UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
FORM 10-QSB
_________________________________
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending September 30, 1996
-----------------------------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission File Number 0-22842
--------------------
First Bancshares, Inc.
------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 43-1654695
- ----------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
142 East First St., Mountain Grove, MO 65711
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(417) 926-5151
- ----------------------------
(Registrant's telephone number)
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 preceding twelve 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
----------- ---------
As of October 12, 1996, there were 1,206,236 shares of the
Registrant's Common Stock, $.01 par value per share, outstanding.
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARY
FORM 10-QSB
September 30, 1996
INDEX PAGE
PART I-FINANCIAL INFORMATION
- ----------------------------
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited) 1
CONSOLIDATED STATEMENTS OF INCOME (unaudited) 2
CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited) 3-4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited) 5-7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8-11
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 2. CHANGES IN SECURITIES 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES
</page>
<TABLE>
FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
- - - - - - - - - - - - - - - - - - - - - - - -
<CAPTION>
(Unaudited)
September 30, June 30,
1996 1996
---------- --------
<S> <C> <C>
ASSETS (Dollars in thousands)
Cash and cash equivalents, including
interest-bearing accounts of $140 at
September 30 and $527 at June 30 $ 4,148 $ 3,316
Certificates of deposit 7,719 2,319
Investment securities available-for-sale,
at fair value 9,690 9,478
Investment securities held-to-maturity (estimated
fair value $2,084 at September 30 and
$2,249 at June 30) 2,061 2,233
Investment in Federal Home Loan Bank stock, at cost 1,038 890
Mortgage backed certificates available-for-sale,
at fair value 2,809 2,831
Loans receivable held-for-investment, net
(includes reserves for loan losses of $530 at
September 30 and $520 at June 30) 122,685 118,780
Accrued interest receivable 544 469
Prepaid expenses 127 107
Property and equipment, less accumulated
depreciation and valuation reserves 3,318 3,194
Intangible assets, less accumulated amortization 39 43
Real estate owned - -
Deferred income tax benefits, net 110 -
Other assets 18 11
------ -------
Total assets $154,306 $143,671
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Customer deposits $109,986 $105,960
Advances from Federal Home Loan Bank 20,500 13,500
Other borrowed funds 55 55
Income taxes payable - current 89 92
Accrued expenses and accounts payable 887 196
Deferred income taxes - 139
------- -------
Total liabilities 131,517 119,942
------- -------
Commitments and contingencies - -
Preferred stock, $.01 par value; 2,000,000
shares authorized, none issued - -
Common stock, $.01 par value; 8,000,000 shares
authorized, 1,554,240 issued, 1,206,376 and
1,268,686 outstanding at September 30 and
June 30, respectively 16 16
Paid-in capital 15,098 15,059
Retained earnings - substantially restricted 13,988 14,011
Treasury stock - at cost; 347,864 and 284,354 shares
at September 30 and June 30, respectively (5,161) (4,123)
Unearned compensation (1,166) (1,209)
Unrealized gain (loss) on securities available-for-,
sale, net of applicable deferred income taxes 14 (25)
------- -------
Total stockholders' equity 22,789 23,729
-------- --------
Total liabilities and stockholders' equity $154,306 $143,671
======= =======
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-1-
</page>
<TABLE>
FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
- - - - - - - - - - - - - - - - - - -
<CAPTION>
(Unaudited)
Quarter Ended September 30,
1996 1995
(Dollars in thousands)
<S> <C> <C>
Interest Income:
Loans receivable $ 2,479 $ 2,069
Investment securities 221 242
Mortgage-backed and related securities 51 52
Other interest-earning assets 15 11
------ ------
Total interest income 2,766 2,374
------ -----
Interest Expense:
Customer deposit 1,308 1,281
Borrowed funds 221 81
----- -----
Total interest expense 1,529 1,362
----- -----
Net interest income 1,237 1,012
Provision for loan losses 12 5
----- -----
Net interest income after
provisions for losses 1,225 1,007
----- -----
Noninterest Income:
Service charges and other fee income 84 45
Loan origination and commitment fees 1 -
Income from real estate operations 22 22
Insurance commissions 15 14
Gain (loss) on investments (4) 2
Gain on sale of property and equipment - 2
----- -----
Total noninterest income 118 85
----- -----
Noninterest Expense:
Compensation and employee benefits 433 402
Occupancy and equipment 89 84
Deposit insurance premiums 699 56
Advertising and promotional 17 65
Professional fees 19 20
Other 110 100
------ ------
Total noninterest expense 1,367 727
----- ----
Income (loss) before taxes (24) 365
Income Taxes Expense (Savings) (57) 114
------ -----
Net income $ 33 $ 251
===== ====
Earnings per share .03 .20
===== ====
Dividends per share .05 .05
===== ====
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-2-
</page>
<TABLE>
FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- - - - - - - - - - - - - - - - - - -
Three months ended September 30, 1996 and 1995
<CAPTION>
(Unaudited)
1996 1995
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 33 $ 251
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 43 36
Amortization 4 4
Unrealized loss on investment securities 4 -
Gain on sale of property and equipment - (2)
Premiums and discounts on mortgage-backed
securities and investment securities - 2
Loss on loans, net of recoveries 12 5
Income reinvested on investment securities and
Federal Home Loan Bank stock - -
ESOP compensation expense at fair value 27 32
Vesting of unearned compensation 43 39
Net change in operating accounts:
Accrued interest receivable and other assets (102) (94)
Deferred loan costs (9) (8)
Deferred income tax benefits, net (282) -
Income taxes payable - current (3) (39)
Deferred income tax payable - 7
Accrued expenses 692 (11)
------ ----
Net cash from operating activities 462 222
------ ----
Cash flows from investing activities:
Purchase of investment securities available-for-sale (150) -
Purchase of investment securities held-to-maturity - (335)
Purchase of Federal Home Loan Bank stock (148) -
Proceeds from sales of investment securities
available-for-sale - 500
Proceeds from maturities of investment securities
available-for-sale - -
Proceeds from maturities of investment securities
held-to-maturity 168 52
Net change in certificates of deposit (5,400) 894
Net change in loans receivable (3,908) (5,074)
Proceeds from maturities of mortgage-backed
certificates 31 44
Purchases of property and equipment (167) (320)
Proceeds from sale of property and equipment - 6
Purchase of other assets - -
----- -----
Net cash used in investing activities (9,574) (4,233)
See accompanying notes to Consolidated Financial Statements.
-3-
FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
- - - - - - - - - - - - - - - - - - - - - - - - -
Three months ended September 30, 1996 and 1995
(Unaudited)
1996 1995
-------- -------
(Dollars in thousands)
Cash flows from financing activities:
Net change in demand deposits, savings accounts,
and certificates of deposit $ 4,026 $ 3,322
Proceeds from borrowed funds 7,000 1,700
Payments on borrowed funds - -
Proceeds from sale of common stock 12 10
Purchase of treasury stock (1,038) (1,104)
Cash dividends paid (56) (61)
------ -----
Net cash from financing activities 9,944 3,867
----- -----
Net increase in cash and cash equivalents 832 (144)
Cash and cash equivalents -
beginning of period 3,316 3,535
----- -----
Cash and cash equivalents -
end of period $ 4,148 $ 3,391
====== ======
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-4-
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE A - Basis of Presentation
The consolidated interim financial statements as of September 30, 1996
included in this report have been prepared by the Registrant without audit.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation are reflected in the
September 30, 1996 interim financial statements. The results of operations
for the periods ended September 30, 1996 and 1995 are not necessarily
indicative of the operating results for the full year. The June 30, 1996
Consolidated Statement of Financial Condition presented with the interim
financial statements was audited and received an unqualified opinion.
NOTE B - Formation of Holding Company and Conversion to Stock Form
On December 22, 1993, First Bancshares, Inc. ("Registrant") became the holding
company for First Home Savings Bank ("Savings Bank") upon the Savings Bank's
conversion from a state chartered mutual savings and loan association to a
state chartered stock savings and loan association. The conversion was
accomplished through the sale and issuance by the Registrant of 1,551,292
shares of common stock at $10.00 per share. Proceeds from the sale of common
stock, net of issuance costs incurred of $639,802, were $14,873,123, inclusive
of $1,520,870 related to shares held by the ESOP plan and $304,170 in
connection with stock held by the MRP. The financial statements included
herein have not been restated as a result of the consummation of the
conversion.
NOTE C - Earnings per Share
Earnings per share are presented for the periods ended September 30, 1996 and
1995 based on the weighted average number of shares issued and outstanding
during the period. For the periods presented, unreleased ESOP shares are not
considered outstanding for purposes of calculating earnings per share.
Average shares include the weighted average number of common shares considered
outstanding, plus the shares issuable upon exercise of stock options after the
assumed repurchase of common shares with the related proceeds as follows:
Weighted Average Number Shares
of Common Shares Outstanding Issuable
Quarter ended September 30, 1996 1,125,242 48,584
Quarter ended September 30, 1995 1,243,813 50,788
NOTE D - Employee Stock Ownership Plan
In connection with the conversion to stock form as described in Note B, the
Savings Bank established an ESOP for the exclusive benefit of participating
employees (all salaried employees who have completed at least 1000 hours of
service in a twelve-month period and have attained the age of 21). The ESOP
borrowed funds from the Holding Company in an amount sufficient to purchase
152,087 shares (10% of the Common Stock issued in the Conversion). The loan
is secured by the shares purchased and is being repaid by the ESOP with funds
from contributions made by the Savings Bank, dividends received by the ESOP
and any other earnings on ESOP assets. All dividends received by the ESOP are
paid on the loan.
-5-
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(continued)
NOTE D - Employee Stock Ownership Plan (continued)
The Savings Bank presently expects to contribute approximately $180,000 plus
interest annually to the ESOP. Contributions will be applied to repay
interest on the loan first, then the remainder will be applied to principal.
The loan is expected to be repaid approximately nine years from inception.
Shares purchased with the loan proceeds are held in a suspense account for
allocation among participants as the loan is repaid. Contributions to the
ESOP and shares released from the suspense account are allocated among
participants in proportion to their compensation relative to total
compensation of all active participants. Benefits generally become 20% vested
after each year of credited service beyond two years.
Vesting is accelerated upon retirement, death or disability of the
participant. Forfeitures are returned to the Savings Bank or reallocated to
other participants to reduce future funding costs. Benefits may be payable
upon retirement, death, disability or separation from service. Since the
Savings Bank's annual contributions are discretionary, benefits payable under
the ESOP cannot be estimated.
The Company accounts for its ESOP in accordance with Statement of Position
93-6, Employers Accounting for Employee Stock Ownership Plans. Accordingly,
the debt of the ESOP is eliminated in consolidation and the shares pledged as
collateral are reported as unearned ESOP shares in the consolidated balance
sheets. Contributions to the ESOP shall be sufficient to pay principal and
interest currently due under the loan agreement. As shares are committed to
be released from collateral, the Company reports compensation expense equal to
the average market price of the shares for the respective period, and the
shares become outstanding for earnings per share computations. Dividends on
allocated ESOP shares are recorded as a reductions of retained earnings;
dividends on unallocated ESOP shares are recorded as a reduction of debt and
accrued interest. ESOP compensation expense was $66,000 and $71,000 for the
three months ended September 30, 1996 and 1995, respectively.
<TABLE>
A summary of ESOP shares at September 30, 1996 is as follows:
<S> <C>
Shares allocated 47,572
Shares committed for release 4,260
Unreleased shares 98,432
------
Total 150,264
=======
Fair value of unreleased shares $1,574,912
=========
</TABLE>
NOTE E - Management Recognition Plan
A Management Recognition Plan (MRP) has been adopted for the benefit of
officers, directors and employees of the Savings Bank. The MRP provides
officers, directors and employees with a proprietary interest in the Holding
Company that will encourage them to remain with the Savings Bank or Holding
Company. The Savings Bank contributed enough funds to the MRP to allow it to
purchase 30,417 shares (2% of the shares of Common Stock issued in the
Conversion). Shares have been granted to qualifying eligible officers,
directors and employees pursuant to terms of the MRP. The shares are in the
form of restricted stock and will vest over a five-year period. Compensation
expense in the amount of the fair market value of the stock at the date of the
grant to the officers, directors or employees will be recognized during the
years in which the shares are payable.
-6-
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(continued)
NOTE F - Treasury Stock
On March 9, 1994, First Bancshares, Inc. announced its first stock repurchase
program. The program was completed on September 30, 1994. Treasury stock
consisting of 77,500 shares (approximately 5% of the outstanding stock) was
purchased for $910,000. First Bancshares, Inc. began its second stock
repurchase program on December 23, 1994. Treasury stock consisting of 73,714
shares was repurchased for $998,000 during the second stock repurchase
program. From July 10, 1995 through January 5, 1996, 69,985 shares were
repurchased at a cost of $1,167,000 to complete a third repurchase program.
Between January 6 and July 15, 1996, 66,560 shares were repurchased at a cost
of $1,103,000 to complete a fourth repurchase program. Pursuant to a fifth
repurchase program, 60,105 shares were repurchased at a cost of $983,000
between July 15 and September 30, 1996. On September 30, 1996, a total of
347, 864 shares were held in treasury stock and were recorded at a cost of
$5,161,000. Between October 1 and November 12, 1996, 140 shares were
purchased at a cost of $2,000. As of November 12, 1996, First Bancshares,
Inc. had authority to purchase 3,015 additional shares pursuant to its fifth
repurchase program. Treasury stock is shown at cost for financial statement
presentation.
NOTE G - Accounting Changes
As of July 1, 1996, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed of". This statement generally requires
disclosures for long-lived impaired assets and long-lived impaired assets to
be disposed of. At this time, the Company does not have any significant long
lived impaired assets for which disclosures are needed.
As of July 1, 1996, the Company adopted SFAS No. 122 "Accounting for Mortgage
Servicing Rights". The statement requires that mortgage banking enterprises
recognize as separate assets rights to service mortgage loans for others. At
this time, the Company does not have a mortgage banking enterprise which
services mortgage loans for others.
As of July 1, 1996, the Company adopted SFAS No. 123 "Accounting for Stock
Based Compensation". This statements establishes a fair value based method of
accounting for stock-based compensation plans. Currently, the Company does
not have any stock-based compensation awards granted after the effective dates
given in the statement.
-7-
</page>
FIRST BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis included herein covers those material changes
in liquidity and capital resources that have occurred since June 30, 1996, as
well as certain material changes in results of operations during the three
month periods ended September 30, 1996 and 1995.
The following narrative is written with the presumption that the users
have read or have access to the Company's 1996 Form 10-KSB, which contains the
latest audited financial statements and notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of June 30, 1996, and for the year then ended. Therefore, only
material changes in financial condition and results of operations are
discussed herein.
Comparison of the Three Months ended September 30, 1996 to the Three Months
Ended September 30, 1995
Financial Condition. Total assets increased $10.6 million during the
quarter to $154.3 million at September 30, 1996. Certificates of deposit
purchased increased $5.4 million during the quarter as a $6.0 million 18-day
CD was purchased from another financial institution in late September with
funds borrowed from the FHLB. The certificate matured on October 15, 1996
with the proceeds largely used to reduce FHLB advances. Property and
equipment increased by $124,000 as work continued on the new Gainesville
branch. Occupancy in mid- to late November is now anticipated.
Net loans increased $3.9 million during the quarter to $122.7 million at
September 30, 1996. Cash and cash equivalents increased $.8 million during
the quarter resulting from an additional FHLB advance.
Nonperforming assets were $1,515,000, or .98% of total assets at
September 30, 1996 compared to $1,266,000, or .88% of total assets, at June
30, 1996. Nonaccrual loans of $130,000 at June 30, 1996 remained the same at
September 30, 1996.
Net Income. Net income decreased to $33,000 for the quarter ended
September 30, 1996 compared to $251,000 for the quarter ended September 30,
1995. Net interest income after provision for loan losses increased $218,000
and noninterest income increased $32,000. These two increases were offset by
a $641,000 increase in noninterest expense almost entirely attributable to a
one-time SAIF assessment of $640,000. Income tax expense decreased $171,000
due to the decrease in income before income tax expense and adjustments for
deferred income taxes. Excluding the one-time SAIF assessment and related tax
savings, net income for the quarter would have been $403,000.
Net Interest Income. Net interest income of $1,237,000 for the quarter
ended September 30, 1996 increased by $225,000, or 22%, from $1,012,000 for
the quarter ended September 30, 1995. Interest income increased $392,000
while interest expense increased $167,000.
Interest Income. Interest income increased by $392,000, or 17%, from
$2,374,000 for the quarter ended September 30, 1995 to $2,766,000 for the
quarter ended September 30, 1996. The increase was due to a $410,000 increase
in interest income from loans receivable from $2,069,000 for the quarter ended
September 30, 1995 to $2,479,000 for the quarter ended September 30, 1996.
The increase was largely attributable to an increase in average loans
outstanding and partly to interest rate increases on existing adjustable rate
loans. Interest income from investment securities decreased by $21,000 from
$242,000 for the quarter ended September 30, 1995 to $221,000 for the quarter
ended September 30, 1996. This decrease was primarily due to the interest
rate decreases on adjustable-rate securities and partly to a slight decrease
in average balances in investment securities.
-8-
</page>
FIRST BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Interest Expense. Interest expense of $1,529,000 for the quarter ended
September 30, 1996 increased $167,000, or 12%, from $1,362,000 for the quarter
ended September 30, 1995. The increase was primarily attributable to an
increase in the balance of FHLB advances. Interest expense on customer
deposits also increased slightly due to an increase in outstanding balances.
Provision for Loan Losses. Loan loss provisions increased by $7,000 from
$5,000 for the quarter ended September 30, 1995 to $12,000 for the quarter
ended September 30, 1996. Actual loan losses, net of recoveries, was $1,800
for the quarter ended September 30, 1996 and zero for the quarter ended
September 30, 1995.
Noninterest Income. Noninterest income was $117,000 for the quarter
ended September 30, 1996 compared to $85,000 for the quarter ended September
30, 1995. This increase of $32,000, or 38%, was primarily attributable to an
increase in service charges and other fee income. A $4,000 loss was
recognized during the quarter ended September 30, 1996 because of a write-down
due to an other than temporary decline in value of a certificate backed by
auto loans. A gain of $2,000 in the quarter ended September 30, 1995 resulted
from the sale of an FHLB note prior to maturity.
Noninterest Expense. Noninterest expense increased $641,000 from
$727,000 for the quarter ended September 30, 1995 to $1,368,000 for the
quarter ended September 30, 1996. The quarter ended September 30, 1996
included a $640,000 expense for a one-time assessment, to be paid by all
savings and loan institutions, to fund the Savings Association Insurance Fund
(SAIF). The legislation mandating the assessment also calls for reductions in
future regular SAIF premiums from $.23 per $100 of deposits to $.065 per $100
of deposits beginning in January of 1997. Compensation and employee benefits
increased $31,000 due to employee salaries and related payroll tax . Other
noninterest expense increased $10,000 primarily attributable to postage
expense. These increases were partially offset by a decrease in advertising
and promotion expense of $48,000 primarily due to a reduction in the marketing
campaign relating to the checking account program which was initiated in
July 1995.
Net Interest Margin. Net interest margin increased from 3.26% for the
three months ended September 30, 1995 to 3.52% for the three months ended
September 30, 1996. Income from earning assets increased by $392,000, or 17%,
between the two quarters while interest expense increased by $167,000, or 12%.
The average earning asset base increased by $16.4 million, or 13%, which was
offset by a $16.7 million, or 16%, increase in the average interest-bearing
liability base.
-9-
</page>
FIRST BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Liquidity and Capital Resources
First Home's primary sources of funds are deposits, proceeds from
principal and interest payments on loans, mortgage-backed securities,
investment securities, FHLB advances and net operating income. While
maturities and scheduled amortization of loans and mortgage-backed securities
are a somewhat predictable source of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
Between October 11, and November 4, 1996, a total of 40,632 shares of stock
primarily in other financial institutions were sold. The net sales proceeds of
$583,000 will be used for general corporate purposes. The sales generated a
pretax profit of $157,000.
First Home must maintain an adequate level of liquidity to ensure
availability of sufficient funds to support loan growth and deposit
withdrawals, satisfy financial commitments and take advantage of investment
opportunities. Funds from a $5 million Federal Home Loan Bank line of credit
can be drawn as an alternative source of funds. During the period presented,
First Home used its sources of funds primarily to fund loan commitments, pay
maturing savings certificates and deposit withdrawals. At September 30, 1996,
First Home had approved loan commitments totaling $1.6 million and undisbursed
loans in process of $2.0 million.
Liquid funds necessary for normal daily operations of First Home are
maintained in three working checking accounts, a daily time account with the
Federal Home Loan Bank of Des Moines and in federal funds. It is the Savings
Bank's current policy to maintain adequate collected balances in those three
checking accounts to meet daily operating expenses, customer withdrawals, and
fund loan demand. Funds received from daily operating activities are
deposited, on a daily basis, in one of the working checking accounts and
transferred, when appropriate, to daily time or federal funds sold to enhance
income or to reduce any outstanding line-of-credit advance from the Federal
Home Loan Bank.
Contingent permission was received from the Missouri Division of Finance on
November 7, 1996 to open a new branch in Theodosia, Missouri. Premises have
been leased with necessary renovations to begin in mid- to late December 1996.
Training of three to four personnel will begin in early December. A mid- to
late January, 1997 opening date is anticipated.
With the exception of expenses for the new Theodosia branch, normal daily
operating expenses are not expected to significantly change. Noninterest
expense (excluding the one-time SAIF assessment) as a percentage of average
assets at 2.00% is expected to remain basically constant. Interest expense is
expected to increase slightly in the near future as the deposit base gradually
increases. Anticipated additional FHLB advances, to fund loan growth and pay
the SAIF assessment, will also contribute to the increase. This expected
increase could be partially offset by maturing certificates being renewed at
slightly lower interest rates. The interest expense increase is projected to
be somewhat offset by the funding of new loans. No significant changes
are anticipated in the rates currently charged on existing adjustable-rate
loans. Customer deposits are expected to exceed withdrawals.
At September 30, 1996, certificates of deposit amounted to $74.0 million, or
67% of First Home's total deposits, including $43.4 million of fixed rate
certificates scheduled to mature within twelve months. Historically, First
Home has been able to retain a significant amount of its deposits as they
mature. Management believes it has adequate resources to fund all loan
commitments from savings deposits, loan payments and the Federal Home Loan
Bank line of credit and adjust the offering rates of savings certificates to
retain deposits in changing interest rate environments.
-10-
</page>
FIRST BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The Office of Thrift Supervision requires a savings institution to
maintain an average daily balance of liquid assets (cash and eligible
investments) equal to at least 5% of the average daily balance of its net
withdrawable deposits and short-term borrowings. In addition, short-term
liquid assets currently must constitute 1% of the sum of net withdrawable
deposit accounts plus short-term borrowings. On September 30, 1996, First
Home's liquidity ratio was 12.40% and its short-term liquidity ratio was
11.01%. First Home consistently maintains liquidity levels in excess of
regulatory requirements, and believes this is an appropriate strategy for
proper asset and liability management.
The Office of Thrift Supervision requires institutions such as the
Savings Bank to meet certain tangible, core, and risk-based capital
requirements. Tangible capital generally consists of stockholders' equity
minus certain intangible assets. Core capital generally consists of
stockholders' equity. The risk-based capital requirements presently address
risk related to both recorded assets and off-balance sheet commitments and
obligations. The following table summarizes the Savings Bank's capital ratios
and the ratios required by FIRREA and subsequent regulations at September 30,
1996.
<TABLE>
Percent of Adjusted
Amount Total Assets
------ ------------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Tangible capital $18,885 12.5%
Tangible capital requirement 2,275 1.5
------- -----
Excess $16,610 11.0%
====== ====
Core capital $18,885 12.5%
Core capital requirement 4,550 3.0
------ ----
Excess $14,335 9.5%
====== ====
Risk-based capital $19,042 19.4%
Risk-based capital requirement 7,833 8.0
------ ----
Excess $11,209 11.4%
====== ====
</TABLE>
-11-
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 1, LEGAL PROCEEDINGS
Neither the Registrant nor the Savings Bank is a party to any material legal
proceedings at this time. From time to time the Savings Bank is involved in
various claims and legal actions arising in the ordinary course of business.
ITEM 2, CHANGES IN SECURITIES
Not applicable.
ITEM 3, DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4, SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5, OTHER INFORMATION
None
ITEM 6, EXHIBITS AND REPORT ON FORM 8-K
None
-12-
</page>
SIGNATURES
Pursuant to the requirements 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 Bancshares, Inc.
Date: October 15, 1996 By: /s/ Stephen H. Romines
------------------------- ------------------------
Stephen H. Romines
Chairman, President
CEO
By: /s/ Susan J. Uchtman
-----------------------
Susan J. Uchtman
CFO
22
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
amounts in thousands
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 4148
<INT-BEARING-DEPOSITS> 140
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 2061
<INVESTMENTS-MARKET> 2084
<LOANS> 122685
<ALLOWANCE> 530
<TOTAL-ASSETS> 154306
<DEPOSITS> 109986
<SHORT-TERM> 0
<LIABILITIES-OTHER> 976
<LONG-TERM> 20555
0
0
<COMMON> 16
<OTHER-SE> 22773
<TOTAL-LIABILITIES-AND-EQUITY> 154306
<INTEREST-LOAN> 2479
<INTEREST-INVEST> 221
<INTEREST-OTHER> 66
<INTEREST-TOTAL> 2766
<INTEREST-DEPOSIT> 1308
<INTEREST-EXPENSE> 1529
<INTEREST-INCOME-NET> 1237
<LOAN-LOSSES> 12
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 1367
<INCOME-PRETAX> (24)
<INCOME-PRE-EXTRAORDINARY> 33
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<YIELD-ACTUAL> 3.52
<LOANS-NON> 130
<LOANS-PAST> 875
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2045
<ALLOWANCE-OPEN> 520
<CHARGE-OFFS> 2
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 530
<ALLOWANCE-DOMESTIC> 530
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 192
</TABLE>
