10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 2-76198
FIRST NATIONAL BANKSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Organized in Louisiana 72-0807084
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
600 East Main Street, Houma, Louisiana 70360
(Address of Principal Executive Office - Zip Code)
Registrant's telephone number, including area code: (504) 868-1660
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter 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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class
Outstanding
Common Stock ($2.50 par value)
2,017,600 shares
FIRST NATIONAL BANKSHARES, INC.
FORM 10-Q/A
INDEX
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Statements of Condition as of
March 31, 1995 (Restated) and December 31,
1994 (Restated)
Consolidated Statements of Income - Three
months ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows for the
three months ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(In thousands)
(Unaudited)
March 31, December 31,
1995 1994*
(AS RESTATED) (AS RESTATED)
ASSETS
Cash and due from banks $ 7,206 $ 6,951
Due from financial institutions -
Interest bearing 6,507 16,004
Securities held-to-maturity
(market value of $54,449
and $53,632 at March 31, 1995
and December 31, 1994, respectively) 56,128 56,809
Securities available-for-sale at market value
(amortized cost of $20,095 and $11,217 at
March 31, 1995 and December 31, 1994,
respectively) 20,140 11,130
Loans 98,099 93,663
Less: Reserve for possible loan losses (2,792) (2,855)
Net Loans 95,307 90,808
Premises and equipment 5,611 5,732
Other real estate and foreclosed assets, net 521 423
Other assets 9,117 9,150
TOTAL ASSETS $200,537 $197,007
LIABILITIES
Deposits:
Non interest-bearing deposits $ 31,311 $ 27,310
Interest-bearing deposits 151,800 150,898
Total deposits 183,111 178,208
Federal funds purchased & securities sold
under repurchase agreements 1,667 3,634
Accrued interest, taxes and
other liabilities 1,058 951
Notes payable 36 89
Dividends payable -0- 202
TOTAL LIABILITIES 185,872 183,084
SHAREHOLDERS' EQUITY
Common stock 5,044 5,044
Par value .................... $2.50
Number of shares authorized .. 10,000,000
Number of shares outstanding . 2,017,600
Additional paid in capital 16,454 16,454
Accumulated deficit (4,904) (5,483)
Net unrealized losses on
securities available for sale (1,893) (2,003)
ESOP - deferred compensation (36) (89)
TOTAL SHAREHOLDERS' EQUITY 14,665 13,923
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $200,537 $197,007
*The statement of condition at December 31, 1994 has been taken
from the audited statement of condition at that date.
The accompanying notes are an integral part of these statements.
FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three months ended
March 31, March 31,
1995 1994
INTEREST INCOME
Interest and fees on loans ............ $ 2,242 $ 1,880
Interest on securities:
U.S. government securities .......... 1,105 922
Mortgage-backed securities .......... 97 183
State and municipal securities ...... 14 14
Other securities .................... 49 46
Interest on funds sold ................ 48 68
Interest on deposits due from
financial institutions ............... 147 -0-
Total interest income ............ 3,702 3,113
INTEREST EXPENSE
Interest on deposits .................. 1,338 1,090
Interest on funds purchased ........... 20 15
Total interest expense ........... 1,358 1,105
Net interest income ............ 2,344 2,008
Provision for possible loan losses ...... -0- -0-
Net interest income after provision
for possible loan losses ............ 2,344 2,008
NON-INTEREST INCOME
Service charges on deposit accounts ... 247 249
Other commissions and fees ............ 75 77
Other operating income ................ 70 49
Securities gains (losses) ............. (1) 3
Trust services income ................. 81 79
Total non-interest income ........ 472 457
NON-INTEREST EXPENSE
Salaries .............................. 716 700
Employee benefits ..................... 201 209
Net occupancy expense ................. 162 155
Equipment expense ..................... 161 140
Expense associated with OREO
and problem loans ................... 26 99
Other operating expense ............... 679 633
Total non-interest expense ....... 1,945 1,936
Income before income taxes............... 871 529
Income taxes ............................ 292 (21)
Net income .............................. $ 579 $ 550
Per share data (based on the weighted
average shares outstanding, 2,017,600,
during the periods:)
Net income ......................... $ .29 $ .27
Cash dividends declared ............ $ -0- $-0-
The accompanying notes are an integral part of these statements.
FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
(Thousands) 1995 1994
CASH FLOWS FROM OPERATIONS ACTIVITIES:
Net Income ......................... .. $ 579 $ 550
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation, Amortization
and Accretion ....................... 83 146
Provision For Losses on
Other Real Estate ................... 4 (12)
Deferred Income Taxes ................. 288 (27)
Realized (Gains) Losses on Securities . 1 (3)
(Gains) Losses on Sale of Property .... (40) 46
(Increase) Decrease in Accrued
Interest Receivable ................. (109) 37
Increase in Accrued Interest Payable... 125 79
Decrease in Other Assets .............. (203) (210)
Decrease in Other Liabilities ......... (18) (46)
NET CASH PROVIDED BY OPERATING ACTIVITIES.. 710 560
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Securities
Available-for-Sale .................. -0- 13,633
Proceeds From Maturities and Calls
of Securities - Held-to-Maturity .... 733 22,638
Available-for-Sale .................. 6,062 9,115
Purchase of Securities -
Held-to-Maturity .................... -0- (8,987)
Available-for-Sale .................. (14,911) (29,625)
Loans Purchased ....................... -0- (113)
Net (Increase) Decrease in Loans ...... (4,640) 732
Net Decrease in
Short-Term Investments .............. 9,496 2,100
Proceeds From Sale of Premises,
Equipment & Foreclosed Property ..... 98 269
Purchases of Premises and Equipment ... (27) (50)
NET CASH (USED) PROVIDED BY
INVESTING ACTIVITIES .................... (3,189) 9,712
CASH FLOWS FROM FINANCING ACTIVITIES:
Interest Increase in Non-Interest
Bearing Deposits .................... 3,925 964
Net Decrease in Interest Bearing
Deposits Other Than Certificates
of Deposit .......................... (2,360) (11,601)
Increase (Decrease) in
Certificate of Deposits ............. 3,338 (1,045)
Increase (Decrease) in
Short-Term Borrowings ............... (1,967) 998
Dividends Paid ........................ (202) -0-
NET CASH (USED) PROVIDED
BY FINANCING ACTIVITIES ................. 2,734 (10,684)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS .................... 255 (412)
Cash and Cash Equivalents at
Beginning of Year ....................... 6,951 7,262
CASH AND CASH EQUIVALENTS AT END OF YEAR .. $ 7,206 $ 6,850
CASH INTEREST INCOME RECEIVED ............. $ 3,593 $ 3,151
CASH INTEREST EXPENSE PAID ................ $ 1,233 $ 1,027
The accompanying notes are an integral part of these statements.
FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
MARCH 31, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: First National Bankshares, Inc. (the Company) is a bank
holding company whose principal subsidiary is the First National
Bank of Houma (First National).
NOTE 2: The Company adopted Statement of Accounting Standards
(SFAS) No. 114, "Accounting by Creditors for Impairment of a
Loan," effective January 1, 1995. SFAS No. 114 requires the
measurement of impaired loans be based on the present value of
expected future cash flows discounted at the loan's effective
interest rate, or at the loan's observable market price or the
fair value of its collateral. SFAS No. 114 does not apply to
large groups of smaller balance homogeneous loans that are
collectively evaluated for impairment. For the Company, loans
collectively evaluated for impairment include all single family
mortgage loans, loans to individuals for household, family and
other consumer expenditures and commercial, industrial, and real
estate loans ("major loans") under a certain dollar amount,
excluding loans which have entered the workout process. The
adoption of SFAS No. 114 did not result in additional provisions
for losses due to the Company's continuing policy of measuring
loan impairment based on methods prescribed in SFAS No. 114.
The Company considers a loan to be impaired when, based upon
current information and events, doubt exists that the Company
will be able to collect all amounts due according to the
contractual terms of the loan agreement. The Company's impaired
loans within the scope of SFAS No. 114 include certain troubled
debt restructurings, and performing and non performing major
loans in which full payment of principal or interest is doubtful.
The Company also adopted Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures", effective January 1,
1995. This Statement allows a creditor to use existing methods
for recognizing interest income on impaired loans and thus the
adoption of SFAS No. 114 did not result in any change in the
amount of interest income reported.
The Company's impaired loans and the related allowance amounted
to approximately $1,785,000 and $610,000 at March 31, 1995,
respectively. There was no significant change in these amounts
during the three months ended March 31, 1995. Interest income
recognized on these loans amounted to approximately $6,700 for
the three months ended March 31, 1995.
NOTE 3: The accompanying unaudited interim financial statements
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures required by generally accepted accounting
principles for complete financial statements have been omitted.
It is suggested that these interim statements be read in
conjunction with the restated financial statements and notes
thereto included in the amended 1994 Annual Report on Form
10-K/A of First National Bankshares, Inc.
In the opinion of management, all adjustments (consisting of
only normal recurring adjustments) necessary for a fair
presentation of the information shown have been included.
The foregoing three months interim results of 1995 are not
necessarily indicative of the results of operations of the full
year 1995.
NOTE 4: Subsequent to the issuance of the Company's 1994
consolidated financial statements, the Company discovered that
an error had been made in the calculation of the valuation
allowance against its deferred tax asset as of December 31,
1994. As a result, the 1994 consolidated financial statements
have been restated from the amounts previously reported to
reflect the revised valuation allowance.
For the period reflected by these financial statements, the
restatement affects the following items:
December 31, 1994 March 31, 1995
Other Shareholders' Other Shareholders'
Assets Equity Assets Equity
As Originally Reported $9,675 $14,448 $9,642 $15,190
Restatement (525) (525) (525) (525)
As Restated $9,150 $13,923 $9,117 $14,665
The foregoing changes are reflected throughout these restated
financial statements. For an indication of the impact of the
restatement on other periods, refer to the restated financial
statements for those periods.
FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESTATED
CONSOLIDATED STATEMENTS OF INCOME AND
CHANGES IN FINANCIAL POSITION
Introduction
The following discussion and analysis of operations for the
quarter ending March 31, 1995 highlight the changes in financial
position and results of operations of First National Bankshares,
Inc. (the Company). The financial position and results of
operations of the Company for the period indicated were due
primarily to its banking subsidiary, First National Bank of
Houma (First National Bank or the Bank). Management's
discussion should be read in conjunction with the consolidated
financial statements and accompanying notes included in this
quarterly report.
In late 1995, the Company discovered an error had been made in
the calculation of a reduction in the latter part of 1994 of the
valuation allowance against the Company's deferred tax asset.
The error, which resulted in an understatement of the valuation
allowance by $525,000 for the period ending December 31, 1994,
related in part to the order of use of tax loss carryforwards
from 1987 and 1988 and in part to the order of use of bad debt
and other than bad debt tax loss carryforwards from 1990. To
correct the error, the Company is restating its financial
statements for the periods ending December 31, 1994, March 31,
1995, June 30, 1995, and September 30, 1995 and filing with the
Securities and Exchange Commission an amended Annual Report on
Form 10-K/A and amended Quarterly Reports on Form 10-Q/A for
those periods to reflect the restated financial statements.
For the period reflected by this report, the restatement
affects the following items:
December 31, 1994 March 31, 1995
Other Shareholders' Other Shareholders'
Assets Equity Assets Equity
As Originally Reported $9,675 $14,448 $9,642 $15,190
Restatement (525) (525) (525) (525)
As Restated $9,150 $13,923 $9,117 $14,665
The Management's Discussion and Analysis of Financial Condition
and Results of Operations that follows and the financial
statements included herewith have been amended from the original
filing of this report to reflect the foregoing restatement. For
a discussion of the impact of the restatement and for restated
financial statements for other periods, refer to the amended
periodic filings for those periods.
Changes in the Company's Consolidated Financial Position
During the first quarter of 1995, loans increased $4,436,000 a
4.7 percent increase from year end 1994. Proceeds from
securities available-for-sale sold during the fourth quarter of
1994 were used to purchase U.S. Treasury obligations in the
first quarter of 1995. This resulted in an increase of
$9,010,000 or a 81.0 percent increase in securities
available-for-sale. While the Company's book value of
securities held-to-maturity at March 31, 1995 did not change
substantially from December 31, 1994, the unrealized loss with
respect to these instruments improved from an unrealized loss of
$3,177,000 at December 31, 1994 to an unrealized loss of
$1,679,000 at March 31, 1995. At March 31, 1995 and December
31, 1994, other assets included $5,315,000 and $5,661,000,
respectively, in deferred tax assets.
Progress continues in First National's efforts to liquidate
property acquired in satisfaction of debt previously contracted.
Management is confident that it will be able to convert to
earning assets a substantial portion of the remaining $521,000
of property acquired in satisfaction of debt previously
contracted.
Non interest bearing deposits reflects an increase of
$4,001,000, or 14.7 percent, from year end 1994. Interest
bearing deposits showed a $902,000 increase, a 0.6 percent
increase, during the first quarter of 1995.
Results of the Company's Operations
For the three month period ending March 31, 1995, compared
to the same period in 1994, interest income increased $589,000
or 18.9 percent, the result of rising interest rates and
increased volumes of loans. Interest expense increased $253,000
or 22.9 percent, during the same period. The principal reasons
for the increase was the increased balances in interest bearing
deposits and rising interest rates. The net effect was an
increase in net interest income of $336,000, an improvement of
16.7 percent, for the three month period ending March 31, 1995
compared to the same period in 1994.
Non-interest income increased $15,000, a 3.3 percent
increase, when comparing the first three months of 1995 to 1994.
The increase is directly related to a gain realized from the
sale of repossessed personal property. Non-interest expense
increased $9,000 or .5 percent during the same period. The
increase reflects the net effect of increases in salaries and
wages, equipment expense and professional fees and decreases in
expenses associated with OREO and other problem loans.
Nonperforming assets continue to have a significant impact on
the results of operations for the Company. Nonperforming assets
increased $14,000 or .3 percent at March 31, 1995 as compared to
December 31, 1994. On March 31, 1995, renegotiated loans still
accruing include a loan for $1,896,000 that is guaranteed by the
Farmers Home Administration. Shown below is a schedule of the
Company's nonperforming assets (in thousands):
March 31, December 31,
1995 1994
Loans:
90 days or more past
due, but still
accruing interest ................ $ 78 $ 64
Renegotiated loans still accruing .. 2,431 2,444
Nonaccruing ........................ 1,952 2,037
Total Nonperforming Loans ............. 4,461 4,545
Other Real Estate and Foreclosed
Property (Net of Reserves) ......... 521 423
Total Nonperforming Assets ............ $4,982 $4,968
In addition to the nonperforming loans, the Company has
identified certain loans which, although currently performing,
have credit weaknesses such that doubt exists as to the
borrower's future ability to comply with present terms. At
March 31, 1995, these loans totaled approximately $769,000.
This represents a decrease of $25,000 or 3.1 percent from the
$794,000 balance on December 31, 1994.
Income before income taxes for the three month period
increased $342,000, or 64.6 percent. Net income for the same
period increased $29,000. In 1993, when the Company changed its
method of accounting for income taxes from the deferred method
to the liability method as required by Statement of Financial
Accounting Standard No. 109, it established a valuation
allowance against its deferred tax assets. This valuation
allowance was established due to the uncertainty of utilizing
prior years' net operating loss carryforwards.
In the third quarter of 1994, the Company began reducing its
valuation allowance based upon the likelihood it would utilize
prior years' net operating loss carryforwards. The credits for
income taxes in 1994 totaled $3,979,000.
During the first quarter of 1995, the Company began utilizing
its net operating loss carryforwards and reduced deferred tax
assets by $288,000. The total provision for income taxes at
March 31, 1995 was $292,000.
Liquidity
The Company has attempted to position itself to meet the
demands of the changing economic conditions with a high ratio of
net liquid assets to net liabilities. At year-end 1994, this
ratio stood at 36.5 percent and on March 31, 1995, 36.0 percent.
In an attempt to position itself to meet the demands of the
changing economic conditions, the Company has identified
approximately $20,139,000 in securities available for sale which
are carried in the statement of condition at market value. The
securities available for sale were identified to comply with
regulatory guidelines which require that if the intent is not to
hold the securities to maturity that they be so identified and
carried as securities available for sale. A schedule of the
Company's interest sensitivity/GAP analysis follows:
INTEREST SENSITIVITY/GAP ANALYSIS
(in thousands)
MARCH 31, 1995 INTEREST RATE SENSITIVITY PERIOD
0-3 4-12 1-5 Over 5
Months Months Years Years TOTAL
ASSETS:
Loans $28,863 $10,863 $37,063 $19,358 $ 96,147
Investments 39,803 14,653 18,657 3,155 76,268
Other 6,508 -0- -0- -0- 6,508
Total Assets $75,174 $25,516 $55,720 $22,513 $178,923
FUNDING SOURCES:
Interest-
Bearing
Deposits $59,523 $30,353 $22,648 $39,471 $151,995
Short-Term
Funds 1,367 -0- -0- -0- 1,367
Long Term
Debt 36 -0- -0- -0- 36
Total Funding
Sources $60,926 $30,353 $22,648 $39,471 $153,398
REPRICING/MATURITY GAP:
Period $14,248 $(4,837) $33,072 $16,958 --
Cumulative $14,248 $ 9,411 $42,483 $25,525 --
Period Gap/
Total Assets 8.0% (2.7)% 18.5% (9.5)% --
Cumulative
Gap/Total
Assets 8.0% 5.3 % 23.7% 14.3 % --
Amounts stated include only fixed and variable rate
instruments of the balance sheet that are still accruing
interest. Variable rate instruments are included in the next
period in which they are subject to change in rate. The
principal portion of scheduled payments on fixed rate
instruments are included in the periods in which they become due
or mature. Because changes in rates paid on interest-bearing
demand deposits have lagged behind changes in rates on other
instruments, only 50 percent of the balance of interest-bearing
demand deposits is included in the first period and 50 percent
is included in the last period.
Capital Adequacy
The Company's and First National's equity were negatively
affected in previous periods by the depressed local economy
which resulted in substantial expenses associated with problem
assets. Management feels that it has identified its problems
and has taken the steps it feels necessary to return First
National and therefore the Company to more acceptable operating
results.
As previously reported in the amended Annual Report on Form
10-K/A for the year ended December 31, 1994, the Company and
First National are subject to the regulatory risk-based capital
guidelines. The applicable risk-based capital ratios are as
follows:
First National March 31, December 31, Regulatory
Bankshares, Inc. 1995 1994 Minimums
Tier 1 Capital/Risk
Weighted Assets Ratio ... 13.81% 13.38% 4.00%
Total Capital/Risk
Weighted Assets Ratio ... 15.06% 14.63% 8.00%
Leverage Ratio ........... 7.51% 7.28% 3.00%
First National Bank March 31, December 31, Regulatory
Bank of Houma 1995 1994 Minimums
Tier 1 Capital/Risk
Weighted Assets Ratio ... 13.85% 13.41% 4.00%
Total Capital/Risk
Weighted Assets Ratio ... 15.10% 14.66% 8.00%
Leverage Ratio ........... 7.53% 7.30% 3.00%
In January of 1995, the Company paid a dividend, which it had
declared in December of 1994, of $.10 per common share. This
was the first dividend in several years, since the Company had
not paid a dividend since 1987. The Company is still required
to obtain regulatory approval prior to any future dividend
declarations.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FIRST NATIONAL BANKSHARES, INC.
(Registrant Company)
DATE: February 2, 1996 BY /s/ Jerome H. Mire
JEROME H. MIRE
CHIEF EXECUTIVE OFFICER AND
PRESIDENT
DATE: February 2, 1996 BY /s/ Russell Blanchard
RUSSELL BLANCHARD
CHIEF FINANCIAL OFFICER AND
COMPTROLLER