UNITED STATES
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: September 30, 2000
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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.
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(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
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(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
(601) 268-8998
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(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 NOVEMBER 8, 2000, 1,152,878 SHARES OF THE ISSUER'S COMMON STOCK, PAR
VALUE $1.00 PER SHARE, WERE ISSUED AND OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
YES NO X
--- ---
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
THE FIRST BANCSHARES, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
($ amounts in thousands) (Unaudited)
September 30, December 31,
ASSETS 2000 1999
__________ ___________
Cash and due from banks $ 2,840 $ 3,184
Interest-bearing deposits with banks 287 308
Federal funds sold 4,935 6,366
________ ________
Total cash and cash equivalents 8,062 9,858
________ ________
Securities held-to-maturity, at amortized cost 60 105
Securities available-for-sale, at fair value 15,370 14,376
________ ________
Total securities 15,430 14,481
________ ________
Loans 81,279 61,626
Allowance for loan losses (913) (739)
________ ________
Loans, net 80,366 60,887
________ ________
Premises and equipment 6,779 4,396
Accrued interest receivable 986 662
Other assets 1,382 1,072
________ ________
$113,005 $ 91,356
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing $ 10,426 $ 8,085
Time, $100,000 or more 24,910 16,442
Interest-bearing 57,065 48,987
________ ________
Total deposits 92,401 73,514
________ ________
Interest payable 440 280
Borrowed funds 7,186 4,991
Other liabilities 100 98
________ ________
TOTAL LIABILITIES 100,127 78,883
________ ________
SHAREHOLDERS' EQUITY:
Common stock, $1 par value. Authorized
10,000,000 shares; issued and
outstanding 1,152,878 at September 30,
2000 and December 31, 1999 1,153 1,153
Paid-in capital 12,376 12,376
Accumulated deficit (574) (924)
Accumulated other comprehensive income (77) (132)
________ ________
TOTAL SHAREHOLDERS' EQUITY 12,878 12,473
________ ________
$113,005 $ 91,356
======== ========
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ amounts in thousands except earnings per share)
(Unaudited) (Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
______________ ______________
2000 1999 2000 1999
______ ______ ______ ______
INTEREST INCOME:
Loans, including fees $1,971 $1,224 $5,360 $3,144
Securities:
Taxable 221 210 687 453
Tax exempt - - - 5
Federal funds sold 70 35 130 144
Other 11 2 17 35
______ ______ _____ ______
TOTAL INTEREST INCOME 2,273 1,471 6,194 3,781
INTEREST EXPENSE:
Deposits 1,143 653 2,970 1,638
Other borrowings 107 35 273 90
______ ______ ______ ______
TOTAL INTEREST EXPENSE 1,250 688 3,243 1,728
______ ______ ______ ______
NET INTEREST INCOME 1,023 783 2,951 2,053
PROVISION FOR LOAN LOSSES 63 116 304 346
______ ______ ______ ______
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 960 667 2,647 1,707
OTHER INCOME:
Service charges on deposit accounts 103 25 305 68
Other service charges, commissions and
fees 82 84 184 244
______ ______ ______ ______
TOTAL OTHER INCOME 185 109 489 312
OTHER EXPENSES:
Salaries and employee benefits 523 395 1,491 1,223
Occupancy and equipment expense 153 133 448 350
Preopening costs - - - 187
Other operating expenses 311 246 847 657
______ ______ ______ ______
TOTAL OTHER EXPENSES 987 774 2,786 2,417
______ ______ ______ ______
INCOME (LOSS) BEFORE INCOME TAXES 158 2 350 (398)
INCOME TAXES - - - -
______ ______ ______ ______
NET INCOME (LOSS) $ 158 $ 2 $ 350 $ (398)
====== ====== ====== ======
INCOME (LOSS) PER SHARE - BASIC $ .14 $ .01 $ .30 $ (.37)
INCOME (LOSS) PER SHARE - ASSUMING
DILUTION $ .13 $ .01 $ .29 $ (.36)
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
__________________
2000 1999
________ ________
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 350 $ (398)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 246 196
Provision for loan losses 304 346
Increase in accrued interest receivable (324) (128)
Increase in interest payable 160 66
Other, net (313) 804
________ ________
NET CASH PROVIDED BY OPERATING ACTIVITIES 423 886
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities and calls of held-to-maturity
securities 45 15
Maturities and calls of securities
available-for-sale 7,634 6,941
Purchases of securities available-for-sale (8,573) (15,924)
Net increase in loans (19,783) (25,154)
Purchases of premises and equipment (2,624) (930)
________ ________
NET CASH USED BY INVESTING ACTIVITIES (23,301) (35,052)
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits 18,887 30,467
Net increase in borrowed funds 2,195 3,502
________ ________
NET CASH PROVIDED BY FINANCING ACTIVITIES 21,082 33,969
________ ________
NET INCREASE (DECREASE) IN CASH (1,796) (197)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,858 4,516
________ ________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,062 $ 4,319
======== ========
CASH PAYMENTS FOR INTEREST $ 3,083 $ 1,662
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 nine months ended September 30, 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 Hattiesburg Bank
opened for business on August 5, 1996, with a total capitalization of
$5.2 million.
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 First National Bank of the Pine
Belt (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 Hattiesburg and Laurel Banks are wholly-owned subsidiaries of the
Company.
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 September 30, 2000, the Company had approximately
$113.0 million in consolidated assets, $80.4 million in consolidated loans,
$92.4 million in consolidated deposits, and $12.9 million in consolidated
shareholders' equity. For the nine months ended September 30, 2000, the
Company reported a consolidated net income of $350,000. For the same
period, the Laurel Bank reported net income of $49,000, and the Hattiesburg
Bank net income of $282,000.
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
September 30, 2000
_____________________________________
Net Income Shares Per Share
(Numerator) (Denominator) Data
_________ ___________ __________
Basic per share $158,000 1,152,878 $ .14
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Effect of dilutive shares:
Stock options - 22,968
________ _________
Diluted per share $158,000 1,175,846 $ .13
======== ========= =====
For the Nine Months Ended
September 30, 2000
_____________________________________
Net Income Shares Per Share
(Numerator) (Denominator) Data
_________ ___________ __________
Basic per share $350,000 1,152,878 $ .30
=====
Effect of dilutive shares:
Stock options - 22,968
________ _________
Diluted per share $350,000 1,175,846 $ .29
======== ========= =====
For the Three Months Ended
September 30, 1999
_____________________________________
Net Income Per Share
(Numerator) (Denominator) Data
_________ ___________ __________
Basic per share $ 2,000 1,150,691 $ .01
=====
Effect of dilutive shares:
Stock options - 24,062
_______ _________
Diluted per share $ 2,000 1,174,753 $ .01
======= ========= =====
For the Nine Months Ended
September 30, 1999
_____________________________________
Net Loss Shares Per Share
(Numerator) (Denominator) Data
_________ ___________ __________
Basic per share $(398,000) 1,064,922 $(.37)
=====
Effect of dilutive shares:
Stock options - 21,930
_________ _________
Diluted per share $(398,000) 1,086,852 $(.36)
========= =========== ======
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 the primary assets of the Company. The
Hattiesburg Bank reported total assets of $72.1 million at September 30,
2000, compared to $60.7 million at December 31, 1999. Loans increased
$12.8 million, or 30.0%, during the first nine months of 2000. Deposits
at September 30, 2000, totaled $60.7 million, compared to $50.4 million
at December 31, 1999. For the nine month period ended September 30, 2000,
the Hattiesburg Bank reported net income of $282,000, compared to $115,000
for the nine months ended September 30, 1999. At September 30, 2000, the
Laurel Bank had total assets of $40.1 million, compared to $30.2 million
at December 31, 1999, total loans of $26.0 million, compared to $18.4
million at December 31, 1999, and total deposits of $33.5 million, compared
to $25.5 million at December 31, 1999. For the nine month period ended
September 30, 2000, the Laurel Bank reported net income from operations of
$49,000, compared to a net loss of $522,000 for the nine months ended
September 30, 1999.
NONPERFORMING ASSETS AND RISK ELEMENTS. Diversification within the loan
portfolio is an important means of reducing inherent lending risks. At
September 30, 2000, the subsidiary Banks had no concentrations of ten
percent or more of total loans in any single industry nor any geographical
area outside their immediate market areas.
At September 30, 2000, the subsidiary banks had loans past due as follows:
($ In Thousands)
Past due 30 through 89 days $182,000
Past due 90 days or more and still accruing 44,000
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
$424,000 at September 30, 2000. Any other real estate owned is carried at
fair value, determined by an appraisal. Other real estate owned totaled
$67,000 at September 30, 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 September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is adequate with cash and cash equivalents of $8.1 million
as of September 30, 2000. In addition, loans and investment securities
repricing or maturing within one year or less exceed $52 million at
September 30, 2000. Approximately $10 million in loan commitments are
expected to be funded within the next six months and other commitments,
primarily standby letters of credit, totaled $458,000 at September 30,
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 September 30, 2000, is $12.9 million,
or approximately 11.4% 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
September 30, 2000, are as follows:
Hattiesburg Laurel
Bank Bank
_____ _____
Tier 1 leverage 6.6% 11.6%
Tier 1 risk-based 9.8% 15.7%
Total risk-based 10.8% 16.7%
RESULTS OF OPERATIONS
The Company had a consolidated net income of $350,000 for the nine months
ending September 30, 2000, compared with consolidated net loss of $398,000
for the same period last year. Included in the consolidated net operating
loss for the nine months ending September 30, 1999, was preopening expenses
of the Laurel Bank of $187,000.
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 $6.2 million
from $3.8 million for the first nine months ending September 30, 2000, or
an increase of 63.8%. Earning assets through September 30, 2000, increased
$28.7 million and interest-bearing liabilities also increased $25.7 million
compared to September 30, 1999, reflecting increases of 50.5% and 40.4%,
respectively.
Noninterest income for the nine months ending September 30, 2000, was
$489,000 compared to $312,000 for the same period in 1999, reflecting an
increase of $177,000, or 56.7%. Noninterest income consists mainly of
other service charges such as commissions and fees. Service charges on
deposit accounts for the nine months ending September 30, 2000, was
$305,000 compared with $68,000 for the same period in 1999.
The provision for loan losses was $304,000 in the first nine months of
2000 compared with $346,000 for the same period in 1999. The allowance
for loan losses of $913,000 at September 30, 2000 (approximately 1.12% 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 increased by $369,000, or 15.2%, in the third quarter
of 2000, compared with the same period in 1999. The increase is due
primarily to an increase in salaries and operating expense and decrease
in preopening expenses associated with the formation and preparation of
the opening of the Laurel bank in 1999.
No provision for income tax expense has been provided. At September 30,
2000, the Company had available approximately $125,000 of tax benefits
due to net operating loss carryovers and other tax credits.
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 incurred in 2000 for ongoing monitoring and support activities are
not significant.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
First National Bank of South Mississippi is a defendant in a
lawsuit in which the plaintiff alleges it was injured due to
the failure of the Bank to extend or renew its loan with the
Bank. Management is of the opinion the suit is without merit
and intends to vigorously defend its position.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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 September 30, 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)
November 13, 2000 /s/ DAVID E. JOHNSON
______________________________ David E. Johnson, President and
(Date) Chief Executive Officer
November 13, 2000 /s/ CHARLES T. RUFFIN
______________________________ Charles T. Ruffin, Principal
(Date) Accounting and Financial Officer
