United States
Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the Period Ended September 30, 1996
or
[ ] Transition Report Under Section 13 or 15(d ) of the Securities Exchange Act
of 1934 For the Transition Period Ended From to
----------------
Commission file number 0-26174
FIRST BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-2094754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2833 Main St.
East Point, Georgia 30344
(Address of principal executive offices) (Zip Code)
(404) 768-9305
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and fiscal year, if changed since last report)
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 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes X No
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $1.00 Par Value 1,052,462 shares as of October 25, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BANKSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- -------------
(Unaudited) (Note)
ASSETS
<S> <C> <C>
Cash and due from banks $ 2,588,395 $ 3,403,926
Investment securities 21,402,672 23,966,501
Federal funds sold 3,520,000 --
Loans, net 72,970,336 58,090,869
Premises and equipment, net 1,812,343 1,828,648
Real estate acquired through foreclosure, net 606,000 808,090
Cash value of life insurance 2,333,262 2,266,781
Other assets 524,807 1,886,208
------------- -------------
$105,757,815 $ 92,251,023
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 83,405,973 $ 78,733,938
Federal funds purchased 4,000,000 2,360,000
Notes payable to FHLB and banks 8,300,000 2,000,000
Other liabilities 1,332,088 1,249,562
------------- -------------
Total Liabilities 97,038,061 84,343,500
Stockholders' Equity:
Common stock, $1.00 par value;
10,00,000 shares authorized; 1,048,840
shares issued and outstanding 1,048,840 1,048,840
Additional paid-in capital 4,198,435 4,198,435
Retained earnings 3,566,520 2,397,106
Net unrealized gains (losses) on securities (94,041) 263,142
-------------- -------------
Total Stockholders' Equity 8,719,754 7,907,523
------------- -------------
$ 105,757,815 $ 92,251,023
============= =============
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The accompanying note is an integral part of the condensed consolidated
financial statements.
<PAGE>
FIRST BANKSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 1,862,761 $ 1,206,298 $ 5,105,096 $ 3,438,613
Investment securities 339,299 298,329 1,027,189 800,543
Other 21,688 54,220 57,211 167,799
----------- ----------- ------------ -----------
Total interest income 2,223,748 1,558,847 6,189,496 4,406,955
Interest expense:
Deposits 671,902 646,123 2,018,911 1,769,108
Federal funds purchased and note payable 66,732 3,087 217,214 6,906
----------- ----------- ------------ -----------
Total interest expense 738,634 649,210 2,236,125 1,776,014
----------- ----------- ------------ -----------
Net interest income 1,485,114 909,637 3,953,371 2,630,941
Provision for possible loan losses 50,000 5,000 50,000 25,000
----------- ----------- ------------ -----------
Net interest income after provision
for possible loan losses 1,435,114 904,637 3,903,371 2,605,941
Noninterest income 670,902 190,973 1,523,588 711,692
Noninterest expenses:
Salaries and employee benefits 645,499 377,412 1,777,424 1,093,900
Occupancy and equipment 100,796 58,335 294,659 175,092
Other operating 506,053 262,132 1,278,853 936,849
----------- ----------- ------------ -----------
Total noninterest expenses 1,252,348 697,879 3,350,936 2,205,841
----------- ----------- ------------ -----------
Income before income taxes 853,668 397,731 2,076,023 1,111,792
Income taxes 320,497 141,847 765,800 361,492
----------- ----------- ------------ -----------
Net income $ 533,171 $ 255,884 $ 1,310,223 $ 750,300
=========== =========== ============ ===========
Net income per share:
Primary $ .51 $ .24 $ 1.25 $ .72
=========== =========== ============ ===========
Fully diluted $ .49 $ .24 $ 1.20 $ .72
=========== =========== ============ ===========
Weighted average common shares:
Primary 1,048,840 1,048,840 1,048,840 1,048,840
Fully diluted 1,094,000 1,048,840 1,094,000 1,048,840
The accompanying note is an integral part of the condensed consolidated
financial statements.
<PAGE>
FIRST BANKSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Cash flows provided by operating activities $ 2,666,254 $ 802,290
Cash flows (used in) provided by investing activities (16,093,820) (14,282,162)
Cash flows provided by (used in) financing activities 12,612,035 12,698,725
------------- -------------
Net increase (decrease) in cash and cash equivalents (815,531) (781,147)
Cash and cash equivalents at beginning of period 3,403,926 3,367,514
------------- -------------
Cash and cash equivalents at end of period $ 2,588,395 $ 2,586,367
============= =============
The accompanying note is an integral part of the condensed consolidated
financial statements.
<PAGE>
FIRST BANKSHARES, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
September 30, 1996
(Unaudited)
Basis of Presentation The accompanying unaudited condensed consolidated
financial statements of First Bankshares, Inc. and Subsidiary (the Company) have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
consolidated financial statements. In the opinion of management, all adjustments
(consisting of normal recurring items) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996. For further
information, refer to the audited consolidated financial statements and notes
thereto included in the Company's Form 10-KSB for the year ended December 31,
1995.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net interest income increased to $1,485,114 for the quarter ended September 30,
1996 from $909,637 for the quarter ended September 30, 1995 and to $3,953,371
for the nine month period ended September 30, 1996 from $2,630,941 for the nine
month period ended September 30, 1995. The increase was primarily due to
increases in loan volumes and other interest bearing assets and the relative
market interest rates and fees which exceed the related cost of funds for
investing in such assets. Total interest income increased to $2,223,748 for the
quarter ended September 30, 1996 from $1,558,847 for the quarter ended September
30, 1995 and to $6,189,496 for the nine month period ended September 30, 1996
from $4,406,955 for the nine month period ended September 30, 1995. The increase
in interest income was primarily the result of increases in the net loan
portfolio of 64% from $44,604,944 to $72,970,336 from September 30, 1995 to
September 30, 1996. Total interest expense increased to $738,634 for the quarter
ended September 30, 1996 from $649,210 for the quarter ended September 30, 1995
and to $2,236,125 for the nine month period ended September 30, 1996 from
$1,776,014 for the nine month period ended September 30, 1995. The increase in
interest expense was primarily due to increases in interest bearing deposits of
9% from $56,680,875 to $61,986,342 and in other borrowings of 100% from no
borrowings to $12,300,000 from September 30, 1995 to September 30, 1996.
Additions to the allowance for possible loan losses (Balance of $1,100,984 and
$920,977 at September 30 1996 and 1995, respectively, and $1,026,830 at December
31, 1995) are made periodically to maintain the allowance at an appropriate
level based on management's analysis of potential risk in the loan portfolio.
The ratio of the allowance for possible loan losses to loans of 1.48% at
September 30, 1996 decreased from the 1.73% at December 31, 1995 as a result of
the increase in the mortgage loans base of total loans outstanding. Such
mortgage loans outstanding at September 30, 1996 carry reduced loss risk since
the Bank generally sells these loans in a short period of time. The amount of
the provision for possible loan losses is determined by an evaluation of the
amount of loans outstanding, the amount of non-performing loans, historical loan
loss experience, delinquency trends, the amount of losses actually charged to
the allowance in a given period, and an assessment of present and anticipated
economic conditions that might possibly impact the Company's market. Management
determined that an additional provision of $50,000 was necessary for the
allowance for the quarter and nine month period ended September 30, 1996
compared to a provision of $5,000 for the quarter ended September 30, 1995 and a
provision of $25,000 for the nine month period ended September 30, 1995.
However, management's judgment is based upon a number of assumptions about
future events, which are believed to be reasonable, but which may or may not
prove valid. Thus, there can be no assurance that charge-offs in future periods
will not exceed the allowance for possible loan losses, that additional
increases in the allowance will not be required, or that any particular level of
allowance for possible loan losses will be maintained.
Noninterest income increased to $670,902 for the quarter ended September 30,
1996 from $190,973 for the quarter ended September 30, 1995 and to $1,523,588
for the nine month period ended September 30, 1996 from $711,692 for the nine
month period ended September 30, 1995. Such increases were largely attributable
to gains on sales of loans in the Company's mortgage loan operations.
Noninterest expense increased to $1,252,348 for the quarter ended September 30,
1996 from $697,879 for the quarter ended September 30, 1995 and to $3,350,936
for the nine month period ended September 30, 1996 from $2,205,841 for the nine
month period ended September 30, 1995. The increases were primarily related to
an increase in the number of full-time employees, particularly related to the
increase in the mortgage loan operations and normal salary increases, in
addition to, the expansion of the mortgage operations into separate facilities.
The Company's net income increased to $533,171 ($.49 per share fully diluted)
for the quarter ended September 30, 1996 from $255,884 ($.24 per share fully
diluted) for the quarter ended September 30, 1995 and to $1,310,223 ($1.20 per
share fully diluted) for the nine month period ended September 30, 1996 from
$750,300 ($.72 per share fully diluted) for the nine month period ended
September 30, 1995. The return on average assets and period end equity increased
to 1.83% from 1.45% and to 22.1% from 15.4%, respectively, for the nine month
period ended September 30, 1996 and 1995. The increases in net income and
returns reflect the increase in net interest income, the increase in investment
in earning assets in a relatively stable interest rate market, and the stability
of the Company's liquidity position.
Liquidity and Sources of Capital
The Company had cash and cash equivalents of $2,588,395 and federal funds sold
of $3,520,000 at September 30, 1996 and cash and cash equivalents of $3,403,926
at December 31, 1995. The increase in liquidity reflects the Company's strategy
of having funds available for increased investment in earning assets and the
relative stability of the Company's need to respond to short term demand for
funds caused by withdrawals from deposit accounts. The loan to deposit ratio at
September 30, 1996 was 86.4% compared to 75.1% at December 31, 1995 and 63.2% at
September 30, 1995. The increase in this ratio continues to reflect the
Company's strategy of increasing investments in higher earning loans and related
fee opportunities.
Primary sources of liquidity are the scheduled repayments on the Company's loans
and interest on and maturities of its investments. Occasionally, the Company may
sell investment securities in connection with the management of its interest
sensitivity gap. The Company may also utilize its cash and due from banks,
interest-earning deposits in financial institutions, federal funds sold,
borrowings from FHLB and repurchase agreements to meet liquidity requirements as
needed. The Company also has the ability, on a short-term basis, to purchase
federal funds from other financial institutions. Presently, the Company has made
arrangements with commercial banks for short-term unsecured and secured advances
of up to $12,250,000 and with the Federal Home Loan Bank for borrowings up to
$5,170,000. The Company believes that its liquidity will be sufficient to meet
its operating requirements over the near term.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which the Company or the Bank
is a party or of which any of their property is subject.
Item 2. Changes in Securities.
(a) Not applicable.
(b) Not applicable.
Item 3. Defaults Upon Senior Securities.
(a) Not applicable.
(b) Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
Not applicable.
Item 6. Other Information.
(a) Exhibits.
None.
(b) Reports on Forms 8-K.
None
<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 BANKSHARES, INC.
(Registrant)
Date November 1, 1996 /s/ R. Elliott Miller
--------------------------- -------------------------------
R. Elliott Miller
President and Chief Executive Officer
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,588
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,520
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,403
<INVESTMENTS-CARRYING> 21,403
<INVESTMENTS-MARKET> 21,403
<LOANS> 74,071
<ALLOWANCE> 1,101
<TOTAL-ASSETS> 105,758
<DEPOSITS> 83,406
<SHORT-TERM> 12,300
<LIABILITIES-OTHER> 1,332
<LONG-TERM> 0
0
0
<COMMON> 1,049
<OTHER-SE> 7,671
<TOTAL-LIABILITIES-AND-EQUITY> 105,758
<INTEREST-LOAN> 1,863
<INTEREST-INVEST> 339
<INTEREST-OTHER> 22
<INTEREST-TOTAL> 2,224
<INTEREST-DEPOSIT> 672
<INTEREST-EXPENSE> 739
<INTEREST-INCOME-NET> 1,485
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,252
<INCOME-PRETAX> 854
<INCOME-PRE-EXTRAORDINARY> 854
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 533
<EPS-PRIMARY> .51
<EPS-DILUTED> .49
<YIELD-ACTUAL> 9.94
<LOANS-NON> 0
<LOANS-PAST> 167
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,044
<CHARGE-OFFS> 1
<RECOVERIES> 8
<ALLOWANCE-CLOSE> 1,101
<ALLOWANCE-DOMESTIC> 1,101
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,101
</TABLE>
