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, 1997
----------------------------------------
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 November 12, 1997, there were 1,093,334 shares of the
Registrant's Common Stock, $.01 par value per share, outstanding.
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARY
FORM 10-QSB
September 30, 1997
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,
1997 1997
-------------- ------------
<S> <C> <C>
ASSETS (Dollars in thousands)
Cash and cash equivalents, including interest-bearing accounts
of $1,007 at September 30 and $1,895 at June 30 $ 4,337 $ 5,809
Certificates of deposit 1,404 1,504
Investment securities available-for-sale, at fair value 12,005 14,227
Investment securities held-to-maturity (estimated
fair value $1,509 at September 30 and $1,626 at June 30) 1,494 1,605
Investment in Federal Home Loan Bank stock, at cost 1,192 1,264
Mortgage backed certificates available-for-sale, at fair value 790 828
Loans receivable held-for-investment, net (includes reserves for
loan losses of $499 at September 30 and $482 at June 30) 136,855 134,104
Accrued interest receivable 703 665
Prepaid expenses 146 117
Property and equipment, less accumulated depreciation
and valuation reserves 3,665 3,694
Intangible assets, less accumulated amortization - 31
Real estate owned 156 114
Other assets 8 11
----------- -----------
Total assets $162,755 $163,973
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Customer deposits $120,117 $117,685
Advances from Federal Home Loan Bank 19,300 23,500
Other borrowed funds 55 55
Income taxes payable - current 134 5
Accrued expenses and accounts payable 259 249
Deferred income taxes 233 272
-------- --------
Total liabilities 140,098 141,766
---------- --------
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,
1,568,480 issued, 1,092,554 and 1,091,554 outstanding at
September 30 and June 30, respectively 16 16
Paid-in capital 15,415 15,250
Retained earnings - substantially restricted 15,682 15,212
Treasury stock - at cost; 475,926 and 466,976 shares at
September 30 and June 30, respectively (7,609) (7,430)
Unearned compensation (930) (977)
Unrealized gain (loss) on securities available-for-sale, net of
applicable deferred income taxes 83 136
-------- --------
Total stockholders' equity 22,657 22,207
------- ------
Total liabilities and stockholders' equity $162,755 $163,973
======== =======
</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,
1997 1996
(Dollars in thousands)
<S> <C> <C>
Interest Income:
Loans receivable $ 2,828 $ 2,479
Investment securities 280 221
Mortgage-backed and related securities 11 51
Other interest-earning assets 42 15
--------- --------
Total interest income 3,161 2,766
-------- -------
Interest Expense:
Customer deposits 1,453 1,308
Borrowed funds 340 221
--------- --------
Total interest expense 1,793 1,529
--------- --------
Net interest income 1,368 1,237
Provision for loan losses 19 12
---------- ---------
Net interest income after
provisions for losses 1,349 1,225
--------- ---------
Noninterest Income:
Service charges and other fee income 107 84
Loan origination and commitment fees 1 1
Income from real estate operations 32 22
Insurance commissions 10 15
Gain (loss) on investments 88 (4)
Gain on sale of property and equipment - -
------- ---------
Total noninterest income 238 118
------- --------
Noninterest Expense:
Compensation and employee benefits 500 433
Occupancy and equipment 106 89
Deposit insurance premiums 18 699
Advertising and promotional 22 17
Professional fees 14 19
Other 108 110
------- ------
Total noninterest expense 768 1,367
------ -------
Income (loss) before taxes 819 (24)
Income Taxes Expense (Savings) 298 (57)
-------- -------
Net income $ 521 $ 33
===== ======
Earnings per share .49 .03
====== ======
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, 1997 and 1996
<CAPTION>
(Unaudited)
1997 1996
-------------- ------------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 521 $ 33
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 47 43
Amortization 1 4
Unrealized loss on investment securities 5 4
Gain on sale of intangibles (51) -
Gain on sale of real estate owned (7) -
Gain on sale of investments securities available-for-sale (42) -
Premiums and discounts on mortgage-backed
securities and investment securities (1) -
Loss on loans, net of recoveries 19 12
ESOP compensation expense at fair value 64 27
Vesting of unearned compensation 47 43
Net change in operating accounts:
Accrued interest receivable and other assets (64) (102)
Deferred loan costs (7) (9)
Deferred income tax benefits, net - (282)
Income taxes payable - current 129 (3)
Deferred income tax payable (9) -
Accrued expenses 10 692
------- -------
Net cash from operating activities 662 462
------- --------
Cash flows from investing activities:
Purchase of investment securities available-for-sale (198) (150)
Purchase of investment securities held-to-maturity - -
Purchase of Federal Home Loan Bank stock - (148)
Proceeds from sales of investment securities
available-for-sale 232 -
Proceeds from maturities of investment securities
available-for-sale 2,150 -
Proceeds from maturities of investment securities
held-to-maturity 106 168
Proceeds from sale of Federal Home Loan Bank stock 72 -
Net change in certificates of deposit 100 (5,400)
Net change in federal funds sold - -
Net change in loans receivable (2,919) (3,908)
Proceeds from maturities of mortgage-backed
certificates 36 31
Purchases of property and equipment (27) (167)
Proceeds from sale of property and equipment 9 -
Proceeds from sale of intangibles 81 -
Proceeds from sale of real estate owned 121 -
--------- -------
Net cash used in investing activities (237) (9,574)
-------- --------
See accompanying notes to Consolidated Financial Statements.
-3-
FIRST BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
- - - - - - - - - - - - - - - - - - - - - - - - - -
Three months ended September 30, 1997 and 1996
(Unaudited)
1997 1996
---------- ----------
(Dollars in thousands)
Cash flows from financing activities:
Net change in demand deposits, savings accounts,
and certificates of deposit $ 2,432 $ 4,026
Proceeds from borrowed funds - 7,000
Payments on borrowed funds (4,200) -
Proceeds from sale of common stock 101 12
Purchase of treasury stock (179) (1,038)
Cash dividends paid (51) (56)
------- --------
Net cash from financing activities (1,897) 9,944
------- -------
Net increase/(decrease) in cash and cash equivalents (1,472) 832
Cash and cash equivalents -
beginning of period 5,809 3,316
------- --------
Cash and cash equivalents -
end of period $ 4,337 $ 4,148
</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, 1997
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, 1997 interim financial statements.
The results of operations for the periods ended September 30, 1997
and 1996 are not necessarily indicative of the operating results for
the full year. The June 30, 1997 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,
1997 and 1996 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 Issuable
----------------------- ---------
1997 1,003,202 66,326
1996 1,125,242 48,584
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. 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.
-5-
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(continued)
Vesting is accelerated upon retirement, death or disability of the
participant. Forfeitures are returned to the Savings Bank or
are allocated 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 $107,000 and $66,000 for the three months ended September
30, 1997 and 1996, respectively.
A summary of ESOP shares at September 30, 1997 is as follows:
Shares allocated 63,463
Shares committed for release 4,721
Unreleased shares 80,377
------
Total 148,561
=======
Fair value of unreleased shares $1,848,671
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
First Bancshares, Inc. has completed six separate stock repurchase
programs between March 9, 1994 and June 30, 1997. During those six
programs, a total of 471,361 shares of stock have been acquired at a
combined cost of $7,368,000. On June 30, 1997, a seventh repurchase
program of 109,466 shares was initiated. As of November 12, 1997,
4,585 shares had been repurchased at a cost of $92,000. Treasury stock
is shown at cost for financial statement presentation.
NOTE G - Accounting Changes
None.
-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, 1997, as well as certain material changes in results of
operations during the three month periods ended September 30, 1997
and 1996.
The following narrative is written with the presumption that
the users have read or have access to the Company's 1997 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, 1997,
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, 1997 to the
Three Months Ended September 30, 1996
Financial Condition. Total assets decreased $1.2 million
during the quarter to $162.8 million at September 30, 1997. Net
loans were $136.9 million at September 30, 1997, an increase of $2.8
million. Cash and cash equivalents decreased $1.5 million during the
quarter and investment securities available-for-sale decreased $2.2
million.
FHLB advances were reduced by $4.2 million. The decreases in
cash and investments described above were the primary source of the
payment. Customer deposits increased by $2.4 million.
Nonperforming assets were $1,597,000, or .98% of total assets at
September 30, 1997 compared to $1,520,000, or .93% of total assets,
at June 30, 1997. Nonaccrual loans of $57,000 at June 30, 1997
remained the same for September 30, 1997.
Net Income. Net income was $521,000 for the quarter ended
September 30, 1997 compared to $33,000 for the quarter ended
September 30, 1996. Net interest income after provision for loan
losses increased $124,000 and noninterest income increased $121,000.
These two increases were combined with a $600,000 decrease in
noninterest expense. Income tax expense increased $355,000 due to
the increase in income before income tax expense.
Net Interest Income. Net interest income increased $131,000,
or 10.6%, to $1,368,000 for the quarter ended September 30, 1997 from
$1,237,000 for the quarter ended September 30, 1996. Interest income
increased $395,000 while interest expense increased $264,000.
Interest Income. Interest income was $3,161,000 for the quarter
ended September 30, 1997 compared to $2,766,000 for the quarter ended
September 30, 1996 for an increase of $395,000, or 14.3%. The
majority of the change was a $349,000 increase in interest income
from loans receivable from $2,479,000 for the quarter ended September
30, 1996 to $2,828,000 for the quarter ended September 30, 1997. The
increase was primarily attributable to the increase in average loans
outstanding coupled with a slight increase in the average yield.
Interest income from investment securities increased by $59,000 from
$221,000 for the quarter ended September 30, 1996 to $280,000 for the
quarter ended September 30, 1997. A higher outstanding balance of
securities along with a higher average interest rate caused the
increase. Income from other interest-earning assets increased by
$27,000 as funds from the call of an investment security were held
in the FHLB daily-time savings account until used to pay on an FHLB
advance. Mortgage-backed securities income decreased by $40,000.
The decrease was caused by a reduction in the outstanding balance due
to a sale of a $2.0 million security in April 1997.
-8-
</page>
FIRST BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Interest Expense. Interest expense increased by $264,000, or
17.2%, from $1,529,000 for the quarter ended September 30, 1996 to
$1,793,000 for the quarter ended September 30, 1997. Interest
expense on customer deposits increased $145,000, or 11%, as the
outstanding balance increased and the rate paid on these deposits
increased slightly. An increase in the outstanding balance of FHLB
advances caused the interest expense to increase by $119,000, or
53.8%.
Provision for Loan Losses. Loan loss provisions increased by
$7,000 from $12,000 for the quarter ended September 30, 1996 to
$19,000 for the quarter ended September 30, 1997. Actual loan
losses, net of recoveries, was $1,800 for the quarter ended
September 30, 1996 and $9,000 for the quarter ended September 30,
1997.
Noninterest Income. Noninterest income of $117,000 for the
quarter ended September 30, 1996 increased by $121,000 to $238,000
for the quarter ended September 30, 1997. Service charges and other
fee income increased by $23,000, or 27%, from $84,000 for the quarter
ended September 30, 1996 to $107,000 for the quarter ended September
30, 1997. The sale of the Lawson and Lawson Insurance Agency which
resulted in a $51,000 pre-tax gain and the sale of common stock at a
pre-tax gain of $43,000 caused the increase in gains on investments.
Noninterest Expense. Noninterest expense decreased $600,000
from $1,368,000 for the quarter ended September 30, 1996 to $768,000
for the quarter ended September 30, 1997. 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). Reductions in
SAIF premiums after that payment further lowered the related expense
by $41,000. The increase in the fair market value of FBSI stock
caused the ESOP expense to increase by $41,000. Normal salary
increases were $19,000 and group health insurance premiums
increased $7,000. Occupancy and equipment expense increased
$16,000 comprised of increases in repairs expense of $6,000 and
additional depreciation for the new Gainesville building and
Theodosia branch of $8,500.
Net Interest Margin. Net interest margin decreased from 3.52%
for the three months ended September 30, 1996 to 3.48% for the three
months ended September 30, 1997. Income from earning assets
increased by $395,000, or 14%, between the two quarters while
interest expense increased by $264,000, or 17%. The average earning
asset base increased by $16.6 million, or 12%, which was offset by
a $18.1 million, or 15%, 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 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.
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, 1997, First
Home had approved loan commitments totaling $2.1 million and
undisbursed loans in process of $2.3 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.
First Home Savings Bank has signed a contract to acquire two banking
centers from NationsBank, N.A. The purchase is expected to be
completed in mid-March 1998. Based on preliminary information from
NationsBank, First Home will receive approximately $8.0 million of
loans, $20.0 million in customer deposits and $12.0 million in liquid
funds at closing. Conversion expenses, such as advertising, notifying
current NationsBank customers and installation of First Home's computer
equipment, will mostly occur in the quarter ended March 31, 1998.
After the purchase is completed, expenses are not expected to exceed
income at the two locations.
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 gradually increase
as the deposit base gradually increases. The interest expense
increase is projected to be largely offset as new loans are funded.
Customer deposits are expected to exceed withdrawals.
At September 30, 1997, certificates of deposit amounted to $81.0
million, or 68% of First Home's total deposits, including $45.3
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. First Home's liquidity ratio was 12.74% at
September 30, 1997 and its short-term liquidity ratio at September
30, 1997 was 11.52%. 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, 1997.
<TABLE>
Percent of Adjusted
Amount Total Assets
--------- ----------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Tangible capital $17,999 11.2%
Tangible capital requirement 2,408 1.5
-------- ------
Excess $15,59 9.7%
======= ======
Core capital $17,999 11.2%
Core capital requirement 4,816 3.0
------- ------
Excess $13,183 8.2%
======= ======
Risk-based capital $18,180 16.9%
Risk-based capital requirement 8,563 8.0
------- -------
Excess $9,617 8.9%
======== ======
</TABLE>
-13-
</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
Form 8-K filed on October 14, 1997 reporting the purchase agreement
between NationsBank, N.A. and First Home Savings Bank. First Home
will purchase the assets and assume the liabilities of the Crane
Banking Center and the Galena Banking Center of NationsBank. Both
centers are in Missouri.
-14-
</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: November 17, 1997 By: /s/ Stephen H. Romines
---------------------- --------------------------
Stephen H. Romines
Chairman, President,
CEO
By: /s/ Susan J. Uchtman
------------------------
Susan J. Uchtman
CFO
16
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