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 March 31, 1997
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.)
600 South Central Avenue
Hapeville, Georgia 30354
(Address of principal executive offices) (Zip Code)
(404) 763-6720
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former 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, $1.00 Par Value 1,056,962 shares as of May 2, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BANKSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ -------------
(Unaudited) (Note)
ASSETS
<S> <C> <C>
Cash and due from banks ...............................................$ 3,801,861 $ 7,581,011
Federal funds sold .................................................... 2,080,000 4,680,000
Investment securities available for sale .............................. 20,506,112 20,791,535
Loans, net ............................................................ 93,595,271 80,854,126
Premises and equipment, net ........................................... 2,078,083 2,052,269
Other real estate owned, net .......................................... 510,000 540,000
Cash value of life insurance policies ................................. 2,666,919 2,355,423
Other assets .......................................................... 1,588,234 2,524,229
------------- -------------
$126,826,480 $ 121,378,593
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ...........................................................$ 97,150,227 $ 91,564,853
Federal funds purchased and securities sold
under agreements to repurchase ................................... 13,100,000 6,000,000
Note payable to FHLB ............................................... 4,900,000 12,400,000
Accrued expenses and other liabilities ............................. 2,064,560 2,064,737
------------- -------------
Total Liabilities .................................................. 117,214,787 112,029,590
Stockholders' Equity:
Common stock, $1.00 par value;
10,00,000 shares authorized; 1,052,462
shares issued and outstanding .................................... 1,052,462 1,052,462
Additional paid-in capital ......................................... 4,194,813 4,194,813
Retained earnings .................................................. 4,251,107 3,938,982
Net unrealized gains (losses) on securities ........................ 113,311 162,746
------------- -------------
Total Stockholders' Equity ......................................... 9,611,693 9,349,003
------------- -------------
$ 126,826,480 $ 121,378,593
============= =============
Note: The balance sheet at December 31, 1996 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
March 31,
---------------------------
1997 1996
------------ ----------
<S> <C> <C>
Interest income:
Loans, including fees ........................................................$ 2,434,195 $1,661,830
Investment securities ........................................................ 325,935 345,633
Other ........................................................................ 37,522 16,558
------------ -----------
Total interest income ........................................................ 2,797,652 2,024,021
Interest expense:
Deposits ..................................................................... 844,544 677,638
Other borrowings ............................................................. 314,910 59,543
------------ -----------
Total interest expense ....................................................... 1,159,454 737,181
------------ -----------
Net interest income .......................................................... 1,638,198 1,286,840
Provision for possible loan losses .............................................. 50,000 --
------------ -----------
Net interest income after provision
for possible loan losses ................................................... 1,588,198 1,286,840
Other operating income ......................................................... 683,707 314,004
Other operating expenses:
Salaries and employee benefits ............................................... 891,051 555,024
Occupancy and equipment ...................................................... 160,139 95,200
Other ........................................................................ 436,620 327,838
------------ -----------
Total operating expenses ..................................................... 1,487,810 978,062
------------ -----------
Income before income taxes ................................................... 784,095 622,782
Income taxes .................................................................... 293,038 225,065
------------ -----------
Net income ...................................................................$ 491,057 $ 397,717
============ ===========
Net income per share:
Primary ....................................................................$ .47 $ .38
============ ===========
Fully diluted ..............................................................$ .45 $ .37
============ ===========
Weighted average common shares:
Primary .................................................................... 1,052,462 1,048,840
Fully diluted .............................................................. 1,102,748 1,081,893
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>
Three Months Ended March 31,
-------------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows provided by operating activities ...........................$ 1,201,025 $ 842,802
Cash flows (used in) provided by investing activities ................. (12,586,617) (5,303,119)
Cash flows provided by (used in) financing activities ................. 5,006,442 2,551,157
------------- -------------
Net increase (decrease) in cash and cash equivalents ............... (6,379,150) (1,909,160)
Cash and cash equivalents at beginning of period ...................... 12,261,011 3,403,926
------------- -------------
Cash and cash equivalents at end of period ............................$ 5,881,861 $ 1,494,766
============= =============
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
March 31, 1997
(Unaudited)
1. 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 month period ended March 31, 1997 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. 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, 1996.
2. On December 13, 1996, the Company entered into an agreement and plan of
merger (Agreement) with Regions Financial Corporation (Regions) to be effective
upon the consent of various regulatory authorities. Among other items, the
Agreement provides for the conversion of each common share of the Company into
.32 of a share of Regions common stock, subject to certain adjustments as
defined. Prior to the consummation of this Agreement, each party must obtain
certain consents and approvals. Such Agreement may be terminated under certain
conditions by the Board of Directors of both or either party. The transaction is
expected to close during the second quarter of 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net interest income increased to $1,638,198 for the quarter ended March 31, 1997
from $1,286,840 for the quarter ended March 31, 1996. 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 $2,797,652 for
the quarter ended March 31, 1997 from $2,024,021 for the quarter ended March 31,
1996. The increase in interest income was primarily the result of increases in
the net loan portfolio of 45% from $64,550,277 to $93,595,271 and in the yield
on loans from 10.34% for the first quarter of 1996 to 11.44% for the first
quarter of 1997, respectively. Total interest expense increased to $1,159,454
for the quarter ended March 31, 1997 from $737,181 for the quarter ended March
31, 1996. The increase in interest expense was primarily due to increases in
interest bearing deposits of 29% from $58,312,939 to $75,358,354 and in other
borrowings of 189% from $6,220,000 to $18,000,000 from March 31, 1996 to March
31, 1997 as the Company funded the increase in loans.
Additions to the allowance for possible loans losses (balance of $1,180,207 and
$1,029,517 at March 31 1997 and 1996, respectively, and $1,129.278 at December
31, 1996) 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 1.18% at March
31, 1997 decreased from 1.56% at March 31, 1996 and from 1.37% at December 31,
1996 as a result of the increase in mortgage loans in process of settlement.
Such mortgage loans outstanding at March 31, 1997 carry reduced loss risk since
the Company 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 no additional provision was necessary for the allowance for the
quarter ended March 31, 1996 compared to a provision of $50,000 for the quarter
ended March 31, 1997. 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.
Other operating income was $683,707 for the quarter ended March 31, 1997
compared to $314,004 for the quarter ended March 31, 1996. The increase was
primarily the result of gains on sales of loans originated and sold by the
Company's mortgage operations and to a lesser extent an increase in fees
associated with the increase in deposit accounts.
Other operating expenses increased to $1,487,810 for the quarter ended March 31,
1997 from $978,062 for the quarter ended March 31, 1996. 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, normal
salary increases and the increased cost of operations due to overall deposit
growth and activity.
The Company's net income increased 23.5% to $491,057 ($.45 per share fully
diluted) for the quarter ended March 31, 1997 from net income of $397,717 ($.37
per share fully diluted) for the quarter ended March 31, 1996. The return on
average assets remained constant at 1.66% for the quarter ended March 31, 1997
as compared to the quarter ended March 31, 1996. However, the return on average
equity increased to 20.64% from 19.63% for the quarters ended March 31, 1997 and
1996, respectively. The increases in net income and returns reflect the increase
in net interest margin, the increase in other operating income partially offset
by the increase in other operating expenses.
Liquidity and Sources of Capital
The Company had cash and cash equivalents (including Federal funds sold) of
$5,881,861 at March 31, 1997 and $12,261,011 at December 31, 1996. The decrease
reflects the Company's 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 and loan funding commitments. The loan to
deposit ratio at March 31, 1997 was 101.1% compared to 89.5% at December 31,
1996 and 87.4% at March 31, 1996. 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 or to manage cash availability. The Company may also utilize its
cash and due from banks, interest-earning deposits in financial institutions,
security repurchase agreements and federal funds sold, and borrowings from FHLB
to meet liquidity requirements as needed. The Company also has the ability, on a
short-term basis, to purchase federal funds or sell securities under agreements
to repurchase from other financial institutions. Presently, the Company has made
arrangements with commercial banks for short-term unsecured and secured advances
of up to $34,600,000 and with the Federal Home Loan Bank for borrowings up to
$20,000,000. Additionally, the Company's internal liquidity ratio of 57.8%
exceeds the internal policy ratio of 30% as well as regulatory minimums. 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.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Other Information.
(a) Exhibits.
Exhibit 27 Financial Data Schedule
(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 May 9, 1997 /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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,802
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,080
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,506
<INVESTMENTS-CARRYING> 20,506
<INVESTMENTS-MARKET> 20,506
<LOANS> 94,775
<ALLOWANCE> 1,180
<TOTAL-ASSETS> 126,826
<DEPOSITS> 97,150
<SHORT-TERM> 18,000
<LIABILITIES-OTHER> 2,065
<LONG-TERM> 0
0
0
<COMMON> 1,052
<OTHER-SE> 8,559
<TOTAL-LIABILITIES-AND-EQUITY> 126,826
<INTEREST-LOAN> 2,434
<INTEREST-INVEST> 326
<INTEREST-OTHER> 38
<INTEREST-TOTAL> 2,798
<INTEREST-DEPOSIT> 845
<INTEREST-EXPENSE> 1,159
<INTEREST-INCOME-NET> 1,638
<LOAN-LOSSES> 50
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,488
<INCOME-PRETAX> 784
<INCOME-PRE-EXTRAORDINARY> 784
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 491
<EPS-PRIMARY> .47
<EPS-DILUTED> .45
<YIELD-ACTUAL> 11.44
<LOANS-NON> 0
<LOANS-PAST> 21
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,130
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,180
<ALLOWANCE-DOMESTIC> 1,180
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,180
</TABLE>
