
At December 31, 1995, investment securities totaled
$77,266,000, a $9,327,000 or 13.7% increase over the $67,939,000
recorded at December 31, 1994. The growth in securities was a
direct result of the growth in deposits, or funding resources,
exceeding the growth in loans for the year. The balance change
in the portfolio is the net result of security purchases and
maturities during 1995. As part of its normal operations, the
Company may accept deposits from public authorities or borrow
funds through repurchase agreements with customers, both of
which require a pledge of the Company's qualifying investment
securities in an amount generally equal to 110% of the funds
deposited or borrowed. As of December 31, 1995 and 1994,
investment securities (at book value) pledged for this purpose
were $47,381,000 or 61.3% and $55,648,000 or 81.9% of the total
investment securities portfolio, respectively.
In May 1993, the Financial Accounting Standards Board issued
SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". The Company adopted the provisions of the
new standard for investments held as of or acquired after
January 1, 1994. SFAS No. 115 requires the classification of
investment securities into one of three categories: Trading,
Available-for-Sale, or Held-to-Maturity.
The Company does not have a trading investment portfolio.
Accordingly, all investment securities were segregated as either
Available-for-Sale or Held-to-Maturity by management utilizing
several criteria including current market values, anticipated
cash flows and liquidity needs.
Upon adoption of SFAS No. 115, the Company reclassified as
Available-for-Sale $66,286,000 of $86,941,000 of its existing
securities. Due to an unstable interest rate environment and
faced with increasing net unrealized loss effects on
shareholders' equity, in September and November 1994, the
Company reclassified Available-for-Sale investment securities
with an amortized cost of $49,234,000, market value of
$46,229,000 and net unrealized loss of $3,005,000 to
Held-to-Maturity (1994 transfer adjustment) to avoid further
recognition of the net unrealized loss. The after income tax
effect equity adjustment related to these securities was
$1,983,000, which remained as an unrealized loss in equity to be
amortized over the remaining life of each respective investment
security.
SFAS No. 115 requires investment securities classified as
Available-for-Sale be recorded at fair market value and the net
effect (net unrealized gains and losses) of the adjustments of
such changes in market values be recorded as an adjustment to
shareholders' equity after considering applicable income tax
effects. However, such adjustments are not considered when
computing regulatory capital and regulatory capital adequacy
ratios. At December 31, 1994, total investment securities
classified as Available-for-Sale totaled $11,130,000 or 16.4% of
the total investment securities portfolio. At December 31,
1994, shareholders' equity was reduced by $2,003,000 to reflect
the after-income tax effects of net unrealized losses in the
Available-for-Sale investment portfolio.
Investment securities classified as Held-to-Maturity represent
an ability and an intent by management to retain the securities
until its stated maturity date, and therefore the Company is not
required to record the net effects of temporary changing market
conditions. Held-to-Maturity investment securities are thus
stated at net amortized cost. At December 31, 1994, investment
securities classified as Held-to-Maturity were $56,809,000, or
83.6% of the total investment portfolio. Market value for these
securities were $53,632,000 or 94.4% of the net amortized cost.
On December 29, 1995, in accordance with the Financial
Accounting Standards Board Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities" hereafter referred to
as the Guide, the Company chose to reexamine and reclassify its
investment securities. On that date and as reflected in the
Consolidated Financial Statements on December 31, 1995, the
Company reclassified the majority of its investment securities
as Available-for-Sale. The net amortized cost of the investment
securities reclassified as Available-for-Sale from
Held-to-Maturity were $43,900,000 with a market value of
approximately $43,350,000 and net unrealized losses of
approximately $550,000. On December 31, 1995,
Available-for-Sale securities were recorded at market value of
$66,615,000 or 99.6% of the net amortized cost of $66,883,000
resulting in net unrealized losses in the Available-for-Sale
portfolio of $268,000. At December 31, 1995, Shareholders'
equity reflects a net unrealized loss of $1,082,000 due to the
net after income tax effects of all entries and adjustments to
the Available-for-Sale investment portfolio recorded since the
adoption of SFAS No. 115 on January 1, 1994 including transfers
into and out of the Available-for-Sale portfolio as permitted by
SFAS No. 115 and the Guide, purchases and sales of
Available-for-Sale securities and amortization of the 1994
transfer adjustment. The improvement in the adjustment to
equity related to the after income tax effects of the unrealized
net security losses from $2,003,000 at December 31, 1994 to
$1,082,000 at December 31, 1995 is primarily due to improving
interest rate market conditions and thus improved market values
of the portfolio.
Held-to-Maturity securities were recorded at their net
amortized cost $10,651,000 as of December 31, 1995. The
Company's decision to retain a certain portion of its security
portfolio as Held-to-Maturity was predominately based on the
market value and interest sensitivity of the individual
investment securities. The securities classified as
Held-to-Maturity are generally considered by management to be
the most complex financial instruments within the portfolio and
are generally considered to be derivative financial instruments.
These securities have interest rate features causing each
security to earn a substantially greater yield in earlier years
than in later years of its stated life. In management's
opinion, the yields on these securities will be substantially
lower in 1996 than experienced in 1995 and in 1994. The
majority of these securities have certain characteristics which
cause them to be much more sensitive to interest rate movements
than traditional securities and therefore result in greater
changes in market values as such market rate changes occur.
Management believes it has isolated those securities with the
greatest propensity to incur market interest rate related losses
to the Held-to-Maturity classification as discussed above
thereby reducing the potential impact to the Company's equity.
The Available-for-Sale portfolio includes some complex
derivative financial instruments with potential interest rate
exposure. As a result of these complex financial instruments in
the Available-for-Sale classification, Management recognizes
that changes in market interest rate conditions may have an
impact on Shareholders' equity.
It is the intent of the Company to retain the securities
classified as Held-to-Maturity until their respective maturity
dates. Management is committed to reducing the market interest
rate risk in the investment portfolio during 1996.
The Company, operating in the current interest rate
environment, intends to classify the majority of its future
investment security purchases as Available-for-Sale.
Refer to Notes 1, 2 and 3 of the Company's Consolidated
Financial Statements for further information and analysis of the
Company's investment portfolio.
DEPOSITS
The Company primarily attracts deposits from local businesses
and professionals, public or governmental bodies, as well as
through retail certificates of deposit, savings and checking
accounts. Maintaining steady and growing levels of deposits is
an important objective to the Company as part of an overall
management program to obtain funding sources for earning assets
and maintain adequate levels of liquidity. The Company did not
have any brokered accounts during 1995, 1994 and 1993 due to the
Company's policy not to purchase such accounts. The Company has
no foreign deposits.
Total deposits increased $22,632,000 or 12.7% to $200,840,000
as of December 31, 1995, from $178,208,000 at December 31, 1994.
Interest-bearing deposit growth comprised 85.1% or $19,257,000
of the total growth during 1995. Management believes the growth
in interest-bearing deposits to be consistent with industry
trends as customers seek more efficient and profitable
management of their deposit funds.
Time deposits of $100,000 or more are generally received from
all sectors of the Company's deposit base. The potential impact
on the Company's liquidity from the withdrawal of these deposits
is considered in the Company's asset and liability management
policies, which attempt to anticipate liquidity needs through
its management of longer term and shorter term investments or by
generating additional deposits. Time deposits of $100,000 or
more increased $6,883,000 or 35.2% to $26,439,000 or 13.2% of
total deposits at December 31, 1995, from $19,556,000 or 11.0%
of total deposits at December 31, 1994. Time deposits of
$100,000 or more balances vary significantly during the year due
to seasonal short-term deposits by larger customers. The
average balance of time certificates of deposits for the year
1995 and 1994 were $23,250,000 or 12.5% of average total
deposits and $18,400,000 or 10.4% of average total deposits,
respectively, an increase of $4,850,000 or 26.4%.
The Company had no short-term borrowings of which the average
balance during the year exceeded 30% of shareholders' equity at
December 31, 1995.
CAPITAL
Capital adequacy is determined by many factors including asset
quality, liquidity, earnings history, management's philosophy
and the economic conditions in the market being served.
Management and regulators closely monitor the capital strength
of the Company and First National on a regular basis.
One measure of capital adequacy is the degree of risk inherent
in a company's assets. Effective December 31, 1990, the
Company, First National and all other financial institutions
became subject to new regulatory risk-based capital guidelines.
In the risk-based capital computation, all assets including
off-balance sheet items, such as loan commitments and standby
letters of credit, are weighted based upon assigned risk
factors. Capital is separated into two categories, Tier 1 and
Tier 2, which combine for Total Capital. Tier 1 capital
consists of common stockholders' equity, perpetual preferred
stock and minority interest. Tier 2 capital consists of the
allowance for possible loan losses and subordinated debt,
subject to certain limitations. Total Capital must be 8
percent, half of which must be Tier 1 capital.
In conjunction with the risk-based capital guidelines, the
regulators issued capital leverage ratio guidelines. The
leverage ratio consists of Tier 1 capital as a percent of total
assets. The minimum Tier 1 leverage ratio for the highest rated
banks and bank holding companies is 3 percent. Regulators may
require a 100 to 200 basis point higher minimum ratio dependent
upon the condition of the individual bank or bank holding
company. The 3 percent minimum was established to ensure that
all banks have a minimum capital level to support assets,
regardless of risk profile.
The Company's and the Bank's capital ratios were as follows at
December 31, 1995:
Company Bank
Shareholders' Equity to Total Assets 7.7% 7.6%
Regulatory:
- Tier 1 Leverage Ratio 7.4% 7.3%
- Tier 1 Risk-Based 13.1% 12.9%
- Total Risk-Based 14.3% 14.2%
As discussed in Note 8 to the Consolidated Financial
Statements, the Bank was considered "Well Capitalized" at
December 31, 1995, by its regulators.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The primary function of asset/liability management is to assure
adequate liquidity and maintain an appropriate balance between
interest-sensitive assets and interest-sensitive liabilities.
The Bank's policy has been to maintain an adequate liquidity
position which, in addition to cash and cash equivalents, relies
on cash inflows principally from earned interest, repayments of
principal on loans and investments, and increases in deposits.
The Bank's principal cash outflows are from loan originations,
purchases of investment securities, decreases in deposits and
payment of operating expenses.
At December 31, 1995, the Company's cash and cash equivalents
totaled $21,539,000, a decrease of $1,416,000 from the balance
at December 31, 1994, of $22,955,000. Operating activities of
the Company provided $3,925,000 primarily related to the
Company's net income of $2,393,000. Investing activities
utilized $25,432,000 due primarily to loan originations in
excess of maturities and principal repayments of $19,523,000.
In addition, purchases of investment securities in excess of
maturities and calls totaled $7,809,000, further reducing cash
and cash equivalents. The Company's financing activities
increased cash and cash equivalents by $20,091,000 principally
due to net increases in non-interest bearing deposits and
interest-bearing deposits of $3,375,000 and $19,257,000,
respectively.
Historically, the Company has experienced seasonal fluctuations
in the first half of the year in its deposit base which may have
required the utilization of short-term federal fund borrowings
from correspondent banks. During 1995, the Bank has marketed
various deposit products to increase its core deposit base. At
December 31, 1995, management believes its liquidity to be
adequate. The Bank has arranged for unsecured and secured
borrowing lines with correspondent banks which, in the opinion
of management, are sufficient to meet all funding needs during
periods of temporary declines in deposits. At December 31,
1995, the Company had no borrowings in place as related to these
correspondent bank arrangements.
Liquidity management requires the attention of the Company
throughout the year. The Company's operations generate
administrative costs associated with regulatory reporting,
internal auditing, accounting and finance, investor relations,
executive management and overall corporate planning. The
Company's primary source of liquidity is dividends from the
Bank. See Note 13 to the Consolidated Financial Statements for
further information on cash flows of the parent company. There
are potential restrictions which could be placed on dividends
from the Bank; however, management believes that adequate
dividends will be received to meet the Company's cash flow needs
through 1996.
Through the Company's interest rate sensitivity management, it
seeks to minimize fluctuating net interest margins and to
enhance consistent growth of net interest income through periods
of changing interest rates.
The difference between the amount of assets and liabilities
that are repricing in various time frames is called the "Gap."
Generally, if repricing assets exceed repricing liabilities in a
given period, the Company would be "asset sensitive".
Alternatively, if repricing liabilities exceed repricing assets,
the Company would be "liability sensitive."
The following table sets forth the interest-rate sensitivity
and repricing schedule of the Company's interest-earning assets
and interest-bearing liabilities, the interest rate sensitivity
gap, the cumulative interest rate sensitivity gap and the
cumulative interest rate sensitivity gap ratio.
Interest Rate Sensitivity Period
December 31, 1995
(in thousands)
0-3 4-12 1-5 Over 5
Months Months Years Years Total
ASSETS:
Loans $31,201 $10,978 $40,141 $24,509 $106,829
Investments 43,942 12,909 13,411 7,004 77,266
Other 11,055 _ _ _ 11,055
Total Assets $86,198 $23,887 $53,552 $31,513 $195,150
FUNDING SOURCES:
Interest-
Bearing
Deposits $75,976 $30,531 $49,330 $14,318 $170,155
Short-Term
Funds 1,497 _ _ _ 1,497
Long-Term Debt _ _ _ _ _
Total Funding
Sources $77,473 $30,531 $49,330 $14,318 $171,652
REPRICING/
MATURITY GAP:
Period $ 8,725 $(6,644) $ 4,222 $17,195
Cumulative $ 8,725 $ 2,081 $ 6,303 $23,498
Period Gap/
Total Assets 4.5% (3.4)% 2.2% 8.8 %
Cumulative Gap/
Total Assets 4.5% 1.1 % 3.2% 12.0 %
Amounts stated include only fixed and variable rate instruments
that are still accruing interest. Variable rate instruments are
included in the next period in which they are subject to a
change in rate. The principal portion of scheduled payments on
fixed rate instruments are included in the periods in which they
become due or mature. Because changes in rates paid on
interest-bearing demand deposits have lagged behind changes in
rates on other instruments, only 50 percent of the balance of
interest-bearing demand deposits is included in the first period
and the remaining balance prorated to periods of one (1) year or
greater.
Based on the average repricing schedules at December 31, 1995,
the Company was "asset sensitive" with respect to
interest-earning assets and interest-bearing liabilities
repricing within one year. Because approximately $2 million of
interest-earning assets in excess of interest-bearing
liabilities reprice within one year, management expects that, in
an increasing rate environment, the Company's net interest
margin would be expected to increase as assets would generally
reprice more quickly than liabilities, and in a decreasing rate
environment, the Company's net interest margin would tend to
decrease. The Company manages its interest rate risk by
emphasizing loan and investment products which either have
variable rates or which have specific maturities which are
generally matched to corresponding funding sources.
IMPACT OF INFLATION
Unlike most industrial companies, the assets and liabilities of
financial institutions such as the Company are primarily
monetary in nature. Therefore, interest rates have a more
significant effect on the Company's performance than the effect
of general levels of inflation on the price of goods and
services. While interest rates earned and paid by the Company
are affected to a degree by the rate of inflation, the Company
believes that the effects of inflation are generally manageable
through asset/liability management.
Item 8. Financial Statements and Supplementary Data
Consolidated Statements of Condition - First National
Bankshares, Inc. and Subsidiaries - December 31, 1995 and
December 31, 1994
Consolidated Statements of Income - First National Bankshares,
Inc. and Subsidiaries - Years ended December 31, 1995, 1994 and
1993
Consolidated Statements of Changes in Shareholders' Equity -
First National Bankshares, Inc. and Subsidiaries - Years ended
December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows - First National
Bankshares, Inc. and Subsidiaries - Years ended December 31,
1995, 1994 and 1993
Notes to Financial Statements - First National Bankshares, Inc.
and Subsidiaries
Independent Auditors' Report - First National Bankshares, Inc.
and Subsidiaries - Years ended December 31, 1995, 1994 and 1993
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1995 1994
(In Thousands, Except Number of Shares and Per Share Data)
Assets
Cash and Due from Financial Institutions
(Note 2) $ 10,484 $ 6,951
Due from Financial Institutions -
Interest Bearing 11,055 16,004
Total Cash and Cash Equivalents 21,539 22,955
Securities Available-for-Sale (Amortized
Cost of $66,883 and $11,217
at December 31, 1995 and 1994,
respectively) (Note 3) 66,615 11,130
Securities Held-to-Maturity (Market
value of $10,325 and $53,632
at December 31, 1995 and 1994,
respectively) (Note 3) 10,651 56,809
Loans, Less Allowance for Possible
Loan Losses of $2,142 and $2,855 at
December 31, 1995 and 1994,
respectively (Notes 1, 4 and 10) 107,834 90,808
Bank Premises and Equipment (Note 2) 5,340 5,732
Accrued Interest Receivable and Other Assets 7,518 9,150
Other Real Estate (Notes 1 and 4) 992 423
Total Assets $220,489 $197,007
Liabilities
Noninterest-Bearing Deposits $ 30,685 $ 27,310
Interest-Bearing Deposits (Note 5) 170,155 150,898
Total Deposits 200,840 178,208
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements 1,497 3,634
Accrued Interest, Taxes and
Other Liabilities 1,028 951
Note Payable (Note 6) _ 89
Dividend Payable 121 202
Total Liabilities 203,486 183,084
Commitments and Contingencies (Note 12) _ _
Shareholders' Equity (Notes 6, 8, and 9)
Preferred Stock, No Par Value
Authorized - 2,000,000; Issued - None _ _
Common Stock (Par Value $2.50) 5,044 5,044
Numbers of Shares Authorized: 10,000,000
Numbers of Shares Outstanding: 2,017,600
Additional Paid in Capital 16,454 16,454
Accumulated Deficit (3,413) (5,483)
Unrealized Loss on Securities
Available-for-Sale, Net (1,082) (2,003)
Note Payable Offset Associated with
Employee Stock Ownership Plan _ (89)
Total Shareholders' Equity 17,003 13,923
Total Liabilities and Shareholders' Equity $220,489 $197,007
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands, Except Per Share Data)
Interest Income
Interest and Fees on Loans $9,853 $8,000 $7,535
Interest on Securities:
Taxable Securities 4,949 4,939 4,569
Tax-Exempt Securities 58 56 46
Interest on Funds Sold and Securities
Purchased under Agreements to Resell 48 159 172
Interest on Deposits with Other
Financial Institutions 419 103 _
Total Interest Income 15,327 13,257 12,322
Interest Expense
Interest on Deposits 6,042 4,668 4,724
Interest on Funds Purchased 68 105 61
Total Interest Expense 6,110 4,773 4,785
Net Interest Income 9,217 8,484 7,537
Provision (Credit) for Possible
Loan Losses (Note 4) _ (500) 51
Net Interest Income After Provision
for Possible Loan Losses 9,217 8,984 7,486
Noninterest Income
Service Charges on Deposit Accounts 1,003 1,000 963
Other Operating Income 400 337 344
Security Gains (Losses), Net (3) (978) (73)
Trust Services Income 393 317 329
Total Noninterest Income 1,793 676 1,563
Noninterest Expense
Salaries and Employee Benefits (Note 9) 3,473 3,604 3,362
Net Occupancy Expense 650 681 655
Other Real Estate Expenses (Income)
(Note 4) (131) 274 619
Other Operating Expenses (Note 14) 3,412 3,200 2,876
Total Noninterest Expense 7,404 7,759 7,512
Income Before Income Taxes 3,606 1,901 1,537
Income Taxes (Credits) (Note 7) 1,213 (3,979) (241)
Net Income Before Cumulative Effect
of Change in Accounting Principle 2,393 5,880 1,778
Cumulative Effect of Change in
Accounting Principle (Note 7) _ _ 340
Net Income $ 2,393 $ 5,880 $ 2,118
Earnings Per Share (Note 8)
Net Income Before Cumulative Effect
of Change in Accounting Principle $1.19 $2.91 $ .88
Cumulative Effect of Change in
Accounting Principle _ _ .17
Net Income $1.19 $2.91 $1.05
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Unrealized
Loss on ESOP
Additional Securities Note
Common Paid In Accumulated Available- Payable
Stock Capital Deficit for-Sale, Net (Note 6) Total
(In Thousands)
BALANCE,
JANUARY 1, 1993 $5,044 $16,454 $(13,279) $ _ $(515) $ 7,704
Net Income _ _ 2,118 _ _ 2,118
Decrease in ESOP
Note Payable _ _ _ - 213 213
BALANCE,
DECEMBER 31, 1993 5,044 16,454 (11,161) _ (302) 10,035
Net Income _ _ 5,880 _ _ 5,880
Unrealized Gain
on Securities
Available-for-Sale,
Net _ _ _ 306 _ 306
Decrease in ESOP
Note Payable _ _ _ _ 213 213
Dividends Declared:
$.10 per share _ _ (202) _ _ (202)
Change in Unrealized
Gain (Loss) of
Securities
Available-for-Sale,
Net _ _ _ (2,309) _ (2,309)
BALANCE,
DECEMBER 31, 1994 5,044 16,454 (5,483) (2,003) (89) 13,923
Net Income _ _ 2,393 _ _ 2,393
Decrease in ESOP
Note Payable _ _ _ _ 89 89
Dividends Declared:
$.16 per share _ _ (323) _ _ (323)
Change in Unrealized
Gain (Loss)
of Securities
Available-for-Sale,
Net _ _ _ 921 _ 921
BALANCE,
DECEMBER 31, 1995 $5,044 $16,454 $(3,413) $(1,082) $ _ $17,003
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 1994 1993
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,393 $ 5,880 $ 2,118
Adjustments to Reconcile
Net Income to Net Cash Provided
by Operating Activities:
Depreciation, Amortization
and Accretion 428 607 689
Provision For Possible
Loan Losses _ (500) 51
Provision For Losses on
Other Real Estate 1 39 718
Realized Losses on Securities 3 978 73
Deferred Income Taxes 1,118 (4,029) (600)
(Gains) Losses on Sale
of Property (133) 151 (425)
(Increase) Decrease in Accrued
Interest Receivable 37 (476) (265)
Increase (Decrease) in Accrued
Interest Payable 166 91 (67)
(Increase) Decrease in
Other Assets 2 (350) 83
Increase (Decrease) in
Other Liabilities (90) (138) 171
NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,925 2,253 2,546
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds From Sales:
- Investment Securities _ _ 36,064
- Available-for-Sale _ 47,219 _
Proceeds From Maturities and
Calls of Securities:
- Investment Securities _ _ 40,260
- Held-to-Maturity 3,646 24,576 _
- Available-for-Sale 9,866 16,133 _
Purchase of Securities:
- Investment Securities _ _ (79,000)
- Held-to-Maturity _ (17,949) _
- Available-for-Sale (21,321) (49,328) _
Loans Purchased _ (7,357) (13,740)
Loans Sold 1,590 1,130 10,188
Net (Increase) Decrease in Loans (19,523) (3,993) 4,586
Net (Increase) Decrease
in Federal Funds Sold and
Securities Purchased Under
Agreements to Resell _ 7,100 (2,570)
Proceeds From Sale of Premises,
Equipment and Other Real Estate 499 856 2,103
Purchases of Premises
and Equipment (189) (392) (348)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (25,432) 17,995 (2,457)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in
Noninterest Bearing Deposits 3,375 2,146 (6,418)
Net Increase (Decrease) in
Interest Bearing Deposits
Other Than Certificates
of Deposits 3,286 (15,605) 8,773
Net Increase (Decrease) in
Certificates of Deposit 15,971 7,450 (3,479)
Net Increase (Decrease) in
Federal Funds Purchased and
Securities Sold Under
Repurchase Agreements (2,137) 1,454 628
Dividends Paid (404) _ _
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 20,091 (4,555) (496)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,416) 15,693 (407)
Cash and Cash Equivalents at
Beginning of Year 22,955 7,262 7,669
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 21,539 $ 22,955 $ 7,262
CASH INTEREST EXPENSE PAID $ 5,944 $ 4,683 $ 4,852
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CURRENT OPERATING ENVIRONMENT AND RISK FACTORS
First National Bankshares, Inc. (the Company) is a bank holding
company whose principal subsidiary is First National Bank of
Houma (First National or the Bank).
The Company places considerable emphasis on each of the
critical issues discussed below (Operations and Loan
Concentrations, Nonperforming Assets, Parent Company Liquidity
and First National Funding and Liquidity). This emphasis is
designed to further improve the Company's financial position,
preserve capital and maintain adequate liquidity.
OPERATIONS AND LOAN CONCENTRATIONS
The Company earned $2,393,000, $5,880,000 and $2,118,000 for
years ended December 31, 1995, 1994 and 1993, respectively.
The composition of the loan portfolio was as follows (in
thousands):
December 31, 1995 1994
Type
Commercial, Financial and
Agricultural $ 46,201 $43,792
Real Estate - Construction 1,561 1,233
Real Estate - Mortgage 14,466 13,049
Consumer 47,523 35,440
Other 225 149
Total Loans $109,976 $93,663
As a percent of total loans at December 31, 1995, the Company
has loans to the oil and gas industry and related service
companies of approximately 11.8 percent.
The Company evaluates the credit risk of each customer on an
individual basis and, where deemed appropriate, collateral is
obtained. Collateral varies by individual loan customer but may
include accounts receivable, inventory, real estate, equipment,
deposits, personal and government guaranties, and general
security agreements. On an ongoing basis, the Company monitors
its collateral and the collateral value related to the loan
balance outstanding.
NONPERFORMING ASSETS
Nonperforming assets were as follows (in thousands):
December 31, 1995 1994
Loans:
90 days or more past due, but
still accruing interest $ 66 $ 64
Renegotiated loans
still accruing 479 2,444
Nonaccrual loans 3,148 2,037
Total Nonperforming Loans 3,693 4,545
Other Real Estate, net of
allowance for possible losses 992 423
Total Nonperforming Assets $4,685 $4,968
December 31, 1995 1994
Nonperforming loans as a
percentage of total loans 3.4% 4.9%
Nonperforming assets as a
percentage of total loans
and other real estate
before allowance
for possible losses 4.2% 5.3%
As discussed in Note 2, the Company adopted SFAS No. 114
effective January 1, 1995. Impairment of loans having recorded
investments of $2,260,000 at December 31, 1995 and $1,700,000 at
December 31, 1994 has been recognized in conformity with SFAS
No. 114. Recorded investments in other impaired loans were
$880,000 at December 31, 1995 and $337,000 at December 31, 1994.
The average recorded investment in impaired loans was
$2,034,000 in 1995. The total allowance for possible loan
losses related to these loans was $494,000 at December 31, 1995.
Renegotiated loans are loans whose interest rates have been
reduced and/or maturity dates extended. The amount of foregone
interest on renegotiated loans still accruing was $29,000,
$11,000 and $47,000 in 1995, 1994 and 1993, respectively. The
decrease in the balance of renegotiated loans still accruing is
the result of the foreclosure on a loan guaranteed by the
Farmers Home Administration. The estimated fair value of the
remaining collateral was added to other real estate.
Nonaccrual loans at December 31, 1995, include $750,000 in
loans to borrowers who are not meeting contractual terms but are
making periodic payments. Foregone interest on nonaccrual loans
was approximately $188,000, $183,000 and $153,000 in 1995, 1994
and 1993, respectively. Interest collected on a cash basis was
$80,000, $233,000 and $6,000 in 1995, 1994 and 1993,
respectively.
In addition to the nonperforming loans, the Company has
identified certain loans which, although currently performing,
have credit weaknesses such that doubt exists as to the
borrower's future ability to comply with present terms. At
December 31, 1995, these loans totaled approximately $436,000.
Other real estate is summarized by category in the following
table (in thousands):
December 31, 1995 1994
Land and land development $ 95 $150
Commercial buildings 822 254
Other 87 34
Total, gross 1,004 438
Less: Allowance for possible losses (12) (15)
Total, net $ 992 $423
At December 31, 1995, before the allowance for possible losses,
the highest carrying value of a single property was $505,000.
The Bank has made substantial progress in its credit risk
management process. Loan policies, loan review and real estate
appraisal review processes have solidified the lending function.
The methodology for determining the adequacy of the loan loss
reserve is continually reviewed and fine-tuned. The Company's
allowance for possible losses are as follows:
December 31, 1995 1994
Allowance for possible
loan losses (in thousands) $2,142 $2,855
Allowance for possible loan
losses as a percentage of:
- total loans 1.9% 3.0%
- total nonperforming loans 58.0% 62.8%
Allowance for possible loan
losses plus allowance for
other real estate losses as a
percentage of total
nonperforming assets
before allowances 45.9% 57.6%
PARENT COMPANY LIQUIDITY
The Company is a holding company, and its ability to fund
dividend payments is dependent in large part on its ability to
receive funds from First National through dividends. Banking
regulations include specific limitation which may preclude the
Company from paying dividends.
FIRST NATIONAL FUNDING AND LIQUIDITY
The principal source of liquidity for First National is core
deposits. First National has none of its deposits brokered or
purchased in the national market. Management believes that
funding and liquidity at First National is more than adequate to
meet its current financial commitments. During 1995, First
National had average net funds sold of $6,432,000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the more significant
accounting policies:
CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, First National.
Intercompany accounts and transactions have been eliminated in
consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
CASH AND DUE FROM FINANCIAL INSTITUTIONS
The Company's banking subsidiary is required to maintain a
noninterest-bearing balance with the Federal Reserve Bank to
fulfill its reserve requirement. The average balance in this
account was $500,000 in 1995 and $859,000 in 1994.
SECURITIES
Securities are being accounted for in accordance with Statement
of Financial Accounting Standards (SFAS) No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." SFAS No.
115, which was adopted effective January 1, 1994, requires the
classification of securities into one of three categories:
Trading, Available-for-Sale, or Held-to-Maturity.
Management determines the appropriate classification of debt
securities at the time of purchase and reevaluates this
classification periodically. Trading account securities are
held for resale in anticipation of short-term market movements.
Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the
securities to maturity. Securities not classified as held to
maturity or trading are classified as available-for-sale. The
Company had no trading account securities at December 31, 1995
or 1994. Held-to-maturity securities are stated at amortized
cost. Available-for-sale securities are stated at market value,
with unrealized gains and losses, net of income taxes, reported
as a separate component of shareholders' equity until realized.
Transfers from securities available-for-sale to securities
held-to-maturity are recorded at market value at the date of
transfer and any unrealized gain or loss at the date of transfer
continues to be reported as a separate component of
shareholders' equity and is accreted back to equity over the
life of the security transferred. Securities classified as
held-for-sale at December 31, 1993, were recorded at the lower
of cost or market value.
The amortized cost of debt securities classified as
held-to-maturity or available-for-sale is adjusted for
amortization of premiums and accretion of discounts to maturity
or, in the case of mortgage-backed securities, over the
estimated life of the security. Amortization, accretion and
accruing interest are included in interest income on securities.
Realized gains and losses, and declines in value judged to be
other than temporary, are included in net securities gains.
Gains and losses on the sale of securities available-for-sale
are determined using the specific-identification method. The
related income tax credit on security losses was $1,000 and
$333,000 in 1995 and 1994, respectively.
LOANS
Interest on loans, other than discount (add-on) loans, is
recognized as income based on the principal balance outstanding.
Interest on discounted loans, all of which have terms of less
than 60 months, is recognized as income over the term of the
loan using the sum-of-the-months' digits method, which does not
differ materially from the result obtained using the effective
interest method.
In accordance with SFAS No. 114, "Accounting by Creditors For
Impairment of a Loan", the Company considers a loan to be
impaired when, based upon current information and events, it
believes it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of
the loan agreement. Impaired loans include troubled debt
restructurings, and performing and nonperforming major loans in
which full payment of principal or interest is not expected.
The Company calculates a reserve required for impaired loans
based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the
loan's observable market price or the fair value of its
collateral.
NONPERFORMING ASSETS
Nonperforming assets include loans 90 days or more past due but
still accruing interest, renegotiated loans, nonaccrual loans
and other real estate. Nonaccrual loans are loans on which the
accrual of interest income has been discontinued because the
borrower's financial condition has deteriorated to the extent
that the collection of principal and/or interest is uncertain.
Until the loan is returned to performing status, generally as
the result of the full payment of all past due principal and
interest plus an acceptable period of performance, interest
income may be recorded on the cash basis.
OTHER REAL ESTATE
Other real estate is reported at the estimated fair value, net
of the costs of disposal. Estimated fair value is the
anticipated sales price of the property, based upon independent
appraisals or other relevant factors. When a reduction to fair
value is required at the time the loan is reclassified to a
foreclosed asset, the difference is charged to the allowance for
possible loan losses. Any subsequent reductions are charged to
other real estate expense. Expenses and gains or losses from
sales related to these properties, net of related income, are
included in other real estate expense. An allowance for
possible losses is maintained to provide for temporary
reductions in values of specific properties. Other real estate
is shown net of this allowance.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is established by
charges to income. The allowance is an amount which management
believes will be adequate to absorb possible losses on existing
loans that may become uncollectible. The level of the allowance
is based on a number of factors, including the collection
history of loans and the evaluation of underlying collateral
values, loss experience, identification and review of problem
loans, quality of the portfolio, and current business and
economic conditions. The adequacy of the reserve is
periodically reviewed and approved by the Board of Directors.
Ultimate losses, however, may differ from the current estimates.
To the extent that adjustments to the allowance for possible
loan losses become necessary, they are reported in earnings in
the periods in which they become known. It is the Company's
policy to charge off any loan or portion thereof when it is
deemed uncollectible in the ordinary course of business. Loan
losses and recoveries are charged or credited directly to the
allowance.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost, less
accumulated depreciation of $7,791,000 and $7,241,000 at
December 31, 1995, and 1994, respectively. Depreciation expense
is computed principally on a straight-line basis over the
estimated useful lives of the depreciable assets.
INCOME TAXES
Income taxes are accounted for using the liability method.
STATEMENTS OF CASH FLOWS
For the purpose of reporting cash flows, cash and cash
equivalents include cash on hand and amounts due on demand from
banks and other financial institutions.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years'
financial statements in order to conform to the classifications
adopted for reporting in 1995.
3. SECURITIES
A comparison of the amortized cost and market values of
securities classified as held-to-maturity at December 31, 1995
and 1994 were as follows (in thousands):
Amortized Estimated Gross Gross
Cost/Book Market Unrealized Unrealized
December 31, 1995 Value Value Gains Losses
U.S. Government Agencies $10,131 $ 9,756 $ 64 $(439)
State and Municipal
Obligations 520 569 49 _
Total $10,651 $10,325 $113 $(439)
Amortized Estimated Gross Gross
Cost/Book Market Unrealized Unrealized
December 31, 1994 Value Value Gains Losses
U.S. Treasury Securities $ 2,116 $ 2,093 $ _ $ (23)
U.S. Government Agencies 47,889 44,805 5 (3,089)
U.S. Government Agency
Mortgage-Backed
Securities 4,378 4,371 50 (57)
State and Municipal
Obligations 673 622 1 (52)
Other Securities 1,753 1,741 _ (12)
Total $56,809 $53,632 $56 $(3,233)
The amortized cost and estimated market values of securities
classified as held-to-maturity at December 31, 1995, by
contractual maturity were as follows (in thousands):
Estimated
Amortized Market
Cost Value
December 31, 1995
Within One Year $ _ $ _
One to Five Years 5,970 5,883
Five to Ten Years 2,569 2,490
After Ten Years 2,112 1,952
Total 10,651 10,325
Mortgage-Backed Securities _ _
Total $10,651 $10,325
A comparison of the book and market values of securities
classified as available-for-sale at December 31, 1995 and 1994,
were as follows (in thousands):
Estimated Gross Gross
Amortized Market Unrealized Unrealized
December 31, 1995 Cost Value Gains Losses
U.S. Treasury Securities $13,985 $14,230 $246 $ (1)
U.S. Government Agencies 45,492 44,946 323 (869)
U.S. Government Agency
Mortgage-Backed
Securities 4,211 4,335 132 (8)
Other Securities 3,195 3,104 2 (93)
Total $66,883 $66,615 $703 $(971)
Estimated Gross Gross
Amortized Market Unrealized Unrealized
December 31, 1994 Cost Value Gains Losses
U.S. Treasury Securities $ 3,978 $ 3,922 $ _ $ (56)
U.S. Government Agencies 5,192 5,185 16 (23)
U.S. Government Agency
Mortgage-Backed
Securities 733 712 _ (21)
Other Securities 1,314 1,311 4 (7)
Total $11,217 $11,130 $ 20 $(107)
The amortized cost and estimated market values of the
securities available-for-sale at December 31, 1995, by
contractual maturity were as follows (in thousands):
Estimated
Amortized Market
Cost Value
December 31, 1995
Within One Year $ 6,975 $ 6,987
One to Five Years 12,983 13,175
Five to Ten Years 1,659 1,680
After Ten Years 41,055 40,438
Total 62,672 62,280
Mortgage-Backed Securities 4,211 4,335
Total $66,883 $66,615
Included in U.S. Government Agencies was approximately
$30,500,000 and $33,600,000 of Collateralized Mortgage
Obligaitons at December 31, 1995 and 1994, respectively.
Approximately half of CMOs consist of first and second tranche
sequential pay and/or planned amortization class instruments,
and the balance consist of support and other tranches. The
balances of CMOs are categorized as U.S. Government Obligations
due to guarantees of the underlying mortgages by agencies of the
U.S. Government.
During 1995, proceeds from redemptions, calls and paydowns of
securities were $5,376,000. Losses of $3,000 were realized on
those security transactions.
During 1994, proceeds from redemptions, calls and paydowns were
$15,581,000. Proceeds from sales of securities classified as
available-for-sale were $47,219,000. Gains of $8,000 and losses
of $986,000 were realized on those security transactions. There
were no sales of securities classified as held-to-maturity
during 1994.
During 1993, proceeds from redemptions, calls and paydowns of
securities were $34,740,000, and proceeds from sales of
securities were $36,064,000. Gains of $403,000 and losses of
$55,000 were realized on those security transactions. In
addition, during 1993 the Company wrote down certain securities
experiencing extraordinary redemptions by $421,000.
On December 29, 1995 as permitted by A Guide to Implementation
of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities issued by the Financial Accounting
Standards Board, the Company reclassified securities with a book
value of $43,900,000 and unrealized gains of $532,000 from
securities held-to-maturity to securities available-for-sale.
During 1994, the Company reclassified securities with an
amortized cost of $49,234,000 and an unrealized loss of
$3,005,000 from securities available-for-sale to securities
held-to-maturity. This unrealized loss is being accreted to
equity over the remaining lives of the securities which are
currently estimated to be 15 years.
At December 31, 1993, the Company reclassified securities with
an amortized cost of $66,286,000 from investment securities to
securities held-for-sale. On January 1, 1994, the Company
reclassified these same securities to securities
available-for-sale which resulted in an increase in
shareholders' equity of $306,000 at that date.
At December 31, 1995 and 1994, securities with a par value of
$48,974,000 and $58,815,000, respectively, were pledged to
secure public and trust deposits and for other purposes as
required or permitted by law.
4. ALLOWANCE FOR POSSIBLE LOAN AND OTHER REAL ESTATE LOSSES
Changes in the allowance for possible loan losses were as
follows (in thousands):
1995 1994 1993
Balance, January 1, $2,855 $2,835 $2,434
Additions and
(Deductions):
Provision Charged (Credited)
to Operating Expense _ (500) 51
Loans Charged Off (960) (185) (387)
Recoveries of Loans
Previously
Charged Off 247 705 737
Balance, December 31, $2,142 $2,855 $2,835
The Company has established an allowance for possible losses on
other real estate. These allowances are netted against other
real estate in the accompanying statements of condition.
Changes in the allowance for possible losses on other real
estate were as follows (in thousands):
1995 1994 1993
Balance, January 1, $15 $ 108 $217
Provision Charged to
Operating Expense 1 39 718
Assets Charged Off (4) (132) (827)
Balance, December 31, $12 $ 15 $108
5. INTEREST-BEARING DEPOSITS
A summary of interest-bearing deposits is as follows:
December 31, 1995 1994
Demand and Savings Deposits $ 81,302 $ 79,780
Certificates of Deposit 80,391 64,420
Other Time Deposits 8,462 6,698
Total Interest-Bearing
Deposits $170,155 $150,898
6. NOTE PAYABLE
The note payable of $89,000 at December 31, 1994 consisted of
the note payable of the First National Bank of Houma's Employee
Stock Ownership Plan (the ESOP) (Note 9). The average interest
rate on the note payable was 7.1 percent and 5.7 percent during
1995 and 1994, respectively.
The ESOP purchased its shares of the Company's stock by
borrowing $2,131,000 from an unaffiliated bank. Principal and
interest (at 80 percent of the lender's prime rate) were payable
monthly through May 1995. The note was guaranteed by the
Company, and, therefore, the balance of the note was shown in
notes payable and deducted from shareholders' equity as Note
Payable Offset Associated with Employee Stock Ownership Plan in
the accompanying consolidated statements of condition. Because
the note payable had a net effect of zero on the Company's
consolidated statement of condition, no fair value was
estimated. The note was paid off in May of 1995.
7. INCOME TAXES
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the
liability method as required by Statement of Financial
Accounting Standard No. 109. Prior years were not restated.
The cumulative effect of this accounting change as of January 1,
1993, amounted to $340,000 and is reflected in the 1993
Statement of Income.
During the third quarter of 1994, the Company reviewed its
recent operating performance and its projections for the future
and determined that a reduction of the previously established
valuation allowance against its deferred tax asset was
appropriate at that time. The valuation allowance had been
established in 1993 with respect to the likelihood of its future
utilization of prior years' net operating loss carryforwards.
As a result of this review, the Company reduced this valuation
allowance by approximately $3,800,000 in the third quarter of
1994. The total credit for income taxes in 1994 was $3,979,000.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities as of December 31,
1995 and 1994, are as follows (in thousands):
1995 1994
Deferred Tax Assets:
Net Operating Loss
Carryforward $3,320 $5,721
Reserve for Other Real Estate
Not Currently Deductible 5 175
Excess Tax Basis
of Securities 850 911
Other 454 408
Total Deferred Tax Assets 4,629 7,215
Deferred Tax Liabilities:
Reserves for Loan Losses (440) (440)
Tax Over Book Depreciation (140) (194)
Other (3) (25)
Total Deferred Tax Liabilities (583) (659)
Deferred Tax Asset 4,046 6,556
Valuation Reserve _ (895)
Net Deferred Tax Asset $4,046 $5,661
Income taxes (credit) consist of the following components (in
thousands):
Years Ended December 31, 1995 1994 1993
Currently Payable $ 95 $ 50 $ 19
Deferred 1,118 (4,029) (260)
Total Income Taxes (Credit) $1,213 $(3,979) $ (241)
The table below shows that the Company's effective income tax
rate was less than the statutory Federal income tax rate:
Years Ended December 31, 1995 1994 1993
Federal Income Tax Rate 34.0% 34.0% 34.0%
Adjustments in Rate
Resulting from:
Nontaxable Income and
Gains on Securities (.5) (.9) (1.0)
Benefit from Net Operating
Loss Carryforward _ (33.1) (33.0)
Change in Valuation
Allowance - (211.9) (16.9)
Other, Net .1 2.6 1.2
Actual Effective Tax Rate 33.6% (209.3%) (15.7%)
At December 31, 1995, the Company had regular tax net operating
loss carryforwards of approximately $9,770,000 to offset future
taxable income. These carryforwards expire as follows:
$1,619,000 in 2005, $5,348,000 in 2006, $45,000 in 2007 and
$2,758,000 in 2009. At December 31, 1995, the Company had
alternative minimum tax net operating loss carryforwards of
approximately $8,760,000 expiring in substantially the same
ratio as the regular tax loss carryforwards.
8. SHAREHOLDERS' EQUITY
Earnings per share were calculated by dividing net income by
the average number of shares outstanding, which was 2,017,600 in
1995, 1994 and 1993.
The Company's shareholders' equity ratio, computed in
accordance with generally accepted accounting principles, at
December 31, 1995, was as follows:
Equity to Assets 7.7%
Regulators limit the amount of deferred taxes that banks and
bank holding companies can include in regulatory capital to the
lesser of 10 percent of Tier 1 capital or to the amount of
deferred tax assets that is expected to be realized within one
year. Additionally, regulators exclude from regulatory capital
the amount of net unrealized gains and losses on
available-for-sale securities.
The Company and First National are required to maintain certain
regulatory minimum capital levels. At December 31, 1995, the
Company and First National were in compliance with the
regulatory minimum capital requirements. Following is a summary
of the minimum required capital levels and the actual ratios at
December 31, 1995.
Actual
Required First
Minimum Company National
Tier 1 Leverage 3.0% - 5.0% 7.4% 7.3%
Tier 1 Risk-Based 4.0% 13.1% 12.9%
Total Risk-Based 8.0% 14.3% 14.2%
The minimum Tier 1 leverage ratio for the highest rated banks
and bank holding companies is 3 percent. Regulators may require
a 100 to 200 basis point higher minimum ratio dependent upon the
condition of the individual bank or bank holding company.
The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA") required each federal banking agency to
implement prompt corrective actions for institutions that it
regulates. The rules provide that an institution is "well
capitalized" if its total risk-based capital ratio is 10% or
greater, its Tier I risk-based capital ratio is 6% or greater,
its leverage is 5% or greater and the institution is not subject
to a capital directive. Under this regulation, the Company and
First National are deemed to be "well capitalized" as of
December 31, 1995 based upon the most recent notifications from
their regulators. There are no conditions or events since those
notifications that management believes would change those
classifications.
9. EMPLOYEE BENEFIT PLANS
Employees of First National are eligible to participate in the
First National Bank of Houma Employee Stock Ownership Plan (the
ESOP). To be eligible to participate, an employee must be at
least 21 years of age and be credited with 1,000 hours of
service annually. The assets of the ESOP are held by the
Employee Stock Ownership Trust, the Trustee of which is First
National. The ESOP purchased its shares of Company stock by
obtaining the loan described in Note 6. First National made
contributions to the ESOP, as necessary, to fund the monthly
installments due on the note. These contributions were $89,000,
$224,000 and $237,000 for 1995, 1994 and 1993, respectively;
which consist of $2,000, $11,000 and $24,000 of interest
payments, respectively, and $213,000 of principal payments in
1993 and 1994 and $89,000 in 1995.
A Salary Savings Plan (the Savings Plan) was established
January 1, 1991, for the benefit of the employees of First
National. Under the terms of the Savings Plan, employees who
are 20.5 years of age and who have been employed by First
National for six months are eligible to participate. Employees
who elect to participate contribute from 1 to 12 percent of
their salary on a pretax basis, by deferring a portion of their
salaries. First National can elect, but is not required, to
make a matching contribution. The percentage of First
National's contribution is determined each year by the
Retirement & Employee Benefits Committee of the Board of
Directors. First National's matching contributions for 1995,
1994 and 1993 were $32,000, $28,000 and $45,000, respectively.
Vesting in matching employer's contributions is based upon the
five-year cliff method.
The Company has allowed retired employees to participate in the
Company's health care plan. These benefits are subject to
deductibles, copayment provisions and other limitations. The
Company reserves the right to change or terminate the benefits
at any time. In order to participate in the health care plan,
retirees must share in the cost of funding the health care plan.
The cost to the Company of providing these benefits to retirees
is the cost of their approved claims less the amount funded by
retirees. The net cost of these postretirement benefits charged
(credited) to expense were $(9,400), $(6,000) and $(1,500) for
1995, 1994 and 1993, respectively.
10. RELATED PARTY TRANSACTIONS
In the ordinary course of business, directors, executive
officers, principal shareholders and related parties of the
Company and its subsidiaries maintain a variety of banking
relationships with the Company's banking subsidiary. An
analysis of activity during 1995 with respect to loans to
directors, executive officers, principal shareholders and
related parties of the Company and its subsidiaries was as
follows (in thousands):
Balance, January 1, 1995 $ 1,930
New Loans 4,048
Repayments (4,179)
Balance, December 31, 1995 $ 1,799
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practicable to estimate that value:
Cash and Due From Financial Institutions and Federal Funds
Sold_ For those short-term instruments, the carrying amount is a
reasonable estimate of fair value.
Securities_For securities, fair value equals quoted market
price, if available. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar
securities.
Loans_The fair value of loans is estimated by discounting the
future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for
the same remaining maturities.
Deposits_The fair value of demand deposits, savings accounts,
and certain money market deposits is the amount payable on
demand at the reporting date. The fair value of fixed-maturity
certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.
Federal Funds Purchased_For those short-term liabilities, the
carrying amount is a reasonable estimate of fair value.
Commitments_The fair value of commitments to extend credit was
not significant.
The estimated fair values of the Company's financial
instruments are as follows at December 31, 1995 and 1994 (in
thousands):
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
$ $ $ $
Financial assets:
Cash and due from
financial institutions
and federal funds
sold, etc. 21,539 21,539 22,955 22,955
Securities available-
for-sale 66,615 66,615 11,130 11,130
Securities held-to-
maturity 10,651 10,325 56,809 53,632
Loans 109,976 110,702 93,663 94,245
Less reserve for
loan losses (2,142) (2,142) (2,855) (2,855)
Loans, net of
reserve 107,834 108,560 90,808 91,390
Financial liabilities:
Deposits 200,840 201,198 178,208 178,614
Federal Funds
purchased, etc. 1,497 1,497 3,634 3,634
12. COMMITMENTS AND CONTINGENCIES
In the normal course of business, various commitments and
contingent liabilities are outstanding which are not reflected
in the financial statements. The Company does not anticipate
any material losses as a result of these transactions. At
December 31, 1995 and 1994, standby letters of credit were
$608,200 and $108,400, respectively, under which the Company has
agreed, subject to the terms of the agreement between the
Company and the customer, to guarantee performance of the
customer's obligation to a third party.
Loan commitments are single-purpose commitments to lend which
will be funded and reduced according to specified repayment
schedules. Most of these commitments have maturities of less
than one year. Total loan commitments outstanding at December
31, 1995 and 1994, were approximately $2,590,000 and $2,939,000,
respectively. Lines of credit are commitments to lend up to a
specified amount. Amounts outstanding under lines of credit
fluctuate because they are generally used to finance short-term,
seasonal working capital needs of the borrower. Total unfunded
lines of credit outstanding as of December 31, 1995 and 1994,
were approximately $11,669,000 and $7,986,000, respectively.
Substantially all of these loan and line of credit commitments
are at variable rates.
First National uses the same credit policies in making
commitments and issuing standby letters of credit as it does for
on-balance-sheet instruments. The Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained if deemed necessary by the Bank upon
extension of credit is based on management's credit evaluation
of the counterparty. Collateral held varies but may include
certificates of deposit, accounts receivable, inventory,
property, plant and equipment, and income-producing properties.
There are no commitments which present an unusual risk to the
Bank, and no material losses are anticipated as a result of
these transactions.
The Company and First National are parties to various legal
proceedings arising in the ordinary course of business. In the
opinion of management based upon the advice of legal counsel,
the ultimate resolution of these legal proceedings will not have
a material adverse effect on the Company's financial condition
or results of operations.
13. PARENT COMPANY FINANCIAL STATEMENTS
Summarized financial statements of First National Bankshares,
Inc. (Parent Company Only) follow (in thousands):
Statements of Condition
December 31, 1995 1994
Investment in Subsidiaries $16,860 $13,899
Cash and Cash Equivalents 266 319
Total Assets $17,126 $14,218
Dividends Payable and
Other Liabilities $ 123 $ 206
Notes Payable _ 89
Shareholders' Equity 17,003 13,923
Total Liabilities and
Shareholders' Equity $17,126 $14,218
Statements of Income
Years Ended December 31, 1995 1994 1993
Income:
Dividends Received
from Subsidiary $ 490 $ 302 $ _
Interest from
Subsidiary 6 3 3
Total Income 496 305 3
Expenses:
Directors Fees 9 4 4
Legal and Professional
Fees 120 90 22
Other 15 25 1
Total Expenses 144 119 27
352 186 (24)
Equity in Undistributed
Income of Subsidiaries 2,041 5,694 2,142
Net Income $2,393 $5,880 $2,118
Statements of Cash Flows
Year Ended December 31 1995 1994 1993
Operating Activities
Net Income $ 2,393 $ 5,880 $ 2,118
Adjustment to Reconcile
Net Income to Net Cash
Provided by (Used in)
Operating Activities:
Other (1) _ _
Undistributed Income
of Subsidiaries (2,041) (5,694) (2,142)
Net Cash Provided by
(Used in) Operating
Activities 351 186 (24)
Dividends Paid (404) _ _
Cash and Cash Equivalents
at Beginning of Year 319 133 157
Cash and Cash Equivalents
at End of Year $ 266 $ 319 $ 133
14. OTHER OPERATING EXPENSES
The components of other operating expenses were (in thousands):
December 31, 1995 1994 1993
Legal and
Professional Fees $ 699 $ 542 $ 318
Stationery and Supplies 204 178 168
Equipment Expense 631 591 571
FDIC Assessment 260 470 506
Other Expenses 1,618 1,419 1,103
Compromise Settlement _ _ 210
Total $3,412 $3,200 $2,876
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
1995
Quarter Ended 12/31 09/30 06/30 03/31
Interest income $3,818 $3,959 $3,848 $3,702
Interest expense 1,664 1,601 1,487 1,358
Net interest income 2,154 2,358 2,361 2,344
Provision for possible
loan losses _ _ _ _
Gain (loss) on sale of
securities _ _ (2) (1)
Other income 416 463 444 473
Other expenses 1,499 1,918 2,042 1,945
Income before income
taxes 1,071 903 761 871
Income taxes 361 304 256 292
Net income $710 $599 $505 $579
Earnings per share $ 0.35 $ 0.30 $0.25 $0.29
Market value (1)
High $16.75 $13.88 $9.38 $5.00
Low $14.00 $ 9.06 $7.00 $4.50
Dividends per share
declared by Company $ 0.06 $ 0.05 $0.05 $ _
1994
Quarter Ended 12/31 09/30 06/30 03/31
Interest income $3,529 $3,398 $3,217 $3,113
Interest expense 1,320 1,213 1,135 1,105
Net interest income 2,209 2,185 2,082 2,008
Provision for possible
loan losses (Reversal) _ _ (500) _
Gain (loss) on sale of
securities (879) 2 (104) 3
Other income 340 419 441 454
Other expenses 2,004 1,946 1,873 1,936
Income before income
taxes (334) 660 1,046 529
Income taxes (credits) (70) (3,763) (125) (21)
Net income $ (264) $4,423 $1,171 $550
Earnings per share $(0.13) $2.19 $0.58 $0.27
Market value (2)
High $4.50 $4.50 $4.37 $3.37
Low $4.13 $4.00 $3.75 $3.25
Dividends per share
declared by Company $0.10 $ _ $ _ $ _
(1) Market values reflect high and low bid prices as reported
by the American Stock Exchange for quarters ended December 31,
September 30 and June 30, 1995. Market value for the quarter
ended March 31, 1995 reflect actual over-the-counter trades.
(2) Market values for 1994 reflect actual over-the-counter
trades.
16. RESTATEMENT
Subsequent to the issuance of the Company's 1994 consolidated
financial statements, the Company discovered that an error had
been made in the calculation of the valuation allowance against
its deferred tax asset as of December 31, 1994. As a result,
the 1994 consolidated financial statements have been restated
from the amounts previously reported to reflect the revised
valuation allowance.
A summary of the significant effects of the restatement, in
thousands except for per share amounts, is as follows:
As
Previously As
Reported Restatement Restated
For the year ended
December 31, 1994:
Income Tax Credits $(4,504) $ 525 $(3,979)
Net Income $ 6,405 $(525) $ 5,880
Net Income Per Share $3.17 $(.26) $2.91
As of December 31, 1994:
Accrued Interest
Receivable and
Other Assets $ 9,675 $(525) $ 9,150
Shareholders' Equity $14,448 $(525) $13,923
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
First National Bankshares, Inc.
Houma, Louisiana
We have audited the accompanying consolidated statements of
condition of First National Bankshares, Inc. and subsidiaries as
of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
First National Bankshares, Inc. and subsidiaries as of December
31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Notes 2 and 7 to the consolidated financial
statements, in 1994 the Company changed its method of accounting
for securities to conform with Statement of Financial Accounting
Standards No. 115 and in 1993 the Company changed its method of
accounting for income taxes to conform with Statement of
Financial Accounting Standards No. 109.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 3, 1996
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of Registrant
There is incorporated by reference herein the information
under the caption "Election of Directors" contained in the
Registrant's definitive proxy statement in connection with the
Annual Shareholders Meeting to be held May 14, 1996.
Item 11. Executive Compensation
There is incorporated by reference herein the information
under the caption "Executive Compensation and Other Transactions
with Management" contained in the Registrant's definitive proxy
statement in connection with the Annual Shareholders Meeting to
be held May 14, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
There is incorporated by reference herein the information
under the caption "Voting Securities and Principal Holders
Thereof" contained in the Registrant's definitive proxy
statement in connection with the Annual Shareholders Meeting to
be held May 14, 1996.
Item 13. Certain Relationships and Related Transactions
There is incorporated by reference herein the information
under the captions "Executive Compensation and Other
Transactions with Management", "Interest of Management and
Others in Certain Transactions", and "Voting Securities and
Principal Holders Thereof" contained in the Registrant's
definitive proxy statement in connection with the Annual
Shareholders Meeting to be held May 14, 1996.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) 1. Index of Financial Statements:
See Item 8.
(a) 2. Index of Financial Schedules:
All schedules have been omitted as not applicable or not
required or because the information has been included in the
financial statements or applicable notes.
(a) 3. Index of Exhibits:
Incorporated
by Reference Exhibit
to Registration Form of Date of Number
Description or File Number Report Report in Report
(3) Articles of
Incorporation and
By-Laws
.1 Articles of
Incorporation 2-76198 10-K 12/31/82 3.3
.2 By-Laws 2-76198 10-K 12/31/82 3.3
(10) Material Contracts
.1 401(K) Profit
Sharing Plan 2-76198 10-K 12/31/92 3.10
.2 Employee Stock
Option Plan 2-76198 10-K 12/31/92 3.10
.3 Lease between the
Registrant and
Hilton Michel,
CLU & Associates,
Inc. dated
November 2, 1987 2-76198 10-K 12/31/92 3.10
.4 Stock Purchase
Agreement between
Financiere Worms &
Cie, S.A. and Messrs.
Mire, Michel, and
Ortego, dated
February 19, 1993 2-76198 10-K 12/31/92 3.10
.5 Severance Agreements
between First National
Bank and Mr. Mire and
five other executive
officers, dated
December 1, 1994 2-76198 10-K 12/31/94 3.10
(22) Subsidiaries of the
Registrant*
(b) Reports on Form 8-k
No reports were filed during the quarter ended December 31, 1995.
*Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIRST NATIONAL BANKSHARES, INC.
(Registrant)
DATE 03/28/96
BY /s/ James J. Buquet, Jr.
JAMES J. BUQUET, JR.
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
DATE 03/28/96 DATE 03/28/96
BY /s/ Kamal Abdelnour BY /s/ Calvin J. Ortego
KAMAL ABDELNOUR CALVIN J. ORTEGO
DIRECTOR DIRECTOR
DATE 03/28/96 DATE 03/28/96
BY /s/ James J. Buquet, Jr. BY /s/ Hilton J. Michel, Jr.
JAMES J. BUQUET, JR. HILTON J. MICHEL, JR.
DIRECTOR DIRECTOR
DATE 03/28/96 DATE 03/28/96
BY /s/ Russell Blanchard BY /s/ Jerome H. Mire
RUSSELL BLANCHARD JEROME H. MIRE
PRINCIPAL FINANCIAL AND PRESIDENT, CHIEF EXECUTIVE
ACCOUNTING OFFICER OFFICER AND DIRECTOR
Exhibit Index
Sequential
Description Page Number
(22) Subsidiaries of the Registrant 64
Exhibit (22). Subsidiaries of Registrant
The following exhibit provides certain information with
respect to the subsidiaries of the Registrant, of which First
National and First Export are wholly owned. The subsidiaries
are included in Registrant's consolidated financial statements.
Incorporated Under
Subsidiary Laws of
1) First National Bank of Houma Louisiana
2) First Export Corporation (Inactive) Louisiana
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,484
<INT-BEARING-DEPOSITS> 11,055
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 66,615
<INVESTMENTS-CARRYING> 10,651
<INVESTMENTS-MARKET> 10,325
<LOANS> 109,976
<ALLOWANCE> 2,142
<TOTAL-ASSETS> 220,489
<DEPOSITS> 200,840
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,646
<LONG-TERM> 0
5,044
0
<COMMON> 0
<OTHER-SE> 11,959
<TOTAL-LIABILITIES-AND-EQUITY> 220,489
<INTEREST-LOAN> 9,853
<INTEREST-INVEST> 5,007
<INTEREST-OTHER> 467
<INTEREST-TOTAL> 15,327
<INTEREST-DEPOSIT> 6,042
<INTEREST-EXPENSE> 6,110
<INTEREST-INCOME-NET> 9,217
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (3)
<EXPENSE-OTHER> 7,404
<INCOME-PRETAX> 3,606
<INCOME-PRE-EXTRAORDINARY> 2,393
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,393
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
<YIELD-ACTUAL> 8.21
<LOANS-NON> 3,148
<LOANS-PAST> 66
<LOANS-TROUBLED> 479
<LOANS-PROBLEM> 436
<ALLOWANCE-OPEN> 2,855
<CHARGE-OFFS> 960
<RECOVERIES> 247
<ALLOWANCE-CLOSE> 2,142
<ALLOWANCE-DOMESTIC> 1,092
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,050
</TABLE>
