U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period from ___________ to___________
Commission File Number 33-94288
THE FIRST BANCSHARES, INC.
(Name of small business issuer as specified in its charter)
MISSISSIPPI 64-0862173
(State or Other Jurisdiction ( I.R.S.
Employer of Incorporation or Organization) Identification No.)
6480 U.S. Hwy. 98 West
Hattiesburg, Mississippi 39402
(Address of Principal Executive Offices) (Zip Code)
(601) 268-8998
Issuer's Telephone Number, Including Area Code
Not Applicable
(Former Name, Address and Fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past
12 months (or 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 __
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
On July 29, 1997, 721,848 shares of the issuer's common stock,
par value $1.00 per share, were issued and outstanding.
Transitional Small Business Disclosure Format (check one):
YES ___ NO X
THE FIRST BANCSHARES, INC.
FORM 10-QSB
INDEX
Part I. Financial Information Page
Number
Item 1. Financial Statement (UNAUDITED)
Condensed Balance Sheet - June 30, 1997 3
Condensed Statement of Operations
for the Period -
January 1, 1997 to June 30, 1997 4
Condensed Statement of Cash Flows
for the Period January 1, 1997
to June 30, 1997 5
Item 2. Management's Discussion and
Analysis or Plan of Operations 6
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 7-8
SIGNATURES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FIRST BANCSHARES, INC. and Subsidiary
Condensed Consolidated Balance Sheets
(UNAUDITED)
(IN THOUSANDS $)
JUNE 30 DECEMBER 31
ASSETS 1997 1996
Cash and due from banks $690 $1,459
Interest-bearing deposits $0 $0
Federal funds sold $955 $2,311
Investment Securities:
Held-to-maturity $0 $0
Available-for-sale $5,469 $4,216
Loans, net of unearned interest $11,151 $4,327
Allowance for Loan Losses ($122) ($37)
Premises and fixed assets, net $2,139 $1,692
Accrued Income $655 $36
Other Assets $177 $173
Total Assets $21,114 $14,177
Liabilities and Stockholders' Equity
Non-interest bearing deposit $1,909 $1,566
Interest-bearing deposits $12,723 $5,941
Total Deposits $14,632 $7,507
Accrued interest expense $92 $27
Accrued income taxes $0 $0
Other liabilities $17 $23
Total Liabilities $14,741 $7,557
Stockholders' equity:
Common stock, $1.00 par value;
authorized 10,000,000 shares;
721,848 issued and outstanding $722 $722
Surplus $6,451 $6,451
Accumulated Deficit ($809) ($556)
Unrealized gain (loss) net
in AFS investments $9 $3
Total Capital $6,373 $6,620
Total Liabilities and Capital $21,114 $14,177
See accompanying notes to Consolidated Financial Statements
FIRST BANCSHARES, INC. and Subsidiary
Condensed Consolidated Statement of Operations
Six Months of Operation
(UNAUDITED)
(In Thousands $ Except Per Share Numbers)
June 30, June 30
1997 1996
Interest Income:
Loans, including fees $368 N/A
Interest-bearing deposits $37 N/A
Federal funds sold $49 N/A
Investment securities:
Taxable $139 N/A
Non-taxable $0 N/A
Dividends $5 N/A
Total Interest Income: $598 N/A
Interest Expense:
Deposits ($263) N/A
Federal funds purchased $0 N/A
Total Interest Expense: ($263) N/A
Net Interest Income $335 N/A
Provision for loan losses ($84) N/A
Net interest income
after provision for loan losses $251 N/A
Other Income:
Service charges on deposits $6 N/A
Other operating income $39 N/A
Securities gains (losses) net $0 N/A
Total other income $45 N/A
Other Expense:
Salaries and employee benefits ($297) N/A
Net occupancy and equipment expense ($78) N/A
Other operating expense ($175) N/A
Total other expense ($550) N/A
Profit before income taxes ($254) N/A
Income tax expense $0 N/A
Net Income (loss) ($254) N/A
Earnings per common share ($.35) N/A
See accompanying notes to Consolidated Financial Statements. No
comparison is provided to prior year since the bank commenced
operations in August 1996.
FIRST BANCSHARES, INC. and Subsidiary
Condensed Consolidated Statement of Operations
Three Months of Operation
(UNAUDITED)
(In Thousands $ Except Per Share Numbers)
June 30, June 30
1997 1996
Interest Income:
Loans, including fees $229 N/A
Interest-bearing deposits $18 N/A
Federal funds sold $20 N/A
Investment securities:
Taxable $76 N/A
Non-taxable
Dividends $5 N/A
Total Interest Income: $348 N/A
Interest Expense:
Deposits ($159) N/A
Federal funds purchased $0 N/A
Total Interest Expense: ($159) N/A
Net Interest Income $189 N/A
Provision for loan losses ($38) N/A
Net interest income
after provision for loan losses $151 N/A
Other Income:
Service charges on deposits $4 N/A
Other operating income $25 N/A
Securities gains (losses) net $0 N/A
Total other income $29 N/A
Other Expense:
Salaries and employee benefits ($159) N/A
Net occupancy and equipment expense ($41) N/A
Other operating expense ($88) N/A
Total other expense ($288) N/A
Profit before income taxes ($108) N/A
Income tax expense $0 N/A
Net Income (loss) ($108) N/A
Earnings per common share ($.15) N/A
See accompanying notes to Consolidated Financial Statements. No
comparison is provided to prior year since the bank commenced
operations in August 1996.
FIRST BANCSHARES, INC. and Subsidiary
Consolidated Statements of Cash Flows
(UNAUDITED)
(In Thousands $)
Six Months Ended June 30,
1997 1996
Cash flows from operating activities:
Net profit(LOSS) ($254) N/A
Adjustments to reconcile net
income net cash:
Depreciation $60 N/A
Provision for loan losses $84 N/A
Amortization and Accretion $49 N/A
Net decrease (increase) deferred taxes $0 N/A
Net decrease (increase) other assets ($4) N/A
Net (decrease) increase accrd int. pay. $65 N/A
Net (decrease) increase accrd inc. taxes$0 N/A
Net (decrease) increase other liab. ($6) N/A
Net (decrease) increase unreal
gain(loss)in AFS investments $6 N/A
Net cash provided/(used) by operations $0 N/A
Cash flows from investing activities:
Purchase of held-to-maturity invest. $0 N/A
Purchase of AFS investments ($5,429) N/A
Proceeds maturities held-to-maturity sec. $0 N/A
Proceeds maturities of AFS investments $3,000 N/A
Proceeds from sale of AFS investments $0 N/A
Net (increase) decrease in loans ($2,429) N/A
Purchase of fixed assets ($545) N/A
Net cash (used) by investing activities ($2,974) N/A
Cash flows from financing activities:
Net increase (decrease) in deposits $7124 N/A
Proceeds from issuance of common stock $0 N/A
Net cash provided (used) by financing
activities $7,124 N/A
Net incr./(decr.) in cash and cash equiv. $4,150 N/A
Cash and cash equiv. beginning/period $3,770 N/A
Cash and cash equiv. at end of period $7,920 N/A
Supplemental disclosures of cash paid for:
Interest $263 N/A
Income Taxes $0 N/A
See accompanying Notes to Consolidated Financial Statements
FIRST BANCSHARES, INC. and Subsidiary
Notes to Consolidated Financial Statements
(UNAUDITED)
Note 1. Basis of Presentation
Organization and Consolidation - The First Bancshares, Inc. (the
"Company") is a bank holding company. Through its subsidiary,
The First National Bank of South Mississippi, the Company
provides banking services to domestic markets principally in
Lamar County and Forest County, Mississippi. The Bank commenced
operations on August 5, 1996. The consolidated financial
statements include the accounts of the parent company and its
wholly owned subsidiary after elimination of all significant
intercompany balances and transactions.
Basis of Presentation - The accompanying consolidated financial
statements have been prepared in accordance with the requirements
for interim financial statements and, accordingly, they are
condensed and omit disclosures which are normally required by
generally accepted accounting principles for complete financial
statements. The financial statements for the interim period of
January 1, 1997 through June 30, 1997 are unaudited and , in the
opinion of management, include all adjustments ( consisting of
normal recurring accruals) considered necessary for a fair
presentation. The financial information as of December 31, 1997
has been derived from audited financial statements as of that
date. For further information, refer to the financial statements
and notes included in The First Bancshares, Inc. Annual Report.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in the forward-
looking statements, and the Company's operating performance each
quarter is subject to various risks and uncertainties that are
discussed in detail in the Company's filings with the Securities
and Exchange Commission, including the "Risk Factors" section in
the Company's Registration Statements on Form S-1 (Registration
Number 33-94288) as filed with and declared effective by the
Securities and Exchange Commission.
The following is a discussion of the Company's financial
condition as of June 30, 1997 compared to December 31, 1996. No
six month comparison to June 30, 1996 is provided since the
Company's subsidiary, The First National Bank of South
Mississippi, was in organization during this period of time and
any comparison is without meaning. These comments should be read
in conjunction with the Company's condensed consolidated
financial statements and accompanying footnotes appearing in this
report.
Results of Operations
The Company was organized on June 23, 1995 (the "Inception
Date"). From the Inception Date through August 2, 1996, the
Company's principal activities related to its organization, the
conducting of its initial stock offering, and pursuit of approval
from the Office of the Comptroller of the Currency ("OCC") for
its application to charter its subsidiary bank, The First
National Bank of South Mississippi (the "Bank"). The Bank
received its national bank charter and commenced operations on
August 5, 1996.
Since the Company was in the process of organizing the Bank
during the period of January 1, 1996 through June 30, 1996,
comparisons to 1997 results are not meaningful and are not
provided. Instead the discussion will focus upon operations
between January 1, 1997 and June 30, 1997. This discussion
should be read in conjunction with the Company's condensed
consolidated financial statements and accompanying footnote(s)
appearing in this report.
At June 30, 1997, the company had demonstrated significant growth
on the balance sheet. Total assets grew from $14,176,760 on
December 31, 1996 to $21,113,934 on June 30, 1997, or 48.9%, with
most of this growth occurring in the loan portfolio. As of June
30, 1997, total assets were comprised of the following: Cash and
Due From Banks - $689,987; Investments and Fed Funds Sold -
$6,423,687; Loans Net of Unearned - $11,151,404; Allowance for
Loan Losses - ($121,505); Fixed Assets net of Depreciation -
$1,807,329; Accrued Income - $654,560; and Other Assets-
$114,570. Total Deposits at June 30, 1997 were $14,631,150.
During the three month period between March 31, 1997 and June 30,
1997, deposits grew $3,991,221, or 37.5%. An analysis of the
composition of total deposits at June 30, 1997 reveals the
following: Non-Interest Bearing Checking - $1,909,057; Interest-
Bearing Checking - $1,832,445; Money Market and Savings Accounts
- - $3,823,605; and Time Deposits - $7,066,041.
During this six months of operation, gross income of $643,377 was
generated by the Company with the majority of this being composed
of interest income from loans and investments. Total expenses of
$897,167 were incurred during the same period resulting in a net
loss of $253,790, year to date. However, the following non-cash
expenses of depreciation ($57,940) and provision for loan losses
($84,358) comprised 56% of the net loss. The Net Interest Margin
during this period of operation was calculated to be 3.79% with a
Return on Average Assets of (2.88%). The Bank had the following
Capital Ratios at the close of the period: Risked Base Capital
Ratio - $26.05%; Tier 1 Capital/Net Risk-Weighted Assets -
25.38%; Leverage Ratio - 21.86%; and Tangible Equity Ratio -
21.86%. Based upon the preceding ratios, this institution would
be assigned to the Well Capitalized category.
The Company intends to devote its efforts during the remainder of
1997 to growing both asset and liability sides of the balance
sheet. The Bank's tremendous growth rate to date is a reflection
of the fact that the Bank just opened for business on August 5,
1996, and the Company does not expect to maintain or duplicate
this growth rate. The Company's management closely monitors and
seeks to maintain appropriate levels of interest earning assets
and interest bearing liabilities so that maturities of assets are
such that adequate funds are provided to meet customer
withdrawals and loan demand. Management expects asset and
liability growth to continue at a rapid pace during the coming
months, with the growth tapering off to a slower, more deliberate
and controllable pace over the long term, and believes capital
should continue to be adequate. However, no assurances can be
given in this regard, as rapid growth, deterioration in loan
quality and poor earnings, or a combination of these factors,
could change the company's capital position in a relatively short
period of time. The Bank will attempt to solicit high quality
loans in the $50,000 to $300,000 range and to grow the investment
portfolio with Treasury and Agency securities with maturities in
the 6 month to 5 year time frame to facilitate liquidity while
increasing our net interest margin. The primary funding source
for growth of these assets will be from deposit gathering
activities in our primary market. Emphasis will be given to
attracting non-interest bearing deposits in conjunction with loan
requests. The location of our main office coupled with the
significant commercial growth occurring at this location should
facilitate our being able to attract commercial deposits.
Special time deposit promotions for maturities of 1 - 3 years
will continue to be offered over short periods of time. By
attracting deposits within these ranges, we believe we can
improve our GAP position, fund our loan demand, and accomplish
this at a cost which is significantly less than we could achieve
through the use of brokered deposits. However, no assurances can
be given that the bank will be able to solicit sufficient non-
interest or low-interest bearing deposits to accommodate the
Bank's anticipated loan growth, nor can any assurances be given
that the bank's loan demand will continue to increase at such a
rapid pace.
At December 31, 1996, the allowance for loan losses amounted to
$37,000. By June 30, 1997 the allowance had grown to $122,000.
The allowance for loan losses, as a percentage of gross loans,
grew from .86% to 1.09% during the six month period ended June
30, 1997. The loan portfolio is periodically reviewed to
evaluate the outstanding loans and to measure both the
performance of the portfolio and the adequacy of the allowance
for loan losses. This analysis includes a review of delinquency
trends, actual losses, and internal credit ratings. Management's
judgment as to the adequacy of the allowance is based upon a
number of assumptions about future events which it believes to be
reasonable, but which may or may not be reasonable. However,
because of the inherent uncertainty of assumptions made during
the evaluation process, there can be no assurance that loan
losses in future periods will not exceed the allowance for loan
losses or that additional allocations to the allowance will not
be required.
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 the subject.
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.
There were no matters submitted to a vote of security holders
during the second quarter of 1997.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on form 8-k.
(a) Exhibits
3.1 Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the
Registration Statement on Form S-1, File No. 3394288.)
3.2 Bylaws of the Company (incorporated by reference
to Exhibit 3.2 of the Registration Statement on Form S
1, File No. 33-94288.)
4.1 Provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders
of the Company's common Stock (incorporated by
reference to Exhibit 4.1 of the Registration Statement
on Form S-1, File No. 33-94288.)
10.3 Contract for the Purchase and assignment of 16th
Section Leasehold, dated June 26, 1995 by and between
the proposed bank and Department of Public Safety,
State of Mississippi (incorporated by reference to
Exhibit 10.4 of the Registration Statement on Form S1,
File No. 33-94288.)
10.4 Option to purchase, dated May 23, 1995, among
proposed bank, John Hudson, and La Carroll Hudson
(incorporated by reference to Exhibit 10.4 of the
Registration Statement on Form S-1, File No. 3394288.)
10.5 Lease agreement, dated June 21, 1995, among Joel
S. Thoms, individually, Thoms Enterprises, Inc. and the
Company (incorporated by reference to Exhibit 10.5 of
the Registration Statement on Form S-1, File No. 33
94288.)
10.7 Amended and restated employment agreement dated
November 20, 1995, between David E. Johnson and the
Company (incorporated by reference to Exhibit 10.7 of
the Company's Form 10-KSB for the fiscal year ended
December 31, 1995, File No. 33-94288).
10.8 1997 Stock Option Plan (incorporated by reference
to Exhibit 10.7 of the company's Form 10-KSB for the
fiscal year ended December 31, 1996, No. 33-94288).
27.1 Financial Data Schedule (For SEC Use Only)
The Company did not file any reports on Form 8-K during the three
months ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registration has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
THE FIRST BANCSHARES, INC.
(Registrant)
DAVID E. JOHNSON
August 12, 1997 DAVID E. JOHNSON
Date President and CEO
CHARLES T. RUFFIN
CHARLES T. RUFFIN
Executive Vice President
and Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
Financial Data Schedule submitted Under Item 601(a) (27) of Regulation S-B
This schedule contains summary fianacial information extracted from The First
Bancshares, Inc. unaudited financial statements for the period ended June 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> $1,459 $690
<INT-BEARING-DEPOSITS> $0 $0
<FED-FUNDS-SOLD> $2,311 $955
<TRADING-ASSETS> $0 $0
<INVESTMENTS-HELD-FOR-SALE> $4,216 $5,469
<INVESTMENTS-CARRYING> $0 $0
<INVESTMENTS-MARKET> $4,219 $5,742
<LOANS> $4,327 $11,151
<ALLOWANCE> ($37) ($122)
<TOTAL-ASSETS> $14,177 $21,114
<DEPOSITS> $7,507 $14,632
<SHORT-TERM> $0 $0
<LIABILITIES-OTHER> $50 $109
<LONG-TERM> $0 $0
$0 $0
$0 $0
<COMMON> $722 $722
<OTHER-SE> $5,898 $5,651
<TOTAL-LIABILITIES-AND-EQUITY> $14,177 $21,114
<INTEREST-LOAN> $80 $367
<INTEREST-INVEST> $180 $193
<INTEREST-OTHER> $189 $38
<INTEREST-TOTAL> $449 $598
<INTEREST-DEPOSIT> $73 $263
<INTEREST-EXPENSE> $79 $263
<INTEREST-INCOME-NET> $370 $335
<LOAN-LOSSES> $0 $0
<SECURITIES-GAINS> $3 $9
<EXPENSE-OTHER> $730 $550
<INCOME-PRETAX> ($356) ($254)
<INCOME-PRE-EXTRAORDINARY> ($356) ($254)
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> ($356) ($254)
<EPS-PRIMARY> ($ .58) ($ .35)
<EPS-DILUTED> ($ .58) ($ .35)
<YIELD-ACTUAL> $0 $0
<LOANS-NON> $0 $0
<LOANS-PAST> $0 $0
<LOANS-TROUBLED> $0 $84
<LOANS-PROBLEM> $0 $0
<ALLOWANCE-OPEN> $0 $0
<CHARGE-OFFS> $0 $0
<RECOVERIES> $0 $0
<ALLOWANCE-CLOSE> $0 $0
<ALLOWANCE-DOMESTIC> $37 $122
<ALLOWANCE-FOREIGN> $0 $0
<ALLOWANCE-UNALLOCATED> $37 $122
</TABLE>
