<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
The First Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
THE FIRST BANCSHARES, INC.
6480 U.S. HIGHWAY 98 WEST
HATTIESBURG, MISSISSIPPI 39402
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1998
TO OUR SHAREHOLDERS:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders (the "Annual Meeting") of The First Bancshares, Inc. (the
"Company"), the holding company for The First National Bank of South
Mississippi. This letter serves as notice that the Annual Meeting will be held
at The First Bancshares, 6480 U.S. Highway 98 West, Hattiesburg, Mississippi
39402 on Tuesday, April 28, 1998, at 5:00 p.m., for the following purposes:
1. To elect three members to the Board of Directors; and
2. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 9, 1998
are entitled to notice of, and to vote at, the Annual Meeting and at any
continuation or adjournment thereof. In addition to the specific matters to be
acted upon, there also will be a report on the operations of the Company, and
directors and officers of the Company will be present to respond to your
questions. Whether or not you plan to attend the annual meeting, please
complete, sign, date and return the accompanying proxy in the enclosed
postage-paid envelope as promptly as possible.
In accordance with the Mississippi Business Corporation Act, a list of
shareholders entitled to vote at the Annual Meeting shall be open to the
examination of any shareholder for any purpose germane to the Annual Meeting
upon written notice during regular business hours at the Company's offices
located at 6480 U.S. Highway 98 West, Hattiesburg, Mississippi 39402, beginning
on the date on which notice of the meeting is given, and the list shall be
available for inspection at the Annual Meeting by any shareholder that is
present.
Please use this opportunity to take part in the affairs of the Company
by voting on the business to come before this Annual Meeting. We look forward to
seeing you at the Annual Meeting.
By Order of the Board of Directors,
/s/ David E. Johnson
-----------------------
David E. Johnson
Chief Executive Officer
Hattiesburg, Mississippi
March 18, 1998
<PAGE> 3
THE FIRST BANCSHARES, INC.
6480 U.S. HIGHWAY 98 WEST
HATTIESBURG, MISSISSIPPI 39402
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 28, 1998
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy Card are being furnished to the shareholders of The First Bancshares,
Inc., a Mississippi corporation (the "Company") and the holding company for The
First National Bank of South Mississippi, in connection with the solicitation of
proxies by the Board of Directors (the "Board") of the Company for use at the
1998 Annual Meeting of Shareholders (the "Annual Meeting"). The Annual Meeting
will be held on Tuesday, April 28, 1998, at 5:00 p.m., at The First Bancshares,
Inc., 6480 U.S. Highway 98 West, Hattiesburg, Mississippi 39402.
VOTING AND REVOCABILITY OF PROXY APPOINTMENTS
The Company has fixed March 9, 1998 as the record date (the "Record
Date") for determining the shareholders entitled to notice of and to vote at the
Meeting. The Company's only class of stock is its Common Stock, par value $1.00
per share (the "Common Stock"). At the close of business on the Record Date,
there were outstanding and entitled to vote 721,848 shares of Common Stock of
the Company with each share being entitled to one vote. There are no cumulative
voting rights. A majority of the outstanding shares of Common Stock represented
at the Meeting, in person or by proxy, will constitute a quorum.
All proxies will be voted in accordance with the instructions contained
in the proxies. If no choice is specified, proxies will be voted "FOR" the
election to the Board of Directors of all the nominees listed below under
"ELECTION OF DIRECTORS" and, at the proxy holder's discretion, on any other
matter that may properly come before the Meeting. Any shareholder may revoke a
proxy given pursuant to this solicitation prior to the Meeting by delivering an
instrument revoking it or by delivering a duly executed proxy bearing a later
date to the Secretary of the Company. A shareholder may elect to attend the
Meeting and vote in person even if he or she has a proxy outstanding.
Management of the Company is not aware of any other matter to be
presented for action at the Meeting other than those mentioned in the Notice of
Annual Meeting of Shareholders and referred to in this Proxy Statement. If any
other matters come before the Meeting, it is the intention of the persons named
in the enclosed Proxy to vote on such matters in accordance with their judgment.
SOLICITATION
The costs of preparing, assembling and mailing the proxy materials and
of reimbursing brokers, nominees, and fiduciaries for the out-of-pocket and
clerical expenses of transmitting copies of the proxy materials to the
beneficial owners of shares held of record will be borne by the Company. Certain
officers and regular employees of the Company or its subsidiaries, without
additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain proxies in addition to this solicitation by mail. The
Company expects to reimburse brokers, banks, custodians and other nominees for
their reasonable out-of-pocket expenses in handling proxy materials for
beneficial owners of the Common Stock.
<PAGE> 4
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The Company's Bylaws provides that the Board of Directors shall be
divided into three classes with each class to be as nearly equal in number as
possible. The Bylaws also provide that the three classes of directors are to
have staggered terms, so that the terms of only approximately one-third of the
Board members will expire at each annual meeting of shareholders. The current
Class I directors are Perry E. Parker, Ted E. Parker, Dennis L. Pierce, and A.
L. Smith. The current Class II directors are John Hudson, David E. Johnson, Dawn
T. Parker, Andrew D. Stetelman, and Charles T. Ruffin. The current Class III
directors are David W. Bomboy, E. Ricky Gibson, and Fred A. McMurry. The current
terms of the Class III directors will expire at the Meeting. Each of the three
current Class III directors has been nominated for reelection and will stand for
election at the Meeting for a three year term. The terms of the Class I
directors will expire at the 1999 Annual Shareholders Meeting, and the terms of
the Class II directors will expire at the 2000 Annual Shareholders Meeting.
It is the intention of the persons named as proxies in the accompanying
proxy to vote FOR the election of the nominees identified below to serve for a
three-year term, expiring at the 2001 Annual Meeting of Shareholders. If any
nominee is unable or fails to accept nomination or election (which is not
anticipated), the persons named in the proxy as proxies, unless specifically
instructed otherwise in the proxy, will vote for the election in his stead of
such other person as the Company's existing Board of Directors may recommend.
The directors shall be elected by a plurality of the votes cast at the
Meeting. Abstentions and broker non-votes will not be considered to be either
affirmative or negative votes.
Set forth below is certain information about the nominees, including
each nominee's age, position with the Company, and position with the Bank. All
of the nominees are nominated as Class III directors and are currently serving
as directors of the Company. Each of the directors has been a director of the
Company since 1995, with the exception of Charles T. Ruffin, who was elected in
1997.
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINATED
INDIVIDUALS.
David Waldron Bomboy, M.D. 52, is a Class III director, and is
nominated for reelection at the meeting, was born in 1946 and is a lifelong
resident of Hattiesburg, Mississippi. He graduated with honors in Pre-Medicine
from the University of Mississippi in 1968 and earned an M.D. degree from the
University of Mississippi Medical Center in 1971. Dr. Bomboy completed his
orthopedic surgical training at the University of Mississippi in 1976. He is a
board-certified orthopedic surgeon and has practiced orthopedics in southern
Mississippi for nineteen years. A vestry member of the Trinity Episcopal Church,
Dr. Bomboy is also a member of the United Way of Southeast Mississippi, the
Family Y, the Mississippi State Medical Association, and the American Medical
Association. Currently, he is the president of the Physicians Healthcare Network
and a member of the executive committee of the Mississippi Orthopedic Society.
He is the past president of the Methodist Hospital Medical Staff.
E. Ricky Gibson, 41, is a Class III director, and is nominated for
reelection at the meeting, is president and owner of N&H Electronic, Inc., a
wholesale electronics distributor, since 1988 and Mid South Electronics, a
wholesale consumer electronics distributor, since 1993. He is active in the
Parkway Heights United Methodist Church. Mr. Gibson attended the University of
Southern Mississippi. He was born in Hattiesburg, Mississippi in 1956.
2
<PAGE> 5
John Hudson, 56, is a Class II director, was born in 1941 in Purvis,
Mississippi and is a lifelong resident of Purvis, Mississippi. Prior to 1992,
Mr. Hudson was an appraiser for, and assistant to the southern division manager
of, the Louisiana Pacific Corporation in Purvis, Mississippi. He managed five
lumber manufacturing mills. From 1992 to 1995, he was the owner and president of
R&R Trucking. Mr. Hudson is a councilman and a member of the finance committee
of the Purvis Church of God. He also served on the Purvis City Council for
eleven years.
David E. Johnson, 44, is a Class II director, received a B.S. degree in
Agricultural Economics in 1975 and an M.B.A. degree, with emphasis in Finance,
in 1977 from Mississippi State University. In 1990, he graduated from the
University of Oklahoma Commercial Lending and Graduate School. Mr. Johnson has
completed various OMEGA lending courses and has taught a course at the
University of Mississippi School of Banking. From 1993 to 1994, he served as
chairman of the Southern Mississippi Group of Robert Morris & Associates. From
1987 to 1995, Mr. Johnson was with Sunburst Bank, now merged with Union Planters
National Bank, as senior lender for the Hattiesburg branch and later as senior
lender and credit administrator for southern Mississippi. He was responsible for
approving loans and maintaining the credit quality of a $250 million portfolio
of consumer, mortgage, and commercial loans. Currently, he is a member of the
First Baptist Church, the Hattiesburg Racquet Club, and the Hattiesburg Rotary
Club. He was born in Laurel, Mississippi in 1953.
Fred A. McMurry, 33, is a Class III director, and is nominated for
reelection at the meeting, has lived in Oak Grove for the past 30 years. Since
1985, he has been the vice president and general manager of Harvard Pest
Control, Inc., a family-owned business. In addition, he is vice president of Oak
Grove Land Co., Inc., a family-owned property management company. He was born in
1964 in Laurel, Mississippi.
Dawn T. Parker, 50, is a Class II director, earned a B.A. degree from
Vanderbilt University in 1970. Prior to 1985, Mrs. Parker was the president and
general manager of Terra Firma Corporation, a rental and land management
company, in Hattiesburg, Mississippi. In addition, she has owned and operated a
commercial art and sign company, Creative Services, located in Hattiesburg, and
has been a partner in H.P. Cattle Co., located in Sumrall, Mississippi, for the
past ten years. She is also president of Clear Run Cattle Co., Inc., a cattle
feeding company. Mrs. Parker is a member of the Sumrall United Methodist Church
and has served on the Lamar County Education Foundation Board of Directors. She
was born in 1948 in Hattiesburg, Mississippi.
Perry Edward Parker, 32, is a Class I director, was born in 1965 in
Hattiesburg, Mississippi. He graduated from Pearl River Junior College in 1983
and the University of Southern Mississippi in 1985. He graduated from the
University of Chicago Graduated School of Business in 1989 with an M.B.A. in
Finance. While attending school in Chicago he worked for Goldman Sachs & Company
on the Chicago Mercantile Exchange. Mr. Parker became a member of the Exchange
in 1990. In 1991, he became a currency option trader for Goldman Sachs &
Company. In 1995 he became a currency options trader with Deutsche Bank. He
currently resides in London, England.
Ted E. Parker, 38, is a Class I director, attended the University of
Southern Mississippi and served as a licensed commodity floor broker at the
Chicago Mercantile Exchange. He has been in the stocker-grazer cattle business
for the past 15 years and is the owner of Highlander Laundry Center. He was
selected as Lamar County Young Farmer and Rancher for 1993 and served as a board
member
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<PAGE> 6
of Farm Bureau Insurance. He is a member of the National Cattlemen's
Association, the Texas Cattle Feeders Association and the Sumrall United
Methodist Church. Mr. Parker was born in 1960 in Hattiesburg, Mississippi.
Dennis L. Pierce, 41, is a Class I director, is President of
Pierce/Foote, Inc. of Baton Rouge, a real estate development company, and the
owner and president of PierCon, Inc. of Hattiesburg, a general contracting firm.
Through PierCon, Mr. Pierce is responsible for several commercial construction
jobs, and he is also involved in numerous commercial ventures. He is the
president of Dennis Pierce Inc., which has been very active in homebuilding and
the development of the Hattiesburg area. In addition, Mr. Pierce is a deacon of
the Lincoln Road Baptist Church; president, director, and national
representative of the Hattiesburg Homebuilders Association; and a director of
the North Lamar Water Association. Since 1995, he has been a member and broker
with the Hattiesburg Board of Realtors. He attended the University of Southern
Mississippi. He was born in 1957 in Hattiesburg, Mississippi.
Charles T. Ruffin, 46, is a Class II director and the Executive Vice
President and Chief Operating Officer of the Bank, was born in 1952 in Laurel,
Mississippi. He received a Bachelor of Arts degree from the University of
Mississippi in 1974 and a Masters of Business Administration in 1979 from the
University of Southern Mississippi. Mr. Ruffin is also a graduate of Louisiana
State University's Graduate School of Banking of The South. He began his banking
career as management trainee with the First National Bank of Jackson (now
Trustmark National Bank) and was later promoted to Assistant Vice President and
Manager of Accounts Services. Mr. Ruffin was a Senior Lender and the Senior
Operations officer of the People's Bank of the Delta until 1991 when he accepted
employment as Senior Credit Officer with The National Bank Commerce of
Mississippi at the Aberdeen Banking Center where he remained employed until
1996. Mr. Ruffin has been Executive Vice President and Chief Operating Officer
with The First National Bank of South Mississippi since 1996.
A.L. "Pud" Smith, 71, is a Class I director, was born in 1929 in
Brooklyn, Mississippi. Before attending the University of Southern Mississippi,
Mr. Smith was in the military. He entered the petroleum business in 1960,
starting with a service station, and today he is owner and manager of A.L. Smith
Oil Company, Inc., a wholesale and retail petroleum products company. Mr.
Smith's community activities range from being the Mayor of the City of
Lumberton, a past president of the Jaycee's, a past president of the Lion's
Club, and a member of the Rotary Club (a Paul Harris Fellow). He is an active
member of the First Baptist Church where he is a deacon and has been a member of
the Finance Committee for 30 years. He serves on the Stone County Economic
Development Council.
Andrew D. Stetelman, 37, is a Class II director, is the third
generation of his family in London and Stetelman Realtors. He graduated from the
University of Southern Mississippi in 1983. He has served in many capacities
with the national and local Board of Realtors, where he was a past president and
the Realtor of the Year in 1992. He presently serves as the chairman of the
Hattiesburg Convention Center, is an ambassador for the Area Development
Partnership, and is a member of Kiwanis International. Mr. Stetelman was born in
1960 in Hattiesburg, Mississippi.
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<PAGE> 7
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows the cash compensation paid by the Company to
the Company's President and Chief Executive Officer for the years ended December
31, 1995 through 1997. No executive officers of the Company or the Bank earned
total annual compensation, including salary and bonus, in excess of $100,000 for
the fiscal year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
----------------------
Name and Principal Position Year Bonus Other Annual
- --------------------------- ---- Salary ----- Compensation
------ ------------
<S> <C> <C> <C> <C>
David E. Johnson, President 1997 $89,049 -- $2,000
and Chief Executive Officer
1996 $82,619 -- $1,060
1995 $50,819 -- $2,500
</TABLE>
- -----------------------
(1) Executive officers of the Company also receive indirect compensation in
the form of certain perquisites and other personal benefits. The amount
of such benefits received in the fiscal year by each named executive
officer did not exceed 10% of the executive's annual salary and bonus.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to Mr. Johnson
concerning the exercise of options during the last fiscal year and unexercised
options held as of the end of the fiscal year.
AGGREGATRED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-the-Money Options
Unexercised Options at Fiscal Year
at Fiscal Year End End(1)($)
Shares Acquired (#) Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
David E. Johnson -0- $-0- 7,218/14,436 $14,436/$28,872
Charles T. Ruffin 0 $0 2,406/4,812 $4,812/$9,624
</TABLE>
5
<PAGE> 8
(1) There is no active trading market for the Company's Common
Stock; therefore, the fair market value of the Common Stock as
of December 31, 1997 is not readily discernible. Based on the
sale of the Common Stock nearest December 31, 1997 of which
the Company is aware, which sale was at $12.00 per share, the
Company believes that the fair market value of the Common
Stock was approximately $12.00 per share on December 31, 1997.
The exercise price for the option is $10.00 per share and thus
based on a fair market value of $12.00 per share, all of the
options are in-the-money as of December 31, 1997.
On March 1997, the Board of Directors adopted a stock option plan under
which directors, executive officers and certain other key employees of the
Company and the Bank can receive options to purchase shares of the Company's
Common Stock, and, as described below, Mr. Johnson has been granted stock
options in accordance with the terms of his employment agreement with the
Company. See "Employment Agreement." The Stock Option Plan was approved at the
1997 Annual Meeting of Shareholders.
EMPLOYMENT AGREEMENT
David E. Johnson and the Company entered into an employment agreement
pursuant to which Mr. Johnson is the President and Chief Executive Officer of
the Company and the President and Chief Executive Officer of the Bank. The
agreement provided for a starting salary of $75,000 per annum until the date the
subscription proceeds were released from escrow and now provides for $85,000 per
annum, to be reviewed by the Board of Directors at least annually and increased
at its discretion. Mr. Johnson will be eligible to participate in any management
incentive program of the Bank or any long-term equity incentive program and be
eligible for grants of stock options, restricted stock, and other awards
thereunder. In addition, for the first and second years after the date the Bank
opens, he will be eligible to receive a cash bonus in an amount determined by
the Board of Directors. In the third year after the Bank opens, Mr. Johnson will
receive a cash bonus equal to 10% of the net profits after taxes of the Bank for
such year. If the term of the employment agreement is extended, Mr. Johnson will
receive a minimum of 5% of the net profits after taxes of the Bank for each of
the next three years of the employment agreement. In accordance with the
employment agreement, the Company has granted Mr. Johnson an option to purchase
21,655 shares of Common Stock, exercisable at $10.00 per share. The options will
vest at the rate of one-third per year for each of the first three years of
operations of the Bank, subject to certain performance criteria (subject to
accelerated vesting in the event of a change in control of the Company). The
options will have a term of ten years. Additionally, Mr. Johnson will
participate in the Bank's retirement, welfare and other benefit programs and is
entitled to a life insurance policy and reimbursement for automobile expenses,
club dues, and travel and business expenses.
The initial term of the employment agreement ends on the third
anniversary of the Bank's opening date and will be automatically extended for an
additional three-year term unless either party serves written notice of its
intent not to renew. In the event that the Company does not renew the employment
agreement, the Company will pay Mr. Johnson his current monthly base salary for
a period of an additional six months.
In addition, after a change in control, Mr. Johnson will have the
option of (i) automatically extending the term of the employment agreement for
three years from the date of the change in control or (ii) receiving, within
fifteen days of the change in control, any sums due him thereunder and, in one
lump sum payment, severance compensation in an amount equal to three times his
then current annual
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base salary. Furthermore, in the event of a change in control, the Company must
remove any restrictions on outstanding incentive awards so that all such awards
vest immediately.
If Mr. Johnson (i) is terminated for cause (other than termination for
behavior which is materially disruptive to the orderly conduct of the Company's
business operations as determined in the good faith judgment of the Board of
Directors), then for the remaining term of the employment agreement, or (ii)
resigns for any reason other than following a change in control, then for a
period of one year following the date of resignation, Mr. Johnson may not (a) be
employed in the banking business as a director, officer, or organizer, or
promoter of, or consultant to, or acquire more than a 1% passive investment in,
any financial institution within the Territory, (b) solicit customers of the
Company or its affiliates for the purpose of providing financial services, or
(c) solicit employees of the Company or its affiliates for employment. Under the
Employment Agreement, "Territory" means a radius of 25 miles from (i) the main
office of the Bank, (ii) any branch office of the Bank, or (iii) any office of
the Company. The Company currently maintains a key man life insurance policy on
Mr. Johnson in the amount of $1,000,000, with the proceeds payable to the
Company.
DIRECTOR COMPENSATION
The Company or the Bank did not pay directors' fees during the last
fiscal year, and does not presently intend to pay directors' fees in the initial
years of operation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires (i) the
Company's directors and executive officers and (ii) persons who own more than
10% of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission (the "SEC"), within certain specified time
periods, reports of ownership and changes in ownership. Such officers,
directors, and shareholders are required by SEC regulations to furnish the
Company with copies of all such reports that they file.
To the Company's knowledge, based solely upon a review of copies of
such reports furnished to the Company and representations that no other reports
were required with respect to the year ended December 31, 1997, all persons
subject to the reporting requirements of Section 16(a) filed the required
reports on a timely basis with respect to 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
GENERAL
The following table sets forth the number and percentage of outstanding
shares of Common Stock beneficially owned at the Record Date by (a) the
President and Chief Executive Officer of the Company, (b) each director of the
Company, (c) all executive officers and directors of the Company as a group, and
(d) each person or entity known to the Company to own more than 5% of the
outstanding Common Stock.
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<TABLE>
<CAPTION>
Shares Beneficially Owned
----------------------------------------------
Name Number of Shares(1) Percent(2)
------------------- ----------
<S> <C> <C>
David W. Bomboy 28,000 3.88%
E. Ricky Gibson(3) 15,500 2.15%
John Hudson(4) 38,100 5.28%
David E. Johnson(5) 24,942 3.45%
Fred A. McMurry 15,000 2.08%
Dawn T. Parker(6) 32,100 4.45%
Perry Edward Parker 26,250 3.64%
Ted E. Parker(7) 11,520 1.60%
Dennis L. Pierce 10,000 1.39%
Charles T. Ruffin(8) 5,149 0.71%
A.L. Smith 10,000 1.39%
Andrew D. Stetelman(9) 10,300 1.43%
Executive officers and directors as a group 226,861 31.45%
(12 persons)
</TABLE>
- ---------------------------------
(1) Information relating to the beneficial ownership of Common Stock is
based upon "beneficial ownership" concepts set forth in rules of the
Securities Exchange Commission under Section 13(d) of the Securities
Exchange Act of 1934. Under these rules a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or direct the voting of each
security, or "investment power," which includes the power to dispose or
to direct the disposition of such security. A person is also deemed to
be a beneficial owner of any security of which that person has the
right to acquire beneficial ownership within 60 days, including,
without limitation, shares of Common Stock subject to currently
exercisable options. Under the rules, more than one person may be
deemed to be a beneficial owner of the same securities, and a person
may be deemed to be a beneficial owner of securities as to which he has
no beneficial interest. For instance, beneficial ownership includes
spouses, minor children, and other relatives residing in the same
household, and trusts, partnerships, corporations or deferred
compensation plans which are affiliated with the principal.
(2) Percent is calculated by treating shares subject to options held by the
named individual for whom the percentage is held by the named
individual for whom the percentage is calculated which are exercisable
within the next 60 days as if outstanding, but treating shares subject
to options held by another stockholder as not outstanding.
(3) Includes 500 shares for which the beneficial ownership is attributable
to Mr. Gibson as a result of his son's ownership of 250 shares and his
daughter's ownership of 250 shares.
(4) Includes 4,100 shares for which the beneficial ownership is
attributable to Mr. Hudson as a result of his wife's ownership of 1,100
shares and his grandchildren's ownership of a total of 3,000 shares.
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<PAGE> 11
(5) Includes 1,362 shares for which the beneficial ownership is
attributable to Mr. Johnson as a result of his wife's ownership of
1,162 shares and his daughters' ownership of 200 shares. Includes
currently exercisable options to purchase a total of 7,218 shares of
Common Stock.
(6) Includes 5,850 shares for which the beneficial ownership is
attributable to Mrs. Parker as a result of her children's ownership of
5,850 shares.
(7) Includes 1,520 shares for which the beneficial ownership is
attributable to Mr. Parker as a result of his wife's ownership of 1,120
shares and his children's ownership of 400 shares.
(8) Includes currently exercisable options to purchase a total of 2,406
shares of Common Stock.
(9) Includes 300 shares for which the beneficial ownership is attributable
to Mr. Stetelman as a result of his children's ownership of 300 shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Along with three other bidders: Carter & Mullings, Inc. Mac's
Construction, Inc., and Finlo Construction Co., Inc., Dennis Pierce's company,
PierCon, Inc., bid on the construction of the Bank's main office. The bid was
awarded to PierCon, Inc., which submitted the lowest bid. The Company and the
Bank have banking and other transactions in the ordinary course of business with
organizers, directors, and officers of the Company and the Bank and their
affiliates, including members of their families or corporations, partnerships,
or other organizations in which such organizers, officers, or directors have a
controlling interest, which the Company believes are on substantially the same
terms (including price, or interest rates and collateral) as those prevailing at
the time for comparable transactions with unrelated parties. Such transactions
are not expected to involve more than the normal risk of collectability nor
present other unfavorable features to the Company and the Bank. The Bank is
subject to a limit on the aggregate amount it could lend to it and the Company's
directors and officers as a group equal to its unimpaired capital and surplus
(or, under a regulatory exemption available to banks with less than $100 million
in deposits, twice that amount), loans to individual directors and officers must
also comply with the Bank's lending policies and statutory lending limits, and
directors with a personal interest in any loan application is excluded from the
consideration of such loan application.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Among other Board committees, the Company has an audit committee, a
compensation committee, and a nominating committee. The Company's audit
committee is composed of Ted E. Parker, Andrew D. Stetelman, E. Ricky Gibson,
and Fred A McMurry and met three times in 1997. The audit committee has the
responsibility of reviewing the Company's financial statements, evaluating
internal accounting controls, reviewing reports of regulatory authorities, and
determining that all audits and examinations required by law are performed. The
committee recommends to the Board the appointment of the independent auditors
for the next fiscal year, reviews and approves the auditor's audit plans, and
reviews with the independent auditors the results of the audit and management's
response thereto. The audit committee is responsible for overseeing the entire
audit function and appraising the effectiveness of internal and external audit
efforts. The audit committee reports its findings to the Board of Directors.
9
<PAGE> 12
The Company's compensation committee is responsible for establishing
the compensation plans for the Company. Its duties include the development with
management of all benefit plans for employees of the Company, the formulation of
bonus plans, incentive compensation packages, and medical and other benefit
plans. This committee met three times during the year ended December 31, 1997.
The compensation committee is composed of John Hudson, David E. Johnson, A.L.
Smith, E. Ricky Gibson, and Fred A. McMurry.
The Company's nominating committee is responsible for nominating
individuals for election to the Company's Board of Directors. Membership on the
nominating committee changes annually. In 1997, the nominating committee met one
time and consisted of E. Ricky Gibson, Dawn T. Parker, and David E. Johnson. The
nominating committee welcomes recommendations made by shareholders of the
Company. Any recommendations for the 1999 Annual Shareholders' Meeting should be
made in writing addressed to the nominating committee of the Company's Board of
Directors.
The Board of Directors of the Company held four meetings, and the Board
of Directors of the Bank held twelve meetings, during the year ended December
31, 1997. All of the directors of the Company and the Bank attended at least 75%
of the aggregate of such board meetings and the meetings of each committee on
which they served.
OTHER MATTERS
The Board knows of no matters other than these referred to in the
Notice of the Annual Meeting to be brought before the Annual Meeting. However,
if any other matter is properly brought before the Annual Meeting, it is the
intention of the persons designated as proxies to vote in accordance with their
best judgment on such matters.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the accounting firm of T.E. Lott &
Company as the Company's independent auditor for the 1998 fiscal year. T.E. Lott
& Company served as the independent auditors for the Company for the fiscal
years ended December 31, 1995, 1996, and 1997. The Company does not expect a
representative from T.E. Lott & Company to be present at the Annual Meeting.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING OF SHAREHOLDERS
Shareholders' proposals intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company no later than November
15, 1998 to be presented at the 1999 Annual Meeting of Shareholders or
considered for inclusion in the Company's Proxy Statement and form of Proxy for
that meeting.
ANNUAL REPORTS
COPIES OF THE COMPANY'S 1997 ANNUAL REPORT ARE BEING MAILED TO ALL
SHAREHOLDERS TOGETHER WITH THIS PROXY STATEMENT. THE COMPANY WILL PROVIDE,
WITHOUT CHARGE, TO ANY SHAREHOLDER OF RECORD AS OF MARCH 9, 1998 WHO SO REQUESTS
IN WRITING A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR
ENDED DECEMBER 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
ANY SUCH REQUESTS SHOULD BE DIRECTED TO: CHARLES T. RUFFIN, THE FIRST
BANCSHARES, INC., 6480 U.S. HIGHWAY 98 WEST, HATTIESBURG, MISSISSIPPI 39402.
Dated: March 18, 1998
10
<PAGE> 13
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES, DATE, SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, POSTAGE FOR WHICH HAS BEEN
PROVIDED. YOUR PROMPT RESPONSE WILL BE APPRECIATED.
11
<PAGE> 14
THE FIRST BANCSHARES, INC.
1997 ANNUAL REPORT
THE FIRST NATIONAL BANK OF SOUTH MISSISSIPPI
<PAGE> 15
CORPORATE PURPOSE
CUSTOMERS
The First National Bank of South Mississippi customers are our reason for being.
They are the constant in every decision that we make. We promise to be
responsive to our customers' needs by providing superior financial products and
services, which will be offered in combination with the high level of personal
attention our customers deserve.
SHAREHOLDERS
The First National Bank of South Mississippi will strive to maximize the value
of our shareholders' investment and will conduct its business in a manner that
will instill a sense of pride in our company.
EMPLOYEES
The First National Bank of South Mississippi will foster a dynamic team
environment for our employees that creates opportunities for personal and
professional growth. We will respect their opinions, believe in their abilities,
support them and recognize their contributions to the success of the company.
COMMUNITY
The First National Bank of South Mississippi, as a locally-owned and managed
financial institution, will be in touch with the communities that we serve,
listening and responding to their credit and financial service needs.
We will direct the energy and excitement of our team toward being a good friend
and neighbor and toward enhancing the quality of life in our communities.
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders ...................................................... 1
Management's Discussion and Analysis......................................... 2
Report of Independent Auditor................................................ 16
Consolidated Financial Statements............................................ 17
Notes to Consolidated Financial Statements................................... 21
Shareholder and Stock Information............................................ 37
Directors and Officers....................................................... 38
</TABLE>
<PAGE> 17
TO OUR SHAREHOLDERS AND FRIENDS
This was an exciting year for THE FIRST. We continue to exceed our own
expectations and have positioned the company for an even more exciting and
projected profitable 1998.
The first full year of operation for our bank was 1997, having opened our
doors in August of 1996. We also opened our new main office in January of 1997
and started a mortgage department in April.
During 1997, assets increased from $14.2 million to $27.5 million. Loans
grew by $13 million and deposits by $13.5 million. Our loss was $263,000 for the
first half of the year and we are happy to report a profit for the second half
of the year of $1,000. This positions us for a good start in 1998. We had no
loan charge-offs in 1997 and, in fact, had no 30-day past due loans at year-end
1997.
We plan to continue to market ourselves as your "local" banking
alternative. Local decision-making and flexibility have proven thus far to be a
real plus with our customers. Merger activities at other institutions have
created welcomed opportunities for THE FIRST. We expect these to continue to
present themselves in 1998.
In 1998, our plans are to open a new branch on Lincoln Road, probably in
the fourth quarter of the year. This will be a 3,300 sq. ft. building very
closely resembling our main office in Oak Grove. We also plan to unveil internet
banking in the second quarter. These additions will make our services more
available to our market of Lamar and Forrest County.
As always, we appeal to you, our shareholders, to support your bank by
taking advantage of our banking services.
Dawn T. Parker David E. Johnson
Chairman of the Board President and CEO
1
<PAGE> 18
MANAGEMENT'S DISCUSSION & ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is intended to further explain financial information
outlined in the accompanying two year listing of selected financial data.
Information contained in this data summary depicts selected totals from the
Company's balance sheet and income statement for the past two years. Your
attention is also directed to management's letter to shareholders at the
beginning of this Annual Report. This letter further explains significant
changes that occurred in the Company's operation during the past year.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The First Bancshares, Inc. ("The Company") was organized 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 FIRST"). THE FIRST received it's
charter and commenced operations on August 5, 1996. The Company's initial stock
offering was closed on August 27, 1996 after 721,848 shares were sold at $10.00
per share generating capital of $7,218,480.
At the close of business, December 31, 1997, THE FIRST concluded it first full
calendar year of operations. As of year end 1997, the Company's assets totaled
$27,532,060. Of this total, $990,261 was Cash and Due From Banks; $1,850,000 was
Fed Funds Sold; $4,303,586 Securities comprised primarily of U.S. Gov't Agency
and Mortgage Backed; $17,487,426 Loans Net of the Reserve for Loan Losses
($193,565); $2,090,225 Premises and Equipment; $841,861 Interest Receivable; and
$162,266 Other Assets.
Deposits as of year end 1997 totaled $22,539,143. Of this total, $2,479,084 were
non-interest bearing; $4,445,832 were Time Deposits of $100,000 or more; and
$15,614,227 were Other Interest Bearing deposits. Interest payable and Other
Liabilities of $107,973 comprised the remaining liabilities as of yearend.
Shareholder's equity totaled $6,367,704 as of December 31, 1997. Of this amount,
$721,848 was Common Stock at $1 par value; $6,451,456 was representative of
Additional paid-in capital from the initial stock offering; ($817,650) was
representative of accumulated losses from operations to date, of which
($261,992) resulted from 1997 operating losses; and $12,051 was representative
of the unrealized gain on "Available for Sale" securities at year end. The net
loss per common share through year end 1997 was equal to ($.36).
Net interest income, the primary source of earnings for the Company, represents
earnings generated from earning assets less the interest expense of funding
those assets. During 1997, earning assets grew $12,823,327. Changes in net
interest income can be divided into components, the change in average earning
assets (volume component) and the change in the net interest margin (rate
component). Net Interest Margin (NIM) represents the difference between yields
on earning assets and rates paid on interest bearing liabilities. The NIM (tax
adjusted) for 1997 was 4.04%.
2
<PAGE> 19
The Company's Provision for Loan and Lease Losses is utilized to replenish its
Reserve for Loan and Lease Losses on its balance sheet. The reserve is
maintained at a level deemed adequate by the Board of Directors after evaluation
of credit risk and loan performance trends in the loan portfolio. The reserve
amount currently maintained (1.10% of loans net of unearned)is deemed adequate
to cover existing exposure within the company's loan portfolio.
Non-interest income and non-interest expense reflect the impact of costs
associated with beginning operations and growing the deposit base. Non-interest
income includes various service charges, fees, and commissions collected by the
Company; non-interest expense represents ordinary overhead expenses to include
salaries, bonuses, and benefits.
LIQUIDITY, ASSET/LIABILITY MANAGEMENT
Liquidity may be defined as the ability of the Company to meet cash flow
requirements created by decreases in deposits and/or other sources of funds or
increases in loan demand. The Company has maintained an asset/liability
management policy which focuses upon interest rate risk and rate sensitivity.
The primary objective of rate sensitivity management is to maintain interest
income growth while reducing exposure to adverse fluctuations in interest rates.
The Company utilizes an Asset/Liability Management Committee which evaluates and
analyzes the Company's pricing, maturities, growth, and balance sheet mix
strategies in an effort to make informed decisions that will increase income and
limit interest rate risk. The committee utilizes GAP Analysis generated using
Asset Liability Management Software. Utilizing GAP Analysis, the bank desires to
maintain a rate sensitivity position which is essentially neutral, with rate
sensitive assets being equal to rate sensitive liabilities with repricing
opportunities of one year or less. The Company has experienced no problem with
liquidity since commencing operations and anticipates that all liquidity
requirements will be met comfortably in the foreseeable future. The Company's
traditional sources of funds from deposit increases, maturing loans and
investments have allowed it to generate sufficient funds for liquidity needs. It
is pointed out that the Company's Loan to Deposit ratio is 77.58% with a goal of
70% and a maximum of 80%.
CAPITAL
Current regulatory requirements call for a basic leverage ratio of 5% for a bank
to be considered "well capitalized". At December 31, 1997, the Company
maintained a 30.3% leverage ratio which allowed it to significantly exceed the
ratio required for a "well capitalized" institution. The regulatory authorities
have become increasingly interested in evaluating a financial institutions
capital against its assets which have been risk weighted (high risk assets would
require a higher capital allotment, lower risk assets a lower capital
allotment). In this context, a "well capitalized" bank is required to have a
Tier I risk based capital ratio (excludes reserve for loan losses) of 6% and a
total risk based capital ratio (includes reserve for loan losses) of 10%. At the
end of 1997, the Company had a Tier I ratio of 30.7% and total risk based
consolidated capital of 31.7%, once again placing the company well above the
consolidated level required for a "well capitalized" institution. The Company's
capital position
3
<PAGE> 20
exceeds regulatory requirements, even for "well capitalized" institutions.
Management considers current capital levels to be entirely sufficient to support
the needs of the Company and anticipates no events or conditions that would
significantly affect the capital position.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements, and notes thereto, presented herein have
been prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Bank's operations. Unlike most industrial
companies, nearly all the assets and liabilities of the Bank are monetary in
nature. As a result, interest rates have a greater impact on the Bank's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the price
of goods and services.
SUPPLEMENTAL STATISTICAL INFORMATION
I. DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY; INTEREST AND
INTEREST DIFFERENTIAL
A. AVERAGE BALANCE SHEETS ( IN THOUSANDS ):
<TABLE>
<CAPTION>
ASSETS 1996 1997
CONSOLIDATED CONSOLIDATED
<S> <C> <C>
CASH AND DUE FROM BANKS $3,313 $ 753
FED FUNDS SOLD AND SECURITIES $3,339 $ 6,373
PURCHASED UNDER AGREEMENTS TO RESELL
LOANS, NET OF UNEARNED and RESERVE FOR LOAN LOSSES $1,432 $12,556
DEPOSITS ON LAND $ 52 $ 221
FIXED ASSETS $ 796 $ 1,956
ACCRUED INCOME $ 16 $ 552
OTHER ASSETS $ 188 $ 179
TOTAL ASSETS $9,111 $22,531
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
NON-INTEREST BEARING $1,152 $ 2,030
INTEREST BEARING $2,402 $13,987
TOTAL DEPOSITS $3,554 $16,017
FED FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE $ 0 $ 0
BORROWED FUNDS $ 0 $ 0
OTHER LIABILITIES $ 25 $ 110
TOTAL LIABILITIES $2,740 $16,128
STOCKHOLDERS' EQUITY $6,371 $ 6,403
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,111 $22,531
</TABLE>
4
<PAGE> 21
B. ANALYSIS OF NET INTEREST EARNINGS
The table below shows, for the periods indicated, an analysis of net interest
earnings, including the average amount of interest-earning assets and
interest-bearing liabilities outstanding during the period, the interest earned
or paid on such accounts, the average yields/rates paid and the net yield on
interest-earning assets:
($ IN THOUSANDS) USING AVERAGE BALANCES
<TABLE>
<CAPTION>
YIELDS YIELDS
EARNED EARNED
AND AND
RATES RATES
EARNING ASSETS CONSOLIDATED PAID CONSOLIDATED PAID %
1996 1997
<S> <C> <C> <C> <C>
NET LOANS $ 1,432 9.486% $12,692 9.01%
INVESTMENTS FED
FUNDS SOLD AND
SECURITIES PURCHASED
AGREEMENTS TO RESELL $ 3,339 5.597% $ 6,373 5.97%
TOTALS $ 4,771 6.46% $19,065 7.99%
INTEREST-BEARING
LIABILITIES
INTEREST-BEARING
DEPOSITS $ 2,402 5.469% $13,987 5.11%
BORROWED FUNDS
AND FED FUNDS
PURCHASED AND
SECURITIES SOLD
UNDER
AGREEMENT T0
REPURCHASE $ 0 0% $ 0 0%
TOTALS $ 2,402 5.469% $13,987 5.11%
NET AMOUNTS $ 2,369 .991% $ 5,078 2.88%
</TABLE>
Net yield on earning assets:
(1) Interest and yields on tax-exempt obligations are not on a fully taxable
equivalent basis.
(2) For the purpose of these computations, non-accruing loans are included in
the average loan balances outstanding.
5
<PAGE> 22
C. INCREASE (DECREASE) IN INTEREST INCOME AND INTEREST EXPENSE
Since The First National Bank of South Mississippi commenced operations on
August 5, 1996, comparison of the prior year to 1997 information regarding
changes in Interest Income and Interest Expense is a comparison of the five
months of operation in 1996 to twelve full months of operation in 1997 and
should be viewed accordingly.
<TABLE>
<CAPTION>
($ to the nearest Thousand)
INTEREST INCOME 1996 1997 DIFFERENCE
<S> <C> <C>
INTEREST ON BALANCES DUE FROM $50 $73 $23
BANKS
INTEREST INCOME ON U.S. TREAS $223 $280 $57
AND AGENCY SEC.
INTEREST ON OBLIGATIONS OF $0 $0 $0
STATES AND POLITICAL
SUBDIVISIONS
INTEREST ON OTHER SECURITIES $6 $10 $4
INTEREST ON FED FUNDS SOLD $69 $91 $22
INTEREST SECURITIES PURCHASED
UNDER AGREEMENTS
TO RESELL
INTEREST AND FEES ON LOANS $707 $1,144 $437
TOTAL INTEREST INCOME $1,055 $1,599 $544
INTEREST EXPENSE:
INTEREST ON CERTIFICATES OF $44 $86 $42
DEPOSIT OF $100,000 OR MORE
INTEREST ON OTHER DEPOSITS $425 $628 $203
INTEREST ON FED FUNDS PURCHASED $0 $0 $0
AND SECURITIES SOLD UNDER
REPURCHASE
AGREEMENTS
INTEREST ON DEMAND NOTES ISSUED $0 $0 $0
TO THE U.S. TREASURY AND ON
OTHER BORROWED MONEY
TOTAL INTEREST EXPENSE $470 $714 $244
</TABLE>
II. INVESTMENT PORTFOLIO
A. The following tables present the book values of securities as of December
31, 1997. All amounts are stated in Thousands.
6
<PAGE> 23
<TABLE>
<CAPTION>
SECURITY DESCRIPTION CONSOLIDATED CONSOLIDATED
D 1997
1996
<S> <C> <C>
U.S. TREASURY $0 $504
U.S. GOV'T AGENCIES AND MORTGAGE BACKED SECURITIES $4,058 $2,635
STATES AND POLITICAL SUBDIVISIONS $0 $0
OTHER $0 $658
TOTAL BOOK VALUE $4,216 $3,797
</TABLE>
B. The following table sets forth maturities of investment and
mortgage-backed securities (carrying values) at December 31, 1997, and
the weighted average yield of such securities. All dollar values are
stated in Thousands.
<TABLE>
<CAPTION>
1997 0 - 1 YIELD 1 - 5 YIELD 5 - 10 YIELD
SECURITIES YEAR (%) YEARS (%) YEARS (%)
<S> <C> <C> <C> <C> <C> <C>
U.S. TREASURY $0 0% $500 6.252% $0 0%
U.S. GOV'T AGENCIES $0 0% $500 6.063% $0 0%
MORTGAGE BACKED $235 5.965% $0 0% $714 6.38
SECURITIES
STATES AND POLITICAL $0 0% $0 0% $0 0%
SUBDIVISIONS
OTHER $0 0% $0 0% $0 0%
TOTAL $235 5.965% $1,000 6.157% $714 6.38%
GREATER THAN YIELD
10 YRS (%)
MORTGAGE BACKED $2,495 6.681
SECURITIES
EQUITY SECURITIES $158 6.00%
TOTAL $2,653 6.76%
</TABLE>
NOTE: Interest and yields on tax-exempt obligations are not on a
taxable equivalent basis. Average yield on floating rate securities was
determined using the current yield.
7
<PAGE> 24
C. Investment securities in excess of 10% of stockholders' equity.
At December 31, 1997, there were no securities from any issues in
excess of 10% of stockholders' equity.
III. LOAN PORTFOLIO
A. TYPE OF LOANS
The amount of loans outstanding by type at the indicated dates are shown
in the following table. All dollar amounts are expressed in Thousands.
<TABLE>
<CAPTION>
LOAN TYPE DECEMBER 31, DECEMBER 31, 1997
1996
<S> <C> <C>
COMMERCIAL, FINANCIAL AND AGRICULTURE $2,740 $4,341
REAL ESTATE - CONSTRUCTION $36 $7,604
REAL ESTATE - MORTGAGE $1,079 $3,314
INSTALLMENT LOANS TO INDIVIDUALS $470 $2,228
OTHER $2 $0
TOTAL LOANS $4,327 $17,487
LESS: UNEARNED INTEREST $0 $0
TOTAL LOANS NET OF UNEARNED INT. $4,327 $17,487
</TABLE>
B. MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES.
All dollar values are expressed in Thousands as of December 31, 1997.
<TABLE>
<CAPTION>
LOAN TYPE WITHIN 1 1 - 5 YEARS 5-10 10-15 OVER
MATURING OR REPRICING YEAR YEARS YEARS 15
YEARS
<S> <C> <C> <C> <C> <C>
COMMERCIAL, FINANCIAL AND $3,702 $639 $0 $0 $0
AGRICULTURAL
REAL ESTATE - CONSTRUCTION $5,481 2,123 $0 $0 $0
REAL ESTATE - MORTGAGE $1,744 $1,556 $14 $0 $0
INSTALLMENT LOANS TO $1,280 $940 $8 $0 $0
INDIVIDUALS
TOTAL LOANS BY MATURITY OR $12,207 $5,258 $22 $0 $0
EARLIEST REPRICING DATE
LOANS INCLUDED IN TOTALS ABOVE
WITH:
PREDETERMINED INTEREST RATES $0 $0 $0 $0 $0
FLOATING INTEREST RATES $8,973 $0 $0 $0 $0
</TABLE>
C. NON-PERFORMING LOANS
1. As of December 31, 1997 there were no loans classified as
non-performing in nature.
2. There were no loan concentrations in excess of 10% of total
loans at December 31, 1997.
8
<PAGE> 25
3. There were no outstanding foreign loans at December 31, 1997.
4. Loans classified for regulatory purposes or for internal credit
review purposes that have not been disclosed in the above table do
not represent or result from trends or uncertainties that
management expects will materially impact the financial condition
of the company or its subsidiary banks, or their future operating
results, liquidity, or capital resources.
5. As of December 31, 1997, no loans were in non-accruing status
and therefore interest income has not been impacted by such
activity.
6. Management stringently monitors loans that are classified as
non-performing. Non-performing loans include non-accrual loans,
loans past due 90 days or more, and loans renegotiated or
restructured because of a debtor's financial difficulties. Loans
are generally placed on non-accrual status if any of the following
events occur: (1) the classification of a loan as non-accrual
internally or by regulatory examiners; (2) delinquency on principal
for 90 days or more unless management is in the process of
collection; (3) a balance remains after repossession of
collateral; (4) notification of bankruptcy; or (5) management's
judgment that non-accrual is appropriate.
D. OTHER INTEREST-BEARING ASSETS
There were no other interest-bearing non-performing assets at
December 31, 1997.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. An analysis of the loan loss experience for the period ending
December 31, 1997 is provided in the following table. All balances
are provided in Thousands of dollars.
<TABLE>
<CAPTION>
BEGINNING BALANCE DECEMBER 31, 1996 DECEMBER 31, 1997
<S> <C> <C>
CHARGE-OFFS:
COMMERCIAL, FINANCIAL AND AGRICULTURAL $0 $0
REAL ESTATE $0 $0
INSTALLMENT LOANS AND OTHER $0 $0
TOTAL CHARGE-OFFS $0 $0
RECOVERIES:
COMMERCIAL, FINANCIAL AND AGRICULTURAL $0 $0
</TABLE>
9
<PAGE> 26
<TABLE>
<S> <C> <C>
REAL ESTATE $0 $0
INSTALLMENT LOANS AND OTHER $0 $0
TOTAL RECOVERIES $0 $0
NET CHARGE-OFFS $0 $0
PROVISION FOR LOAN LOSSES BEGINNING $0 $37
BALANCE
PROVISION CHARGED TO OPERATIONS $37 $156
ENDING BALANCE $37 $193
RATIO OF NET CHARGE-OFFS TO AVERAGE $0 0%
LOANS OUTSTANDING
RATIO OF RESERVE FOR LOAN LOSSES TO .86% 1.10%
LOANS OUTSTANDING AT YEAR END
</TABLE>
B. DETERMINATION OF RESERVE FOR LOAN LOSSES
The loan loss reserve is currently based upon the formula
established in the bank charter application with the Office of
the Comptroller of the Currency. The reserve is based upon 1.10%
of net loans for the first year of operation. The bank will
build this loan loss reserve based upon this schedule with
additional reserves as individual loans are classified internally
or by examiners (OLEM 5%, Substandard 10%, Doubtful 15% plus
specific reserve for recognized exposure, and Loss 100%) for
credit, collateral or repayment weaknesses.
C. LOANS AND RISK DESCRIPTIONS
REAL ESTATE LOANS
Approximately $10.9 million or 62% of the loan portfolio
consisted of Real Estate loans at 12/31/97. These loans were
extended after a thorough review of all supporting financial and
collateral information with a loan to value margin of up to 80%.
The Bank believes that these loans represent an acceptable risk.
At 12/31/97 the Bank had $4.3 million or approximately 25% of the
loan portfolio in Commercial/Financial/Industrial loans. These
loans to both businesses and individuals were booked after a
thorough credit analysis of the borrower's repayment ability. The
credit analysis included the review of financial statements, tax
returns, credit bureaus, and supporting collateral. These type
loans represent the core of the bank's loan portfolio and
represent a conservative vehicle for interest income.
D. CONSUMER AND OTHER LOANS
At 12/31/97 approximately 12.7% or $2.2 million of the Bank's
portfolio consisted of consumer loans. These loans represent an
opportunity for the bank to meet the varied
10
<PAGE> 27
needs of its customers. These loans allow the Bank to earn a
stable rate of interest income and are reserved for borrower's
that meet the bank's credit quality standards.
V. DEPOSITS
A. AVERAGE DEPOSITS ( ALL $ TO THE NEAREST THOUSAND )
<TABLE>
<CAPTION>
1996 1996 1997 1997
$ RATE $ RATE
<S> <C> <C> <C> <C>
NON-INTEREST BEARING $250 0% $2,030 0%
DEPOSITS
INTEREST BEARING $1,565 4.75% $6,754 4.60%
DEPOSITS (1)
SAVINGS DEPOSITS $25 2.417% $145 2.07%
TIME DEPOSITS $402 5.661% $6,894 5.80%
TOTAL DEPOSITS $2,248 4.351% $15,459 4.63%
</TABLE>
(1) INCLUDES MONEY MARKET ACCOUNTS
B. OTHER CATEGORIES
None
C. FOREIGN DEPOSITS
None
D. TIME CERTIFICATES OF DEPOSIT OF $100,000 OR MORE AND MATURITIES AT
DECEMBER 31.
<TABLE>
<CAPTION>
TIME CERTIFICATES OF 1996 1997
DEPOSIT OF $100,000 OR
MORE
<S> <C> <C>
3 MONTHS OR LESS $100 $508
3 - 6 MONTHS $0 $1,620
6 - 12 MONTHS $400 $1,018
OVER 12 MONTHS $200 $1,299
</TABLE>
E. FOREIGN OFFICE TIME DEPOSITS OF $100,000 OR MORE
Not Applicable
11
<PAGE> 28
VI. RETURN ON EQUITY AND ASSETS
The following financial ratios are presented for analytical purposes:
<TABLE>
<CAPTION>
RATIO DESCRIPTION DECEMBER 31, 1996 DECEMBER 31, 1997
<S> <C> <C>
RETURN ON ASSETS (NET INCOME DIVIDED (5.42%) (1.16%)
BY AVERAGE TOTAL ASSETS)
RETURN ON EQUITY ( NET INCOME DIVIDED (7.75%) (4.09%)
BY AVERAGE EQUITY)
DIVIDEND PAYOUT RATIO (DIVIDENDS PER 0% 0%
SHARE DIVIDED BY NET INCOME PER
SHARE)
EQUITY TO ASSET RATIO (AVERAGE EQUITY 69.93% 28.42%
DIVIDED BY AVERAGE TOTAL ASSETS)
</TABLE>
VII. SHORT TERM BORROWINGS
As of December 31, 1997 there were no short term borrowings. During 1997
the Company and its subsidiaries had no short term borrowings in excess of
30% of stockholders' equity.
VIII. CAPITAL ADEQUACY DATA
Total capital of the Company as a percentage of total adjusted assets was
as follows:
<TABLE>
<CAPTION>
($ THOUSANDS) ($ THOUSANDS)
DECEMBER 31, 1996 DECEMBER 31, 1997
<S> <C> <C>
TOTAL ASSETS $14,177 $27,534
ALLOWANCE FOR LOAN LOSSES ($37) ($193)
TOTAL ADJUSTED ASSETS $14,214 $27,727
TOTAL STOCKHOLDERS' EQUITY (EXCLUDING $6,618 $6,363
UNREALIZED GAIN/LOSS)
ALLOWANCE FOR LOAN LOSSES $37 $193
OTHER COMPONENTS OF CAPITAL $0 $0
TOTAL PRIMARY CAPITAL $6,655 $6,556
TOTAL SECONDARY CAPITAL $0 $0
TOTAL CAPITAL $6,655 $6,556
RATIO OF TOTAL CAPITAL TO TOTAL ADJUSTED 46.80% 23.65%
ASSETS
</TABLE>
Tier I and total Capital as a percentage of "risk-weighted" assets at
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
<S> <C> <C>
TIER I CAPITAL PERCENTAGE 91.3% 30.7%
TOTAL CAPITAL PERCENTAGE 91.8% 31.7%
</TABLE>
12
<PAGE> 29
The Company's capital ratios exceed the minimum capital requirements at
December 31, 1997 and management expects this to continue.
IX. INTEREST RATE SENSITIVITY ANALYSIS
The following table reflects the year-end position of the Company's
interest-earning assets and interest-bearing liabilities which can either
reprice or mature within the designated time period. The interest rate
sensitivity gaps can vary from day-to-day and are not necessarily a
reflection of the future. In addition, certain assets and liabilities
within the same designated time period may none the less reprice at
different times and at different levels.
<TABLE>
<CAPTION>
($ IN THOUSANDS)
DECEMBER 31, 1997
INTEREST SENSITIVE WITHIN (CUMULATIVE)
WITHIN WITHIN WITHIN 5 YEARS TOTAL INTEREST
3 MONTHS 12 MONTHS 5 YEARS OR MORE EARNING ASSETS
<S> <C> <C> <C> <C> <C>
INTEREST EARNING
ASSETS:
LOANS $ 9,471 $2,736 $5,258 $ 22 $17,487
INVESTMENTS AND $ 0 $1,217 $1,000 $3,209 $ 5,426
MORTGAGE BACKED
SECURITIES
FED FUNDS SOLD AND $ 1,850 $ 0 $ 0 $ 0 $ 1,850
OTHER
TOTALS $11,321 $3,953 $6,258 $3,231 $21,033
INTEREST BEARING
LIABILITIES:
DEPOSITS AND BORROWED $ 5,287 $9,807 $4,742 $ 178 $20,015
FUNDS
SENSITIVITY GAP:
DOLLAR AMOUNT $ 6,034 $ 180 $1,696 $4,749
PERCENT OF TOTAL 28.68% .86% 8.06% 22.58%
INTEREST EARNING ASSETS
</TABLE>
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive"
and by monitoring rate sensitivity differences ("GAP") between assets and
liabilities. An asset or liability is considered to be rate sensitive
within a specific time period if it will mature or be subject to
repricing within that period of time. The interest rate sensitivity gap
is the difference between the amount of interest-earning assets
anticipated, based upon certain assumptions, to mature or reprice within
that time period. a gap is considered to be positive when the amount of
rate sensitive assets maturing or repricing within a period of time
exceeds the amount of rate sensitive liabilities maturing within that same
time frame. During a period of falling interest rates, a negative gap
would tend to result in an increase in net interest income while a
positive gap would tend to adversely affect net interest income. In an
environment of rising interest rates, an institution with a positive gap
would generally be expected, absent the effects of other factors, to
experience a greater increase in the yield of its assets relative to the
costs of its liabilities and thus an increase in the institution's net
interest income would result whereas an institution with a negative gap
could experience the opposite results.
13
<PAGE> 30
At December 31, 1997, total interest-earning assets maturing or repricing
within one year was greater than interest bearing liabilities maturing or
repricing within the same period of time by $180 thousand (cumulative),
representing a positive cumulative gap of .86% of earning assets. The
Company has a positive gap in all time frames, it is expected that this
gap will move toward a more neutral position with the addition of deposits
with fixed maturities of a longer duration than seen at the present time.
This trend should be particularly noticeable in the 2 - 5 year time frame,
since these will be the maturities in which most time deposits will be
marketed and in which any change in interest rates will have the greatest
impact on earnings.
14
<PAGE> 31
THE FIRST BANCSHARES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
DECEMBER 31, 1997 AND 1996
15
<PAGE> 32
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
The First Bancshares, Inc.
Hattiesburg, Mississippi
We have audited the accompanying consolidated balance sheets of The First
Bancshares, Inc., and subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the consolidated financial position of The First
Bancshares, Inc., and subsidiary as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
T.E. Lott & Company
Columbus, Mississippi
February 11, 1998
<PAGE> 33
THE FIRST BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
Cash and due from banks $ 970,262 $ 1,458,586
Federal funds sold 1,870,000 2,311,386
Securities (Note C) 4,303,587 4,216,027
Loans, net of reserve for loan losses of $193,566
in 1997 and $37,148 in 1996 (Note D) 17,293,861 4,290,272
Premises and equipment (Note E) 2,092,225 1,691,760
Interest receivable 188,365 35,576
Other assets 808,338 173,153
------------ ------------
$ 27,526,638 $ 14,176,760
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 2,479,084 $ 1,566,076
Time, $100,000 or more 2,631,198 400,000
Other interest-bearing 15,948,103 5,540,573
------------ ------------
Total deposits 21,058,385 7,506,649
Interest payable 94,649 26,646
Other liabilities 5,900 22,936
------------ ------------
Total liabilities 21,158,934 7,556,231
------------ ------------
Commitments and contingent liabilities (Note J)
Stockholders' Equity (Note F):
Common stock, par value $1 per share; 10,000,000
shares authorized; issued and outstanding 721,848
at December 31, 1997 and 1996 721,848 721,848
Preferred stock, par value $1 per share, 10,000,000
shares authorized; no shares issued and outstanding -- --
Additional paid-in capital 6,451,456 6,451,456
Accumulated deficit (817,651) (555,658)
Unrealized gain on available-for-sale securities 12,051 2,883
------------ ------------
Total stockholders' equity 6,367,704 6,620,529
------------ ------------
$ 27,526,638 $ 14,176,760
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE> 34
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
INTEREST INCOME ---------- ---------
<S> <C> <C>
Interest and fees on loans $ 1,141,101 $ 80,035
Interest and dividends on investment securities - taxable 290,247 60,738
Interest on federal funds sold 91,354 119,003
Interest on deposits in banks -- 6,516
Other, preopening -- 183,083
----------- ---------
1,522,702 449,375
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 68,385 7,433
Interest on other deposits 572,762 66,052
Interest on borrowed funds -- 5,909
----------- ---------
641,147 79,394
----------- ---------
Net interest income 881,555 369,981
Provision for loan losses 156,418 37,148
----------- ---------
Net interest income after provision for loan losses 725,137 332,833
OTHER INCOME
Service charges on deposit accounts 67,543 2,136
Other service charges and fees 24,723 2,190
Other (Note E) 123,858 --
----------- ---------
216,124 4,326
OTHER EXPENSES
Salaries 531,754 172,051
Employee benefits 100,538 34,328
Occupancy expense 77,401 13,166
Furniture and equipment expense 122,739 51,942
Marketing and public relations 43,245 21,182
Other 327,577 176,253
Preopening expenses (Note K) -- 223,985
----------- ---------
1,203,254 692,907
----------- ---------
Net loss $ (261,993) $(355,748)
=========== =========
Net loss per common share (Note B-12) $ (.36) (.58)
=========== =========
Net loss per common share - assuming dilution (Note B-12) $ (.36) $ (.58)
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 35
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Unrealized
Gain
On
Additional Available-
Common Paid-in Accumulated For-Sale
Stock Capital Deficit Securities Total
--------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ 10 $ 90 $(199,910) $ -- $ (199,810)
Issuance of common stock,
net of issuance costs 721,848 6,451,456 -- -- 7,173,304
Net loss for 1996 -- -- (355,748) -- (355,748)
Unrealized gain on available-
for-sale securities -- -- -- 2,883 2,883
Redemption of organization
stock (10) (90) -- -- (100)
--------- ----------- --------- ---------- -----------
Balance, December 31, 1996 721,848 6,451,456 (555,658) 2,883 6,620,529
Net loss for 1997 -- -- (261,993) -- (261,993)
Net change in unrealized gain
on available-for-sale
securities, net of tax -- -- -- 9,168 9,168
--------- ----------- --------- ---------- -----------
Balance, December 31, 1997 $ 721,848 $ 6,451,456 $(817,651) $ 12,051 $ 6,367,704
========= =========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 36
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIODS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (261,993) $ (355,748)
Adjustments to reconcile net income to net cash:
Depreciation and amortization 157,333 42,210
Provision for loan losses 156,418 37,148
Amortization and accretion (101,992) (13,285)
Increase in interest receivable (152,789) (35,576)
Increase in other assets (672,157) (69,791)
Increase in interest payable 68,003 26,646
(Decrease) increase in other liabilities (17,036) 12,808
------------ ------------
Net cash used in operating activities (824,213) (355,588)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities (6,252,319) (4,949,859)
Proceeds from maturities and calls of available-for-sale
securities 6,782,920 750,000
Purchase of securities to be held-to-maturity (507,001) --
Increase in loans (13,160,007) (4,327,420)
Additions to premises and equipment (520,826) (1,585,625)
------------ ------------
Net cash used in investing activities (13,657,233) (10,112,904)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits 13,551,736 7,506,649
Decrease in borrowed funds -- (441,950)
Proceeds from issuance of stock, net -- 7,173,204
------------ ------------
Net cash provided by financing activities 13,551,736 14,237,903
------------ ------------
Net increase (decrease) in cash and cash equivalents (929,710) 3,769,411
Cash and cash equivalents at beginning of year 3,769,972 561
------------ ------------
Cash and cash equivalents at end of year $ 2,840,262 $ 3,769,972
============ ============
CASH PAID DURING THE YEAR FOR:
Interest $ 573,144 $ 52,748
Income taxes -- --
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE> 37
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A - ORGANIZATION
The First Bancshares, Inc. (the Company) was incorporated under the laws of
Mississippi on June 23, 1995 (the "Inception Date"), for the purpose of
becoming a one-bank holding company. From the Inception Date through August 5,
1996, the Company was a development-stage company and its activities during
the period consisted of its organization, the conducting of its initial public
stock offering, pursuit of the approval of 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"), and the establishing of
systems, hiring and training of personnel, and other matters related to the
opening of the Bank. The Bank began its operations on August 5, 1996.
NOTE B - SUMMARY OF ACCOUNTING POLICIES
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
the Bank. All significant intercompany accounts and transactions have been
eliminated.
2. NATURE OF OPERATIONS
The Company as a bank holding company is regulated by the Federal Reserve
Bank.
The Bank operates under a national bank charter and provides full banking
services. It is subject to the regulation of the OCC. The Bank provides
services primarily to Forrest and Lamar Counties of Mississippi.
3. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
( Continued )
21
<PAGE> 38
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE B - SUMMARY OF ACCOUNTING POLICIES (Continued)
4. SECURITIES
Investments in securities are classified into three categories and are
accounted for as follows:
Available-for-Sale Securities
Securities classified as available-for-sale are those securities that are
intended to be held for an indefinite period of time, but not necessarily to
maturity. Any decision to sell a security classified as available-for-sale
would be based on various factors, including movements in interest rates,
liquidity needs, security risk assessments, changes in the mix of assets and
liabilities and other similar factors. These securities are carried at their
estimated fair value, and the net unrealized gain or loss is reported in
stockholders' equity, net of tax, when applicable, until realized.
Gains and losses on the sale of available-for-sale securities are determined
using the adjusted cost of the specific security sold.
Premiums and discounts are recognized in interest income using the interest
method.
Securities to be Held-to-Maturity
Securities classified as held-to-maturity are those securities for which there
is a positive intent and ability to hold to maturity. These securities are
carried at cost adjusted for amortization of premiums and accretion of
discounts, computed by the interest method.
Trading Account Securities
Trading account securities are those securities which are held for the purpose
of selling them at a profit. There were no trading account securities on hand
at December 31, 1997 and 1996.
5. LOANS
Loans are carried at the principal amount outstanding, net of the reserve for
loan losses. Interest income on loans is recognized based on the principal
balance outstanding and the stated rate of the loan.
( Continued )
22
<PAGE> 39
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE B - SUMMARY OF ACCOUNTING POLICIES (Continued)
6. RESERVE FOR LOAN LOSSES
For financial reporting purposes, the provision for loan losses charged to
operations is based upon management's estimations of the amount necessary to
maintain the reserve at an adequate level, considering losses charged to the
loan portfolio, current economic conditions, credit reviews of the loan
portfolio, and other factors warranting consideration. Reserves for any
impaired loans are generally determined based on collateral values. Loans are
charged against the reserve for loan losses when management believes the
collectibility of the principal is unlikely. The reserve is maintained at a
level believed adequate by management to absorb potential loan losses.
7. PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation. The
depreciation policy is to provide for depreciation over the estimated useful
lives of the assets using the straight-line method. Repairs and maintenance
expenditures are charged to operating expenses; major expenditures for
renewals and betterments are capitalized and depreciated over their estimated
useful lives.
8. ORGANIZATION COSTS
Organization costs consisting of incorporation expenses are included in other
assets and are being amortized to expense over a sixty-month period.
9. INCOME TAXES
A deferred tax asset or liability is recognized for the future income tax
effects attributable to the differences in the tax bases of assets or
liabilities and their reported amounts in the financial statements, as well as
operating loss and tax credit carryforwards. The deferred tax asset or
liability is measured using the enacted tax rate expected to apply to taxable
income in the period in which the deferred tax asset or liability is expected
to be realized.
10. STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks and federal funds sold. Generally, federal funds are sold
for a one-day period.
( Continued )
23
<PAGE> 40
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE B - SUMMARY OF ACCOUNTING POLICIES (Continued)
11. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, the Bank enters into off-balance sheet
financial instruments consisting of commitments to extend credit, credit card
lines and standby letters of credit. Such financial instruments are recorded
in the financial statements when they are exercised.
12. NET LOSS PER SHARE
In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, "Earnings Per Share," which is effective for years ending
after December 15, 1997. Under Statement No. 128, two per share amounts are to
be considered and presented, if applicable. Basic per share data is calculated
based on the weighted-average number of common shares outstanding during the
reporting period. Diluted per share data includes any dilution from potential
common stock outstanding, such as exercise of stock options.
The following table discloses the reconciliation of the numerators and
denominators of the basic and diluted computations:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1997 December 31, 1996
---------------------------------------------- -------------------------------------------
Net Loss Shares Per Share Net Loss Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Data
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic per share $(261,993) 721,848 $ (.36) $(355,748) 612,435 $ (.58)
======= =======
Effect of dilutive
shares:
Stock options -- 8,865 -- --
--------- ------- --------- -------
Diluted per share $(261,993) 730,713 $ (.36) $(355,748) 612,435 $ (.58)
========= ======= ======= ========= ======= =======
</TABLE>
The diluted per share amounts were computed by applying the treasury stock
method.
24
<PAGE> 41
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE C - SECURITIES
Securities at December 31, 1997 and 1996, consisted of available-for-sale
securities with a carrying amount of $3,796,862 and $4,216,027, respectively,
and securities held-to-maturity with a carrying amount of $506,725 and $-0-,
respectively. The amortized cost, gross unrealized gains, gross unrealized
losses and estimated fair value of these securities at December 31, 1997 and
1996, are as follows:
<TABLE>
<CAPTION>
1997
------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
Available-for-sale securities:
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 499,928 $ 3,822 $ -- $ 503,750
Obligations of U. S
Government agencies 500,000 -- 310 499,690
Mortgage-backed securities 2,126,525 9,721 1,181 2,135,065
Equity securities 167,950 -- -- 167,950
Other securities 490,407 -- -- 490,407
---------- ------- ------ ----------
$3,784,810 $13,543 $1,491 $3,796,862
========== ======= ====== ==========
Held-to-maturity securities:
Mortgage-backed securities $ 506,725 $ 877 $ -- $ 507,602
========== ======= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
1997
-------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Available-for-sale securities:
Obligations of U. S.
Government agencies $3,458,269 $ 3,486 $4,448 $3,457,307
Mortgage-backed securities 596,475 3,845 -- 600,320
Equity securities 158,400 -- -- 158,400
---------- ------- ------ ----------
$4,213,144 $ 7,331 $4,448 $4,216,027
========== ======= ====== ==========
</TABLE>
( Continued )
25
<PAGE> 42
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE C - SECURITIES (Continued)
The scheduled maturities of securities at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Estimated
Amortized
Fair
Cost Value
---------- ---------
<S> <C> <C>
Due in one year or less $ 490,407 490,407
Due after one year through five years 999,928 1,003,440
Mortgage-backed securities and equity securities 2,801,200 2,810,617
---------- ----------
$4,291,535 $4,304,464
========== ==========
</TABLE>
Actual maturities can differ from contractual maturities because the
obligations may be called or prepaid with or without penalties.
Equity securities consist of stock in the Federal Reserve Bank, the
transferability of which is restricted.
No gains and losses were realized on available-for-sale securities in 1997 and
1996.
Securities with a carrying value of $499,310 and $-0- at December 31, 1997 and
1996, respectively, were pledged to secure public deposits and for other
purposes as required or permitted by law.
NOTE D - LOANS
Loans outstanding include the following types at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
(In Thousands)
1997 1996
--------------------------- -------
<S> <C> <C>
Commercial, financial, and agricultural $ 5,187 $ 1,106
Real estate - construction 2,031 36
Real estate - mortgage:
Commercial 4,166 1,508
Residential 3,698 1,205
Consumer 2,392 470
Other 13 2
-------- -------
17,487 4,327
Reserve for loan losses (193) (37)
-------- -------
$ 17,294 $ 4,290
======== =======
</TABLE>
Activity in the reserve for loan losses included a provision for loan losses
charged to operations of $156,418 and $37,148 for the years ended December 31,
1997 and 1996. For the period ended December 31, 1997 and 1996, the Bank had no
loans classified as impaired.
26
<PAGE> 43
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE E - PREMISES AND EQUIPMENT
The detail of premises and equipment at December 31, 1997 and 1996, is as
follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Premises:
Land $ 453,366 $ 452,121
Buildings and improvements 1,380,205 60,863
Equipment 421,225 342,443
Construction in process -- 878,543
----------- -----------
2,254,796 1,733,970
Less accumulated depreciation (162,571) (42,210)
----------- -----------
$ 2,092,225 $ 1,691,760
=========== ===========
</TABLE>
The amounts charged to operating expense for depreciation were $120,361 and
$42,210 in 1997 and 1996, respectively.
Included in other income for the year ended December 31, 1997, is a gain of
$112,177 from the sale of nonbanking real estate.
NOTE F - REGULATORY MATTERS
The Company and its subsidiary bank are subject to regulatory capital
requirements administered by federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could
have a direct material effect on the Company's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to
qualitative judgment by regulators about components, risk weightings, and
other related factors.
To ensure capital adequacy, quantitative measures have been established by
regulators and these require the Company and the Bank to maintain minimum
amounts and ratios (set forth in the table below) of total and Tier I
capital (as defined) to risk-weighted assets (as defined), and of Tier I
capital to adjusted total assets (leverage). Management believes, as of
December 31, 1997, that the Company and the Bank exceed all capital adequacy
requirements.
(Continued)
27
<PAGE> 44
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE F - REGULATORY MATTERS (Continued)
At December 31, 1997, the Bank was categorized by regulators as
well-capitalized under the regulatory framework for prompt corrective
action. A financial institution is considered to be well-capitalized if it
has total risk-based capital of 10% or more, has Tier I risk-based ratio of
6% or more, and has a Tier I leverage capital ratio of 5% or more. There are
no conditions or anticipated events that, in the opinion of management,
would change the categorization.
The actual capital amounts and ratios at December 31, 1997 and 1996, are
presented in the following table. No amount was deducted from capital for
interest-rate risk exposure.
<TABLE>
<CAPTION>
($ In Thousands )
Company
(Consolidated) Bank
------------------- --------------------
Amount Ratio Amount Ratio
------ ----- ------ ------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Total risk-based $6,496 31.7% $5,023 24.5%
Tier I risk-based 6,303 30.7% 4,829 23.6%
Tier I leverage 6,303 30.3% 4,829 23.2%
DECEMBER 31, 1996
Total risk-based $6,655 91.8% $4,842 69.8%
Tier I risk-based 6,618 91.3% 4,805 69.1%
Tier I leverage 6,618 46.6% 4,805 34.5%
</TABLE>
The minimum amounts of capital and ratios as established by banking
regulators at December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
($ In Thousands )
Company
(Consolidated) Bank
------------------- --------------------
Amount Ratio Amount Ratio
------ ----- ------ -----
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Total risk-based $1,640 8.0% $1,638 8.0%
Tier I risk-based 820 4.0% 819 4.0%
Tier I leverage 839 4.0% 832 4.0%
DECEMBER 31, 1996
Total risk-based $ 580 8.0% $ 556 8.0%
Tier I risk-based 290 4.0% 278 4.0%
Tier I leverage 569 4.0% 557 4.0%
</TABLE>
( Continued )
28
<PAGE> 45
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE F - REGULATORY MATTERS (CONTINUED)
The Company's dividends, if any, will be made from dividends received from the
Bank. The OCC limits dividends of a national bank in any calendar year to the
net profits of that year combined with the retained net profits for the two
preceding years. At December 31, 1997, the Bank had no retained net profits free
of the restrictions.
NOTE G - INCOME TAXES
The Company's accounting and reporting of income taxes is in accordance with
FASB Statement No. 109, "Accounting for Income Taxes." At December 31, 1997 and
1996, the Company had a net operating loss carryforward of approximately
$817,000 and $555,000, respectively, for financial reporting purposes. The
realization of any deferred tax asset by the Company depends upon having
sufficient taxable income in the carryforward periods. Under Statement No. 109,
deferred tax assets are recognized for future deductible amounts resulting from
differences in the financial statements and tax bases of assets, liabilities and
operating loss carryforwards. A valuation allowance is then established to
reduce the deferred tax asset to an amount that it is "more likely than not" to
be realized in the future. The net operating losses during the years ended
December 31, 1997 and 1996, generated deferred tax assets of approximately
$306,000 and $208,000, respectively, each of which have been fully offset by a
valuation allowance of the same amount.
For income tax accounting purposes, the Company had a consolidated net
operating loss of approximately $360,000 at December 31, 1997. The
difference in the loss carryforward for financial and tax reporting purposes
is primarily due to the deferral and amortization of pre-opening expenses
over a sixty-month period for tax reporting. Carryforwards of net operating
losses will expire in the year 2012 if not utilized.
29
<PAGE> 46
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE H - EMPLOYEE BENEFITS
The Company and the Bank have an employment agreement with its President and
Chief Executive Officer. The initial term of the agreement is for three
years with an extension provision for an additional three year term. It
provides for a minimum salary to be reviewed by the Board of Directors
annually and increased at its discretion and allows for participation in any
management incentive programs, long-term equity incentives, and eligibility
for grants of any stock options, restricted stock, and other similar awards.
In the first two years of operations of the Bank, bonuses were determined by
the Board of Directors. Thereafter, the bonuses will be based upon a
percentage of net profits after taxes of the Bank. Initially, the agreement
granted an option to purchase up to 3% of the number of shares sold in the
stock offering at a price per share equal to the initial offering price. The
options vested one-third per year for the first three years of operations of
the Bank and were subject to certain performance criteria as established by
the Board of Directors. The option to purchase had a term of ten years. The
stock option provisions of the agreement were superseded by the stock option
plan adopted in 1997. In addition, the agreement provides for additional
benefits in the event of termination after a change in control.
In 1997, the Company adopted the 1997 Stock Option Plan (the "Plan"). The plan
provides for the granting of options to purchase up to 72,185 shares of Company
common stock by directors and key employees of the Company and its subsidiary.
As of December 31, 1997, all shares had been granted. The options may be
exercised at an option price equal to the fair market value of the stock at the
grant date. The options may be exercised over ten years.
The Company accounts for stock options in accordance with Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees". In accordance with APB 25, no expense has been recorded in the
accompanying consolidated financial statements. If FASB No. 123, "Accounting
for Stock-Based Compensation" had been applied, the net loss from operations
for the years ended December 31, 1997 and 1996, would have been $300,468 and
$367,290, respectively, and the basic net loss per common share would have
been $.42 and $.60, respectively.
The Bank provides a deferred compensation arrangement (401(k) plan) whereby
employees contribute a percentage of their compensation. For employee
contributions of three percent or less, the Bank provides a matching
contribution. Contributions by the Bank totaled $8,646 in 1997 and $2,017 in
1996.
30
<PAGE> 47
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE I - RELATED PARTY TRANSACTIONS
In the normal course of business, the Bank makes loans to its directors and
officers and to companies in which they have a significant ownership
interest. These loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons. Such loans amounted to
approximately $1,565,000 and $655,000 at December 31, 1997 and 1996,
respectively. In the opinion of management, such loans are consistent with
sound banking policies and are within applicable regulatory and lending
limitations.
The Bank contracted with a company in which a director is a principal to
construct a new bank building. Approximately $310,000 in 1997 and $580,000
in 1996 were paid to the company for construction costs. Management of the
Company and of the Bank are of the opinion such transactions are consistent
with sound business practices.
NOTE J - COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS OF CREDIT RISK
In the normal course of business, there are outstanding various commitments and
contingent liabilities, such as guaranties, commitments to extend credit, etc.,
which are not reflected in the accompanying financial statements. The Bank had
outstanding letters of credit of $82,500 and $50,000 at December 31, 1997 and
1996, and had made loan commitments of approximately $1,882,000 and $785,000 at
December 31, 1997 and 1996. The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments to
extend credit and letters of credit is represented by the contractual amount of
the instrument. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for its lending activities. No significant
losses are anticipated as a result of these transactions.
The primary market area served by the Bank is Forrest and Lamar Counties
within South Mississippi. Management closely monitors its credit
concentrations and attempts to diversify the portfolio within its primary
market area. As of December 31, 1997, management does not consider there to
be any significant credit concentration within the loan portfolio. Although
the Bank's loan portfolio, as well as existing commitments, reflect the
diversity of its primary market area, a substantial portion of a borrower's
ability to repay a loan is dependent upon the economic stability of the
area.
The Bank has Sixteenth Section land leases and contracts for bank premises.
The leases have 40 year terms with annual rentals of $20,240 subject to
reappraisals every 10 years.
31
<PAGE> 48
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE K - PREOPENING EXPENSES
A summary of the components of pre-opening expenses for the year ended
December 31, 1996, is as follows:
<TABLE>
<S> <C>
Salaries and employee benefits $153,736
Professional fees 19,557
Marketing and public relations 9,910
Occupancy costs 22,526
Supplies and postage 7,607
Other 10,649
--------
$223,985
========
</TABLE>
NOTE L - FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB No. 107, "Disclosure about Fair Value of Financial Instruments,"
requires the Company to disclose estimated fair values for its financial
instruments. Fair value estimates, methods, and assumptions are set forth
below. The following information does not purport to represent the aggregate
consolidated fair value of the Company.
Cash and Cash Equivalents - The carrying amount of these financial
instruments (cash and due from banks and federal funds sold) approximate
fair value.
Investment Securities - Fair values are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based
on quoted market prices of comparable instruments.
Loans - For certain categories of loans, such as variable rate loans and
other lines of credit, the carrying amount, adjusted for credit risk, is a
reasonable estimate of fair value as the Company has the ability to reprice
the loan as interest rate changes occur. The fair value of other loans is
estimated by discounting the future cash flows using the current rates at
which similar loans would be made to borrowers with similar credit ratings
and for the same remaining maturities.
( Continued )
32
<PAGE> 49
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE L - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Deposits - The fair value of demand deposits, savings accounts, and money
market accounts is the amount payable on demand at the reporting date. The
fair value of fixed-maturity certificates of deposit is estimated by
discounting the future cash flows using rates currently offered for deposits
of similar remaining maturities.
Commitments to Extend Credit - Management is of the opinion the estimated
fair value is not significantly different than the contractual or notational
amounts.
The carrying amount and estimated fair value of the Company's consolidated
financial instruments are as follows:
<TABLE>
<CAPTION>
(In Thousands)
December 31, 1997 December 31, 1996
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 2,840 $ 2,840 $ 3,770 $ 3,770
======== ======== ======== ========
Investment securities $ 4,304 $ 4,304 $ 4,216 $ 4,216
======== ======== ======== ========
Loans $ 17,487 $ 17,466 $ 4,327 $ 4,320
Reserve for loan losses (193) -- (37) --
-------- -------- -------- --------
Net Loans $ 17,294 $ 17,466 $ 4,290 $ 4,320
======== ======== ======== ========
Financial Liabilities:
Deposits:
Noninterest-bearing demand $ 2,479 $ 2,479 $ 1,566 $ 1,566
Interest-bearing demand 6,666 6,666 3,912 3,912
Savings 200 200 71 71
Certificates of deposit 11,713 11,719 1,958 1,960
-------- -------- -------- --------
Total Deposits $ 21,058 $ 21,064 $ 7,507 $ 7,509
======== ======== ======== ========
</TABLE>
Statement No. 107 prohibits adjustments for any value derived from the expected
retention of deposits for a future time period. That value, often referred to as
a core deposit intangible, is neither included in the fair value amounts nor
recorded as an intangible asset in the consolidated balance sheets.
33
<PAGE> 50
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE M - PARENT COMPANY FINANCIAL INFORMATION
The balance sheets, statements of operations, and cash flows for The First
Bancshares, Inc. (parent only) follow:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Assets:
Cash $ -- $ 461
Interest-bearing deposit with subsidiary bank 1,480,758 1,515,077
Investment in subsidiary bank 4,861,510 4,807,805
Fixed assets -- 332,077
Other 32,861 43,518
---------- ----------
$6,375,129 $6,698,938
========== ==========
Liabilities:
Other $ 7,425 $ 78,410
Stockholders' equity 6,367,704 6,620,528
---------- ----------
$6,375,129 $6,698,938
========== ==========
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
December 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Income:
Interest $ 73,435 $ 242,583
Other 8,134 --
---------- ----------
81,569 242,583
Expenses:
Other 44,034 28,884
---------- ----------
Income before income taxes and equity in
undistributed loss of subsidiary 37,535 213,699
Income taxes 7,188 75,410
---------- ----------
Income before equity in undistributed loss
of subsidiary 30,347 138,289
Equity in undistributed loss of subsidiary (292,340) (494,037)
---------- ----------
Net loss $ (261,993) $ (355,748)
========== ==========
</TABLE>
( Continued )
34
<PAGE> 51
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE N - PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
December 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (261,993) $ (355,748)
Adjustments to reconcile net loss to net cash
and cash equivalents:
Equity in undistributed loss of subsidiary 292,340 494,037
Other, net (60,327) 128,126
---------- ----------
Net cash provided by (used in) operating activities (29,980) 266,415
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in subsidiary -- (5,298,960)
Acquisition of fixed assets (4,800) (183,732)
---------- ----------
Net cash used in investing activities (4,800) (5,482,692)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock, net -- 7,173,204
Payment of note payable -- (441,950)
---------- ----------
Net cash provided by financing activities -- 6,731,254
---------- ----------
Net increase (decrease) in cash and cash equivalents (34,780) 1,514,977
Cash and cash equivalents at beginning of period 1,515,538 561
---------- ----------
Cash and cash equivalents at end of period $1,480,758 $1,515,538
========== ==========
</TABLE>
35
<PAGE> 52
SHAREHOLDER INFORMATION
- ----------------------------------------------------
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at 5:00 p.m., Tuesday,
April 28, 1998:
The First National Bank of South Mississippi
6480 U. S. Highway 98 West
Hattiesburg, Mississippi 39402
All shareholders are invited.
FORM 10K/FINANCIAL INFORMATION
Copies of The First Bancshares, Inc. Annual Report to the Securities &
Exchange Commission, Form 10K, and other information may be obtained
from:
Charles T. Ruffin
The First National Bank of South Mississippi
P. O. Box 15549
Hattiesburg, MS 39404-5549
TRANSFER AGENT
Registrar and Transfer Company
10 Commerce Drive
Cranford, N. J. 07016
1-800-368-5948
INDEPENDENT AUDITOR
T. E. Lott & Company
A Professional Association
Certified Public Accountants
Columbus, Mississippi
STOCK INFORMATION
- ----------------------------------------------------
The First Bancshares, Inc. common stock is not currently listed or traded on any
exchange. There is no established public trading market in the common stock and
one is not expected to develop in the near future. Transactions in the common
stock are negotiated privately and management does not have knowledge of any
transactions involving the Company's stock.
The Company's articles of incorporation authorize it to issue up to 10,000,000
shares of common stock, par value $1.00 per share (the "Common Stock"), of which
721,848 were sold in the Company's initial public offering and are outstanding
as of March 9, 1998. As of December 31, 1997, the Company had 719 shareholders
of record.
36
<PAGE> 53
DIRECTORS
- ----------------------------------------------------
David E. Johnson
President and CEO
The First Bancshares, Inc.
The First National Bank of South Mississippi
David Waldron Bomboy
Orthopedic Surgeon
E. Ricky Gibson
President and Owner, N & H Electronics
John T. Hudson
Past President and Owner, R & R Trucking
Fred A. McMurry
Vice President and General Manager
Havard Pest Control, Inc.
Dawn T. Parker
H P Cattle Company
Chairman of the Board
The First Bancshares, Inc.
The First National Bank of South MS
Perry E. Parker
Currency Options Trader, Deutsche Bank, London
Ted E. Parker
Cattle Farmer
Dennis L. Pierce
Real Estate Developer
A. L. "Pud" Smith
Owner, A. L. Smith Oil Co., Inc.
Andrew D. Stetelman
London and Stetelman Realtors
Charles T. Ruffin
Executive Vice President and Chief Operating Officer,
The First Bancshares, Inc.
The First National Bank of South Mississippi
37
<PAGE> 54
OFFICERS
- ----------------------------------------------------
THE FIRST BANCSHARES, INC.
Dawn T. Parker
Chairman of the Board
David E. Johnson
President and
Chief Executive Officer
Chandra B. Kidd
Corporate Secretary
THE FIRST NATIONAL BANK OF SOUTH MS
Dawn T. Parker
Chairman of the Board
David E. Johnson
President and
Chief Executive Officer
Charles T. Ruffin
Executive Vice President
Chief Operating Officer
Irvinder "Bandy" Singh
Senior Vice President and
Senior Lender
Jessie M. Laird
Assistant Vice President
Branch Manager, Purvis, MS Branch
Canda R. Smith
Assistant Vice President and Mtg Loan Originator
John M. Rogers, II
Assistant Vice President
Operations
Chandra B. Kidd
Assistant Vice President &
Corporate Secretary
38
<PAGE> 55
APPENDIX
<TABLE>
<S> <C>
THE FIRST BANCSHARES, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
6480 U.S. Highway 98 West The undersigned hereby appoints David E. Johnson as Proxy, with the power
Hattiesburg, Mississippi 39402 to appoint his substitute, and hereby authorizes him to represent and to vote as
designated below all the shares of common stock of The First Bancshares,
Inc. held of record by the undersigned on March 18, 1998, at the Annual
Meeting of Shareholders to be held on April 28, 1998, or any adjournment
thereof.
1. Election of Directors (all nominees are nominated for Class III):
[ ]1 FOR all nominees listed below [ ]2 WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
David Waldron Bomboy, E. Ricky Gibson, and Fred A. McMurry
(Instruction: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided
below)
_____________________________________________________________________
2. In their discretion, the Proxy is authorized to vote upon such other business as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED (i) FOR THE ELECTION OF ALL LISTED NOMINEES, (ii) AT THE DISCRETION OF THE PROXY
ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney,
as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized
person.
DATED: , 1998
---------------------
---------------------------------
Signature Signature if held jointly
---------------------------------
Please Print Name Please Print Name
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>
