U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2000
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 33-94288
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THE FIRST BANCSHARES, INC.
-----------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
MISSISSIPPI 64-0862173
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
6480 U.S. HIGHWAY 98 WEST
HATTIESBURG, MISSISSIPPI 39404-5549
---------------------------------- ------------------------------------
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
(601) 268-8998
------------------------------------------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
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(FORMER NAME, ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE ISSUER: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT
OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
ON MARCH 31, 2000, 1,152,878 SHARES OF THE ISSUER'S COMMON STOCK, PAR VALUE
$1.00 PER SHARE, WERE ISSUED AND OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
--- ---
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
THE FIRST BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
($ amounts in thousands) (Unaudited)
March 31, December 31,
ASSETS 2000 1999
________ ________
Cash and due from banks $ 4,178 $ 3,184
Interest-bearing deposits with banks 195 308
Federal funds sold 818 6,366
________ ________
Total cash and cash equivalents 5,191 9,858
Securities held-to-maturity, at amortized cost 84 105
Securities available-for-sale, at fair value 15,299 14,376
Loans 72,133 61,626
Allowance for loan losses (862) (739)
________ ________
LOANS, NET 71,271 60,887
Premises and equipment 4,749 4,396
Accrued income receivable 653 662
Other assets 1,329 1,072
________ ________
$ 98,576 $ 91,356
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 9,102 $ 8,085
Time, $100,000 or more 18,804 16,442
Interest-bearing 50,369 48,987
________ ________
TOTAL DEPOSITS 78,275 73,514
Interest payable 301 280
Borrowed funds 7,416 4,991
Other liabilities 75 98
________ ________
TOTAL LIABILITIES 86,067 78,883
SHAREHOLDERS' EQUITY:
Common stock, $1 par value. Authorized
10,000,000 shares; issued and
outstanding 1,152,878 at March 31, 2000
and December 31, 1999 1,153 1,153
Paid-in capital 12,376 12,376
Accumulated deficit (886) (924)
Accumulated other comprehensive income (134) (132)
________ ________
TOTAL SHAREHOLDERS' EQUITY 12,509 12,473
________ ________
$ 98,576 $ 91,356
======== ========
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ amounts in thousands except earnings per share)
(Unaudited)
Three Months Ended
March 31,
__________________
2000 1999
________ ________
INTEREST INCOME:
Loans, including fees $ 1,562 $ 875
Securities:
Taxable 235 95
Tax exempt - -
Federal funds sold 28 72
Other 3 32
________ ________
TOTAL INTEREST INCOME 1,828 1,074
INTEREST EXPENSE:
Deposits 853 445
Other borrowings 69 36
________ ________
TOTAL INTEREST EXPENSE 922 481
________ ________
NET INTEREST INCOME 906 593
PROVISION FOR LOAN LOSSES 138 121
________ ________
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 768 472
OTHER INCOME:
Service charges on deposit accounts 87 12
Other service charges, commissions and fees 53 68
________ ________
TOTAL OTHER INCOME 140 80
________ ________
OTHER EXPENSES:
Salaries and employee benefits 469 354
Occupancy and equipment
expense 147 102
Preopening costs - 187
Other operating expenses 254 268
________ ________
TOTAL OTHER EXPENSES 870 911
________ ________
INCOME (LOSS) BEFORE INCOME TAXES 38 (359)
INCOME TAXES - -
________ ________
NET INCOME (LOSS) $ 38 $ (359)
======== ========
EARNINGS (LOSS) PER SHARE - BASIC $ .03 $ (.34)
EARNINGS (LOSS) PER SHARE - ASSUMING DILUTION .03 $ (.33)
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
__________________
2000 1999
________ ________
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 38 $ (359)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 78 59
Provision for loan losses 138 121
(Increase) decrease in accrued income
receivable 9 (90)
Increase in interest payable 21 8
Other, net (289) (7)
________ ________
NET CASH USED BY OPERATING ACTIVITIES (5) (268)
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities and calls of securities
available for sale 2,163 4,693
Maturities and calls of securities held-to-
maturity 21 -
Purchases of securities available-for-sale (3,079) (7,388)
Net increase in loans (10,522) (7,655)
Purchases of premises and equipment (431) (727)
________ ________
NET CASH USED BY INVESTING ACTIVITIES (11,848) (11,077)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits 4,761 11,434
Net increase (decrease) in borrowed funds 2,425 (9)
________ ________
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,186 11,425
________ ________
NET INCREASE IN CASH (4,667) 80
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,858 4,516
________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,191 $ 4,596
======== ========
CASH PAYMENTS FOR INTEREST $ 931 $ 473
CASH PAYMENTS FOR INCOME TAXES - -
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial statements and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. However, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. Operating results for the three
months ended March 31, 2000, are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000. For further
information, please refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB for the year ended
December 31, 1999.
NOTE B -- SUMMARY OF ORGANIZATION
The First Bancshares, Inc., Hattiesburg, Mississippi (the "Company"), was
incorporated June 23, 1995, under the laws of the State of Mississippi for
the purpose of operating as a bank holding company with respect to a then
proposed de novo bank, The First National Bank of South Mississippi,
Hattiesburg, Mississippi (the "Hattiesburg Bank").
The Company offered its common stock for sale to the public under an
initial public offering price of $10 per share. As of August 27, 1996,
when the offering was terminated, 721,848 shares were sold, resulting in
net proceeds of approximately $7.1 million.
During 1996, the Company obtained regulatory approval to operate a national
bank in Hattiesburg, Mississippi, and the Company purchased 100% of the
capital stock of the Hattiesburg Bank. The Hattiesburg Bank opened for
business on August 5, 1996, with a total capitalization of $5.2 million.
In June 1998, the Company entered into a bank development agreement with
the organizers of The First National Bank of the Pine Belt, a proposed de
novo community bank in Laurel, Mississippi (the "Laurel Bank"). On
August 10, 1998, the Company filed a registration statement on Form SB-2
relating to the issuance of up to 533,333 shares of Common Stock in
connection with the formation of the Laurel Bank. The offering was closed
on December 31, 1998, with 428,843 shares subscribed with an aggregate
purchase price of $6.4 million. On January 19, 1999, the Laurel Bank
received approval from its banking regulator to begin banking operations,
and the Company used $5 million of the net proceeds to purchase 100% of
the capital stock of the Laurel Bank. Simultaneously, the 428,843 shares
subscribed to in the offering were issued.
The Company's strategy is for the Hattiesburg Bank and the Laurel Bank to
operate on a decentralized basis, emphasizing each Bank's local board of
directors and management and their knowledge of their local community. Each
Bank's local board of directors acts to promote its Bank and introduce
prospective customers. The Company believes that this autonomy will allow
each Bank to generate high-yielding loans and to attract and retain core
deposits.
The Hattiesburg Bank and the Laurel Bank engage in general commercial
banking business, emphasizing in its marketing the Bank's local management
and ownership. The Banks offer a full range of banking services designed
to meet the basic financial needs of its customers. These services
include checking accounts, NOW accounts, money market deposit accounts,
savings accounts, certificates of deposit, and individual retirement
accounts. The Banks also offer short- to medium-term commercial, mortgage,
and personal loans. At March 31, 2000, the Company had approximately $98
million in consolidated assets, $71 million in consolidated loans, $78
million in consolidated deposits, and $12 million in consolidated
shareholders' equity. For the three months ended March 31, 2000, the
Company reported a consolidated net income of $38,000. For the same
period, the Laurel Bank reported a net loss of $19,000, the Hattiesburg
Bank net income of $47,000, and the Company, parent only, reported net
income of $10,000.
NOTE C -- EARNINGS PER COMMON SHARE
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.
For the Three Months Ended
March 31, 2000
_____________________________________
Net Loss Shares Per Share
(Numerator) (Denominator) Data
_________ ___________ __________
Basic per share $ 38,000 1,152,878 $ .03
======
Effect of dilutive shares:
Stock options - 22,968
_________ ___________
Diluted per share $ 38,000 1,175,846 $ .03
========= =========== ======
For the Three Months Ended
March 31, 1999
_____________________________________
Net Loss Shares Per Share
(Numerator) (Denominator) Data
_________ ___________ __________
Basic per share $(359,000) 1,064,922 $ (.34)
======
Effect of dilutive shares:
Stock options - 20,066
_________ ___________
Diluted per share $(359,000) 1,084,988 $ (.33)
========= =========== ======
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
The First Bancshares, Inc.
Hattiesburg, Mississippi
We have reviewed the accompanying condensed consolidated balance sheet and
the related condensed consolidated statements of income and cash flows of
The First Bancshares, Inc., and consolidated subsidiaries as of March 31,
2000, and for the three month period then ended. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, stockholders' equity, and cash
flows for the year then ended (not presented herein) and in our report
dated March 3, 2000, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of
December 31, 1999, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/S/ T. E. LOTT & COMPANY
Columbus, Mississippi
May 5, 2000
ITEM NO. 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The following discussion contains "forward-looking statements" relating to,
without limitation, future economic performance, plans and objectives of
management for future operations, and projections of revenues and other
financial items that are based on the beliefs of the Company's management,
as well as assumptions made by and information currently available to the
Company's management. The words "expect," "estimate," "anticipate," and
"believe," as well as similar expressions, are intended to identify
forward-looking statements. The Company's actual results may differ
materially from the results discussed in the forward-looking statements,
and the Company's operating performance each quarter is subject to various
risks and uncertainties that are discussed in detail in the Company's
filings with the Securities and Exchange Commission, including the "Risk
Factors" section in the Company's Registration Statement on Form SB-2
(Registration Number 333-61081) as filed with and declared effective by the
Securities and Exchange Commission.
The Hattiesburg Bank completed its first full year of operations in 1997
and has grown substantially since opening on August 5, 1996. The Laurel
Bank has been in operation since January 19, 1999. Comparisons of the
Company's results for the periods presented should be made with an
understanding of the subsidiary Banks' short histories.
The subsidiary Banks represent virtually all of the assets of the Company.
The Hattiesburg Bank reported total assets of $65 million at March 31,
2000, compared to $47.1 million at December 31, 1999. Loans increased
$5 million, or 10.4%, during the first three months of 2000. Deposits at
March 31, 2000 totaled $53.6 million compared to $40.8 million at
December 31, 1999. For the three month period ended March 31, 2000, the
Hattiesburg Bank reported net income of $47,000. At March 31, 2000, the
Laurel Bank had total assets of $33 million, total loans of $23 million,
and total deposits of $26.8 million. For the three month period ended
March 31, 2000, the Laurel Bank reported a net loss from operations of
$19,000.
NONPERFORMING ASSETS AND RISK ELEMENTS. Diversification within the loan
portfolio is an important means of reducing inherent lending risks. At
March 31, 2000, the subsidiary Banks had no concentrations of ten percent
or more of total loans in any single industry nor any geographical area
outside their immediate market areas.
At March 31, 2000, the subsidiary banks had loans past due as follows:
($ In Thousands)
Past due 30 through 89 days $529
Past due 90 days or more and still accruing 7
The accrual of interest is discontinued on loans which become ninety days
past due (principal and/or interest), unless the loans are adequately
secured and in the process of collection. Nonaccrual loans totaled $303,000
at March 31, 2000. Any other real estate owned is carried at fair value,
determined by an appraisal. Other real estate owned totaled $67,000 at
March 31, 2000. A loan is classified as a restructured loan when the
interest rate is materially reduced or the term is extended beyond the
original maturity date because of the inability of the borrower to
service the debt under the original terms. The subsidiary Banks had no
restructured loans at March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and cash equivalents of $5.2 million
as of March 31, 2000. In addition, loans and investment securities
repricing or maturing within one year or less exceed $46.7 million at
March 31, 2000. Approximately $8.0 million in loan commitments are
expected to be funded within the next six months and other commitments,
primarily standby letters of credit, totaled $208,000 at March 31, 2000.
There are no known trends or any known commitments of uncertainties that
will result in the subsidiary banks' liquidity increasing or decreasing
in a material way. In addition, the Company is not aware of any
recommendations by any regulatory authorities which would have a material
effect on the Company's liquidity, capital resources or results of
operations.
Total consolidated equity capital at March 31, 2000 is $12.5 million, or
approximately 12.7% of total assets. The Hattiesburg Bank and Laurel Bank
currently have adequate capital positions to meet the minimum capital
requirements for all regulatory agencies. Their capital ratios as of
March 31, 2000, are as follows:
Hattiesburg Laurel
Bank Bank
_____ _____
Tier 1 leverage 8.4% 14.4%
Tier 1 risk-based 10.0% 17.9%
Total risk-based 11.0% 19.1%
RESULTS OF OPERATIONS
The Company had a consolidated net income of $38,000 for the three months
ending March 31, 2000, compared with consolidated net loss of $359,000
for the same period last year.
Interest income and interest expense both increased from 1999 to 2000
resulting from the increase in earning assets and interest-bearing
liabilities. Consequently, net interest income increased to $906,000
from $593,000 for the first three months ending March 31, 2000, or an
increase of 53%. Earning assets through March 31, 2000, increased $35.2
million and interest-bearing liabilities also increased $34.1 million
compared to March 31, 1999, reflecting increases of 67.2% and 80.3%,
respectively.
Noninterest income for the three months ending March 31, 2000, was $140,000
compared to $80,000 for the same period in 1999, reflecting an increase of
$60,000, or 75%. Noninterest income consists mainly of other service
charges such as commissions and fees. Service charges on deposit accounts
for the three months ending March 31, 2000 was $87,000 compared with
$12,000 for the same period in 1999.
The provision for loan losses was $138,000 in the first three months of
2000 compared with $121,000 for the same period in 1999. The allowance
for loan losses of $862,000 at March 31, 2000 (approximately 1.2% of
loans) is considered by management to be adequate to cover losses inherent
in the loan portfolio. The level of this allowance is dependent upon a
number of factors, including the total amount of past due loans, general
economic conditions, and management's assessment of potential losses. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant change. Ultimately, losses may vary from
current estimates and future additions to the allowance may be necessary.
Thus, there can be no assurance that charge-offs in future periods will not
exceed the allowance for loan losses or that additional increases in the
loan loss allowance will not be required. Management evaluates the
adequacy of the allowance for loan losses quarterly and makes provisions
for loan losses based on this evaluation.
Other expenses decreased by $41,000, or 4.5%, in the first quarter of
2000, primarily due to the preopening costs reported in the first quarter
of 1999, associated with the formation and preparation of the opening of
the Laurel Bank.
No provision for income tax expense has been provided. At March 31, 2000,
the Company had available approximately $191,000 of consolidated net
operating loss carryovers.
YEAR 2000 ISSUES
During 1999, management completed the process of preparing for the year
2000 date change. The process involved identifying and remediating date
recognition problems in computer systems, software and other operating
equipment, working with third parties to address year 2000 issues, and
developing contingency plans to address potential risks in the event of
year 2000 failures. To date, the Company has successfully managed the
transition.
Although considered unlikely, unanticipated problems in the Company's
processes, including problems associated with non-compliant third parties
and disruptions to the economy in general, could still occur despite
efforts to date to remediate affected systems and develop contingency
plans. Management has and will continue to monitor all business processes,
including interaction with the Company's customers, vendors and other third
parties, throughout the year 2000 to address any issues and ensure all
processes continue to function properly.
Through 1999, the cost of the Year 2000 project was approximately $30,000.
Costs expected to be incurred in 2000 for ongoing monitoring and support
activities are not expected to be significant.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the quarter ended March 31, 2000.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) 27 Financial Data Schedule (for SEC use only)
b) The Company did not file any reports on Form 8-K during the
quarter ended March 31, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registration has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FIRST BANCSHARES, INC.
--------------------------
(Registrant)
May 15, 2000 /s/ DAVID E. JOHNSON
______________________________ David E. Johnson, President and
(Date) Chief Executive Officer
May 15, 2000 /s/ CHARLES T. RUFFIN
______________________________ Charles T. Ruffin, Principal
(Date) Accounting and Financial Officer
<TABLE> <S> <C>
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