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 March 31, 2000
----------------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- --------------
Commission File Number 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 May 03, 2000, there were 1,940,915 shares of the
Registrant's Common Stock, $.01 par value per share, outstanding.
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
FORM 10-QSB
March 31, 2000
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
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited) 6-7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8-13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES
</page>
<TABLE>
<CAPTION>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
- - - - - - - - - - - - - - - - - - - - - - - -
(Unaudited)
March 31, June 30,
2000 1999
------------ --------
ASSETS
(Dollars in thousands)
<S> <C> <C>
Cash and cash equivalents, including interest-bearing
accounts of $5,804 at March 31 and $8,032 at June 30 $ 8,867 $ 10,722
Federal funds sold 320 245
Certificates of deposit 1,109 1,209
Investment securities available-for-sale, at fair value 3,911 3,217
Investment securities held-to-maturity (estimated
fair value $1,494 at March 31 and $1,530 at June 30) 1,572 1,544
Investment in Federal Home Loan Bank stock, at cost 1,072 1,058
Mortgage backed certificates available-for-sale, at fair value 472 550
Loans receivable held-for-investment, net (includes reserves for
loan losses of $579 at March 31 and $540 at June 30) 166,415 153,616
Accrued interest receivable 881 772
Prepaid expenses 215 91
Property and equipment, less accumulated depreciation
and valuation reserves 5,759 4,652
Real estate owned 99 -
Intangible assets, less accumulated amortization 834 885
Other assets 14 160
---------- ----------
Total assets $ 191,540 $ 178,721
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Customer deposits $ 159,729 $ 151,210
Advances from Federal Home Loan Bank 6,055 2,200
Other borrowed funds 27 -
Income taxes payable - current 406 196
Accrued expenses and accounts payable 655 672
Deferred income taxes 201 194
---------- ----------
Total liabilities 167,073 154,472
---------- ----------
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,
2,753,816 and 2,718,796 issued at March 31 and June 30,
respectively, 1,960,515 and 2,063,902 outstanding at
March 31 and June 30, respectively 28 27
Paid-in capital 16,557 16,245
Retained earnings - substantially restricted 19,685 18,362
Treasury stock - at cost; 793,301 and 654,894 shares at
March 31 and June 30, respectively (11,360) (9,873)
Unearned compensation (368) (491)
Accumulated other comprehensive loss (75) (21)
--------- ----------
Total stockholders' equity 24,467 24,249
---------- ----------
Total liabilities and stockholders' equity $ 191,540 $ 178,721
========== ==========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-1-
</page>
<TABLE>
<CAPTION>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- - - - - - - - - - - - - - - - - - - - -
(Unaudited) (Unaudited)
Quarter Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
-------- ------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable $ 3,280 $3,019 $ 9,644 $ 9,117
Investment securities 111 96 335 300
Mortgage-backed and related securities 8 10 26 43
Other interest-earning assets 62 84 208 251
------- ------ -------- --------
Total interest income 3,461 3,209 10,213 9,711
------- ------ -------- --------
Interest Expense:
Customer deposits 1,724 1,572 5,035 4,840
Borrowed funds 126 55 220 215
------- ------ ------- --------
Total interest expense 1,850 1,627 5,255 5,055
------- ------ ------- --------
Net interest income 1,611 1,582 4,958 4,656
Provision for loan losses 25 17 62 60
------- ------ ------- --------
Net interest income after
provisions for losses 1,586 1,565 4,896 4,596
------- ------- ------ --------
Noninterest Income:
Service charges and other fee income 169 148 490 441
Loan origination and commitment fees 3 3 6 6
Income from real estate operations 45 25 113 76
Insurance commissions 44 49 140 124
Gain on investments 1 21 1 7
Gain on sale of property and equipment - - - (8)
------- ------ ------- -------
Total noninterest income 262 246 750 646
------ ------- ------- -------
Noninterest Expense:
Compensation and employee benefits 624 634 1,938 1,910
Occupancy and equipment 174 155 497 440
Deposit insurance premiums 8 22 52 64
Advertising and promotional 13 14 45 55
Professional fees 21 23 60 86
Other 207 211 641 576
------ ------- ------- -------
Total noninterest expense 1,047 1,059 3,233 3,131
------ ------- -------- -------
Income before taxes 801 752 2,413 2,111
Income Taxes 296 284 866 778
------ ------- ------ --------
Net income $ 505 $ 468 $1,547 $ 1,333
====== ====== ====== ========
Earnings per share - basic .27 .23 .80 .65
====== ====== ====== =======
Earnings per share - diluted .26 .22 .77 .62
====== ====== ====== =======
Dividends per share .04 .04 .12 .10
====== ====== ====== =======
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-2-
</page>
<TABLE>
<CAPTION>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- - - - - - - - - - - - - - - - - - - - -
Nine months ended March 31, 2000 and 1999
(Unaudited)
2000 1999
-------- -------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,547 $ 1,333
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 250 198
Amortization 51 51
Unrealized loss on investment securities - 14
Gain on sale of property and equipment - (14)
Loss on loans, net of recoveries 62 60
Release of ESOP shares 261 361
Vesting of MRP shares - 56
Net change in operating accounts:
Accrued interest receivable and other assets (87) (1)
Deferred loan costs (34) (41)
Income taxes payable - current 210 304
Deferred income tax payable 3 (9)
Accrued expenses (17) (64)
-------- --------
Net cash from operating activities 2,246 2,248
-------- --------
Cash flows from investing activities:
Purchase of investment securities
available-for-sale (743) (898)
Purchase of investment securities held-to-maturity (100) (466)
Purchase of Federal Home Loan Bank stock (14) -
Proceeds from maturities of investment securities
available-for-sale - 600
Proceeds from maturities of investment securities
held-to-maturity 72 423
Net change in certificates of deposit 100 621
Net change in federal funds sold (75) (245)
Net change in loans receivable (12,926) (5,744)
Proceeds from maturities of mortgage-backed
certificates 77 109
Purchases of property and equipment (1,357) (583)
Proceeds from sale of property and equipment - 114
-------- ---------
Net cash used in investing activities (14,966) (6,069)
-------- ---------
See accompanying notes to Consolidated Financial Statements.
-3-
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
- - - - - - - - - - - - - - - - - - - - - - - - -
Nine months ended March 31, 2000 and 1999
(Unaudited)
2000 1999
------- ----------
(Dollars in thousands)
Cash flows from financing activities:
Net change in demand deposits, savings accounts,
and certificates of deposit $ 8,519 $ 7,678
Proceeds from borrowed funds 3,884 -
Payments on borrowed funds (2) (2,000)
Proceeds from sale of common stock 175 79
Purchase of treasury stock (1,487) (1,794)
Cash dividends paid (224) (201)
-------- ---------
Net cash from financing activities 10,865 3,762
-------- ---------
Net increase/(decrease) in cash and cash equivalents (1,855) (59)
Cash and cash equivalents -
beginning of period 10,722 11,863
-------- ---------
Cash and cash equivalents -
end of period $ 8,867 $ 11,804
========= =========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-4-
</page>
<TABLE>
<CAPTION>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE INCOME
- - - - - - - - - - - - - - - - - - - - -
Nine months ended March 31, 2000 and 1999
(Unaudited)
Quarter Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net income $ 505 $ 468 $ 1,547 $ 1,333
------ ------ -------- --------
Unrealized gains (losses) on securities:
Gains (losses) arising during period,
net of tax 8 (59) (54) (33)
Reclassification adjustment, net of tax - - - -
------ ------ -------- --------
Other comprehensive income 8 (59) (54) (33)
------ ------ -------- ---------
Comprehensive income $ 513 $ 409 $ 1,493 $ 1,300
====== ====== ======== =========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-5-
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE A - Basis of Presentation
The consolidated interim financial statements as of March 31, 2000
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 March 31, 2000 interim financial statements.
The results of operations for the periods ended March 31, 2000 and
1999 are not necessarily indicative of the operating results for the
full year. The June 30, 1999 Consolidated Statement of Financial
Condition presented with the interim financial statements was audited
and received an unqualified opinion.
NOTE B - Earnings per Share
Basic earnings per share excludes dilution and is computed by
dividing net income available to common stockholders by the weighted
average number of shares outstanding during the period. Diluted
earnings per share reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised
or resulted in the issuance of common stock that would share in the
earnings of the Company. Dilutive potential common shares are added
to weighted average shares used to compute basic earnings per share.
The number of shares that would be issued from the exercise of stock
options has been reduced by the number of shares that could have been
purchased from the proceeds at the average market price of the
Company's stock. For the periods presented, unreleased ESOP shares
are not considered outstanding for purposes of calculating earnings
per share.
</page>
-6-
FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(continued)
NOTE B - Earnings per Share-continued
Dilutive
Weighted Average Number Shares
of Common Shares Issuable
------------------- ---------
Quarter ended March 31, 2000 1,902,507 65,221
Quarter ended March 31, 1999 2,009,395 106,382
Nine months ended March 31, 2000 1,928,353 69,808
Nine months ended March 31, 1999 2,034,867 107,200
NOTE C - Treasury Stock
First Bancshares, Inc. has completed seven separate stock repurchase
programs between March 9, 1994 and September 21, 1999. During those
seven programs, a total of 683,308 shares of stock have been acquired
at a combined cost of $10.2 million. On September 21, 1999, an
eighth repurchase program of 203,239 shares was initiated. As of
May 3, 2000, 133,021 shares had been repurchased at a cost of
$1,395,000. Treasury stock is shown at cost for financial statement
presentation.
NOTE D - Accounting Changes
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities,"
which established accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments as fair value.
This Statement was adopted July 1, 1999 by the Company. The
adoption of this standard has not had a material impact on the
Company to date.
-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, 1999, as well as certain material changes in
results of operations during the three and nine month periods ended
March 31, 2000 and 1999.
The following narrative is written with the presumption that
the users have read or have access to the Company's 1999 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, 1999,
and for the year then ended. Therefore, only material changes in
financial condition and results of operations are discussed herein.
This report contains certain "forward-looking statements." The
Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 and is including
this statement for the express purpose of availing itself of the
protection of such safe harbor with respect to all of such
forward-looking statements. These forward-looking statements, which
are included in Management's Discussion and Analysis, describe future
plans or strategies and include the Company's expectations of future
financial results. The words "believe", "expect", "anticipate",
"estimate", "project," and similar expressions identify
forward-looking statements. The Company's ability to predict results
or the effect of future plans or strategies is inherently uncertain.
Factors which could affect actual results include interest rate
trends, the general economic climate in the Company's market area and
the country as a whole, loan delinquency rates and changes in federal
and state regulation. These factors should be considered in
evaluating the forward-looking statements, and undue reliance should
not be placed on such statements.
Comparison of the Three Months ended March 31, 2000 to the Three
Months Ended March 31, 1999
Financial Condition. During the quarter ended March 31,
2000, total assets increased $5.6 million to $191.5 million.
Net loans increased $4.6 million to $166.4 million. Cash
and cash equivalents increased $.4 million, investment
securities available-for-sale increased $.3 million and property
and equipment, net of accumulated depreciation increased $.3 million.
Customer deposits increased $7.2 million to $159.7 million
during the quarter ended March 31, 2000. The increase was split between
checking accounts and customer certificates of deposit. The increase
in funds was used to fund loan growth and reduce FHLB advances by $2.1 million.
Nonperforming assets decreased slightly to $2.6 million, or 1.36% of
total assets at March 31, 2000 compared to $2.7 million, or 1.45% of
total assets, at December 31, 1999.
-8-
</page>
FIRST BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Net Income. Net income of $505,000 for the quarter ended
March 31, 2000 increased $37,000 from $468,000 for the quarter
ended March 31, 1999. Net interest income, after provision for
loan losses, increased $21,000. Noninterest income increased
$16,000. Net income was also enhanced by a $12,000 reduction in
noninterest expense. These increases were somewhat offset by a
$12,000 income tax expense increase.
Net Interest Income. Net interest income increased $29,000,
or 1.8%, from $1,582,000 for the quarter ended March 31, 1999 to
$1,611,000 for the quarter ended March 31, 2000. Interest income
increased $252,000 offset by a $223,000 increase in interest
expense.
Interest Income. Interest income of $3,461,000 for the quarter
ended March 31, 2000 increased $252,000, or 7.9%, from $3,209,000
for the quarter ended March 31, 1999. Interest income from loans
receivable increased $261,000 from $3,019,000 for the quarter ended
March 31, 1999 to $3,280,000 for the quarter ended March 31,
2000. The increase was attributable to the increase in average loans
outstanding as well as a slight increase in the average yield.
Income from investment securities increased $15,000. The
average balance of investment securities was higher for the quarter
ended March 31, 2000. Income from other interest-earning assets
decreased by $22,000 as a lower balance was maintained in the FHLB
daily-time savings account during the quarter ended March 31, 2000.
Interest Expense. Interest expense increased by $223,000 to
$1,850,000 for the quarter ended March 31, 2000 from $1,627,000
for the quarter ended March 31, 1999. Interest expense on customer
deposits increased $152,000 as the outstanding balance of those deposits
increased and a higher average interest rate was paid.
Interest expense on borrowed funds increased by $71,000 as
additional borrowing was necessary to fund loan growth. Further,
the rate on borrowings was higher than in the same quarter a year ago.
Provision for Loan Losses. Loan loss provisions increased
from $17,000 for the quarter ended March 31, 1999 to
$25,000 for the quarter ended March 31, 2000. Actual loan losses,
net of recoveries, on First Home originated loans were $24,000 for
the quarter ended March 31, 2000 compared to $9,000 for the quarter
ended March 31, 1999.
Noninterest Income. Noninterest income increased $16,000, or
6.5% to $262,000 for the quarter ended March 31, 2000 from
$246,000 for the quarter ended March 31, 1999. Service charges
and other fee income increased $21,000, or 14.2%. This increase was
combined with an increase of $20,000 in income from real estate
operations. Gains on investments decreased from $21,000 for the quarter
ended March 31, 1999 to $1,000 for the quarter ended March 31, 2000.
Insurance commissions decreased $5,000.
Noninterest Expense. Noninterest expense decreased $12,000
from $1,059,000 for the quarter ended March 31, 1999 to
$1,047,000 for the quarter ended March 31, 2000. Deposit insurance
premiums decreased $14,000 based on lower premium rates. Compensation
and employee benefits decreased $10,000. A $40,000 decrease in ESOP
expense due to the decline in the fair market value of FBSI stock was
partially offset by a $22,000 increase in normal salaries and an
$8,000 increase in group health insurance costs. There were slight
decreases in advertising, professional fees and other noninterest
expenses. These decreases were partially offset by a $19,000 increase in
occupancy and equipment expenses, specifically depreciation and
repairs and maintenance on investment property and depreciation on computer
hardware.
-9-
</page>
FIRST BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Net Interest Margin. Net interest margin decreased from 3.77%
for the three months ended March 31, 1999 to 3.66% for the three
months ended March 31, 2000. Income from earning assets
increased by $252,000, or 7.8%, between the two quarters while
interest expense increased by $223,000, or 13.7%. The average earning
asset base increased by $10.3 million, or 6.1%, which was offset by
a $12.3 million, or 8.5%, increase in the average interest-bearing
liability base.
Comparison of the Nine Months ended March 31, 2000 to the Nine
Months Ended March 31, 1999.
Financial Condition. Total assets increased $12.8 million during
the nine months ended March 31, 2000. Net loans increased $12.8
million, property and equipment increased a net $1.1 million and
investments increased $.7 million. Cash and cash equivalents
decreased $1.8 million. Customer deposits increased $8.5 million
to $159.7 million at March 31, 2000. FHLB advances increased $3.9
million with the proceeds used to fund loan growth.
Nonperforming assets increased $700,000 during the nine months to
$2.6 million.
Net Income. Net income increased $214,000 from $1,333,000 for
the nine months ended March 31, 1999 to $1,547,000 for the nine
months ended March 31, 2000. Net interest income, after provision
for loan losses, increased $300,000, or 6.5%. Noninterest income
increased $104,000. Those increases were, however, offset
by a $102,000, or 3.3%, increase in noninterest expense and an $88,000
increase in income tax expense.
Net interest income. Net interest income of $4,958,000 for the
nine months ended March 31, 1999 increased $302,000 from $4,656,000
for the nine months ended March 31, 1999. Interest income
increased $502,000 while interest expense increased $200,000.
Interest income. Total interest income increased $502,000 from
$9,711,000 for the nine months ended March 31, 1999 to $10,213,000
for the nine months ended March 31, 2000. Interest income from
loans receivable increased $527,000 as a result of a higher
outstanding balance in loans receivable offset somewhat by a slightly lower
average yield. Income from investment securities increased $35,000
attributable to a higher balance in those assets. Those increases
were offset; however, by a $43,000 decrease in income from interest-earning
assets and a $17,000 decrease in mortgage-backed and related
securities. Both decreases resulted from a lower balance in investments
and a slightly lower average yield.
Interest Expense. During the nine months ended March 31,
2000, interest expense increased $200,000 to $5,255,000 from
$5,055,000 for the nine months ended March 31, 1999. Interest
expense on customer deposits increased $195,000. Higher
outstanding balances, primarily in interest bearing checking
accounts, more than offset a lower average rate paid on deposits.
A comparison of FHLB advances between the nine month periods reflects
only a slight variance in the average outstanding balance and the
average rate; therefore the change from the nine months ended March 31,
1999 to the nine months ended March 31, 2000 was a $5,000 decrease.
Provision for loan losses. Provision for loan losses increased slightly
from $60,000 for the nine months ended March 31, 1999 to $62,000
for the nine months ended March 31, 2000. Actual loan losses, net
of recoveries, for the nine months ended March 31, 2000 were $23,200.
Actual loan losses, net of recoveries, were $20,200 for the nine
months ended March 31, 1999.
-10-
</page>
FIRST BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Noninterest income. Noninterest income was $750,000 for the nine
months ended March 31, 2000 compared to $646,000 for the nine
months ended March 31, 1999. The $104,000 increase included an
increase in service charges and other fee income of $49,000, an
increase in insurance commissions of $16,000 and an increase in
income from real estate operations of $37,000. The increase in
insurance commissions resulted from increased activity at the
Hartville office and addition of South Central Missouri Title, Inc.
offices in Marshfield and Ava, Missouri. Income from real estate
operations increased with the acquisition of additional rental
properties.
The nine months ended March 31, 1999 contained a write-down
of $14,000 in an auto loan pool security offset by a $21,000 gain
on the sale of investment real estate and an $8,000 loss in the disposal
of unused equipment. During the nine months ended March 31, 2000, there
was only a $1,000 recovery on the write-off of the auto pool security.
Noninterest expense. Noninterest expense for the nine months
ended March 31, 2000 was $3,233,000 compared to $3,131,000 for the
nine months ended March 31, 1999. The $102,000 increase was
primarily related to other operating expenses. The majority of the
increase in other operating expenses were postage costs, in-house
printing of checks for customers with selected checking accounts and
additional charitable contributions for which First Home received
state tax credits. Also contributing to the overall increase was a
$35,000 reduction in a loss reserve for items deposited with the
correspondent bank for which First Home had not yet received credit
as of June 30, 1998. First Home received credit for these items
during the nine months ended March 31, 1999.
Compensation and employee benefits increased $28,000. In July,
1999, First Home's management initiated a reimbursement plan to
employees who purchased a personal computer for home use. The
expense for the nine months ended March 31, 2000 for this plan
was $60,000. Normal salary increases and additional personnel
increased $77,000 while group health insurance premiums
and self-insurance funding costs increased $39,000. The decrease in
the fair market value of FBSI stock caused the ESOP expense to
decrease by $104,000. Final vesting of the MRP shares in December
1998 created a $44,000 expense. There was no such corresponding
expense in the nine months ended March 31, 2000.
Occupancy and equipment expense increased $57,000. The increase
was primarily caused by additional depreciation and operating costs
of computer hardware and software and depreciation and repair and
maintenance on investment property acquired during the nine months
ended March 31, 2000.
Professional fees decreased $26,000 as a result of reduction of audit
and outside accounting costs. Deposit insurance premiums decreased $12,000
based on lower premium rates. Advertising expense decreased $10,000.
Net interest margin. Net interest margin increased from 3.74%
for the nine months ended March 31, 1999 to 3.78% for the nine
months ended March 31, 2000. Income from earning assets increased
by $502,000, or 5.2%, while interest expense increased $200,000, or
4.0%. The average earning asset base increased $8.8 million, or
5.3%. The average interest-bearing liability base increased $9.9
million, or 6.7%.
-11-
</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 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 March 31, 2000, First
Home had approved loan commitments totaling $3.3 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.
Normal daily operating expenses are expected to increase
somewhat as a new branch at Kissee Mills, Missouri is activated
over the last half of calendar year 2000. Noninterest expense as
a percentage of average assets at 2.3% is expected to increase
slightly. Interest expense is expected to gradually increase as
the deposit base gradually increases and average interest rates paid
on new and renewed accounts increase. New or renewed FHLB advances
are expected to contribute to the increase in interest expense. The
interest expense increase is projected to be largely offset as new
loans are funded and rates on existing adjustable rate loans are gradually
increased. Customer deposits are expected to exceed withdrawals.
At March 31, 2000, certificates of deposit amounted to $96.7
million, or 61% of First Home's total deposits, including $58.4
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.
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 4% of the average daily
balance of its net withdrawable deposits and short-term borrowings.
First Home's liquidity ratio was 7.04% at March 31, 2000. First
Home consistently maintains liquidity level in excess of regulatory
requirements, and believes this is an appropriate strategy for proper
asset and liability management.
-12-
</page>
FIRST BANCSHARES, INC. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
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 March 31, 2000.
<TABLE>
<CAPTION>
Percent of Adjusted
Amount Total Assets
------------ ---------------------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Tangible capital $19,595 10.4%
Tangible capital requirement 2,824 1.5
------- ------
Excess $16,771 8.9%
------- ------
Core capital $19,595 10.4%
Core capital requirement 7,532 4.0
------- -----
Excess $12,063 6.4%
------- -----
Risk-based capital $19,857 14.0%
Risk-based capital requirement 11,317 8.0
------- -----
Excess $ 8,540 6.0%
------- -----
</TABLE>
-13-
</page>
FIRST BANCSHARES, INC. AND SUBSIDIARIES
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.
-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: May 12, 2000 By: /s/ Stephen H. Romines
-------------------- -------------------------
Stephen H. Romines
Chairman, President
CEO
By: /s/ Susan J. Uchtman
-----------------------
Susan J. Uchtman
CFO
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
in thousands
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-2000
<PERIOD-END> MAR-31-2000 MAR-31-2000
<CASH> 8867 8867
<INT-BEARING-DEPOSITS> 5804 5804
<FED-FUNDS-SOLD> 320 320
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 3911 3911
<INVESTMENTS-CARRYING> 1572 1572
<INVESTMENTS-MARKET> 1494 1494
<LOANS> 166415 166415
<ALLOWANCE> 579 579
<TOTAL-ASSETS> 191540 191540
<DEPOSITS> 159729 159729
<SHORT-TERM> 5855 5855
<LIABILITIES-OTHER> 1262 1262
<LONG-TERM> 227 227
0 0
0 0
<COMMON> 28 28
<OTHER-SE> 24439 24439
<TOTAL-LIABILITIES-AND-EQUITY> 191540 191540
<INTEREST-LOAN> 3280 9644
<INTEREST-INVEST> 111 335
<INTEREST-OTHER> 70 234
<INTEREST-TOTAL> 3461 10213
<INTEREST-DEPOSIT> 1724 5035
<INTEREST-EXPENSE> 1850 5255
<INTEREST-INCOME-NET> 1611 4958
<LOAN-LOSSES> 25 62
<SECURITIES-GAINS> 1 1
<EXPENSE-OTHER> 207 641
<INCOME-PRETAX> 801 2413
<INCOME-PRE-EXTRAORDINARY> 801 2413
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 505 1547
<EPS-BASIC> .27 .80
<EPS-DILUTED> .26 .77
<YIELD-ACTUAL> 3.66 3.78
<LOANS-NON> 55 55
<LOANS-PAST> 2611 2611
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 578 540
<CHARGE-OFFS> 24 28
<RECOVERIES> 0 5
<ALLOWANCE-CLOSE> 579 579
<ALLOWANCE-DOMESTIC> 579 579
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 296 296
</TABLE>
