U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period from ___________ to___________
Commission File Number 33-94288
THE FIRST BANCSHARES, INC.
(Name of small business issuer as specified in its charter)
MISSISSIPPI 64-0862173
(State or Other Jurisdiction ( I.R.S.
Employer of Incorporation or Organization) Identification No.)
6480 U.S. Hwy. 98 West
Hattiesburg, Mississippi 39402
(Address of Principal Executive Offices) (Zip Code)
(601) 268-8998
Issuer's Telephone Number, Including Area Code
Not Applicable
(Former Name, Address and Fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past
12 months (or shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO __
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
On November 5, 1997, 721,848 shares of the issuer's common stock,
par value $1.00 per share, were issued and outstanding.
Transitional Small Business Disclosure Format (check one):
YES ___ NO X
THE FIRST BANCSHARES, INC.
FORM 10-QSB
INDEX
Part I. Financial Information Page
Number
Item 1. Financial Statement (UNAUDITED)
Condensed Balance Sheet - September 30, 1997 3
Condensed Statement of Operations
for the Period -
January 1, 1997 to September 30, 1997 4
Condensed Statement of Operations
for the Period -
June 30, 1997 to September 30, 1997 5
Condensed Statement of Cash Flows
for the Period January 1, 1997
to September 30, 1997 6
Item 2. Management's Discussion and
Analysis or Plan of Operations 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8-9
SIGNATURES
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FIRST BANCSHARES, INC. and Subsidiary
Condensed Consolidated Balance Sheets
(UNAUDITED)
(IN THOUSANDS $)
SEPT 30 DECEMBER 31
ASSETS 1997 1996
Cash and due from banks $1,125 $1,459
Interest-bearing deposits $0 $0
Federal funds sold $1,560 $2,311
Investment Securities:
Held-to-maturity $0 $0
Available-for-sale $4,319 $4,216
Loans, net of unearned interest $14,510 $4,327
Allowance for Loan Losses ($159) ($37)
Premises and fixed assets, net $2,106 $1,692
Accrued Income $648 $36
Other Assets $194 $173
Total Assets $24,303 $14,177
Liabilities and Stockholders' Equity
Non-interest bearing deposit $2,178 $1,566
Interest-bearing deposits $15,562 5,941
Total Deposits $17,740 $7,507
Accrued interest expense $132 27
Accrued income taxes $0 $0
Other liabilities $25 $23
Total Liabilities $17,897 $7,557
Stockholders' equity:
Common stock, $1.00 par value;
authorized 10,000,000 shares;
721,848 issued and outstanding $722 $722
Surplus $6,451 $6,451
Accumulated Deficit ($782) ($556)
Unrealized gain (loss) net
in AFS investments $15 $3
Total Capital $6,405 $6,620
Total Liabilities and Capital $24,303 $14,177
See accompanying notes to Consolidated Financial Statements
FIRST BANCSHARES, INC. and Subsidiary
Condensed Consolidated Statement of Operations
Nine Months of Operation
(UNAUDITED)
(In Thousands $ Except Per Share Numbers)
Sept 30 Sept 30
1997 1996
Interest Income:
Loans, including fees $707 $10
Interest-bearing deposits $50 $2
Federal funds sold $69 $172
Investment securities:
Taxable $223 $97
Non-taxable $0 N/A
Dividends $6 N/A
Total Interest Income: $1,055 $281
Interest Expense:
Deposits ($470) ($27)
Federal funds purchased $0 N/A
Total Interest Expense: ($470) ($27)
Net Interest Income $585 $254
Provision for loan losses ($122) ($6)
Net interest income
after provision for loan losses $463 $248
Other Income:
Service charges on deposits $11 $4
Other operating income $169 $0
Securities gains (losses) net $0 N/A
Total other income $180 $4
Other Expense:
Salaries and employee benefits ($459) ($232)
Net occupancy and equipment expense ($125) ($57)
Other operating expense ($286) ($151)
Total other expense ($870) ($440)
Profit before income taxes ($227) ($188)
Income tax expense $0 N/A
Net Income (loss) ($227) ($188)
Earnings per common share ($.31) ($.26)
See accompanying notes to Consolidated Financial Statements.
FIRST BANCSHARES, INC. and Subsidiary
Condensed Consolidated Statement of Operations
Three Months of Operation
(UNAUDITED)
(In Thousands $ Except Per Share Numbers)
Sept 30, Sept 30
1997 1996
Interest Income:
Loans, including fees $340 $10
Interest-bearing deposits $12 $2
Federal funds sold $20 $82
Investment securities:
Taxable $84 $21
Non-taxable
Dividends and Other Income $1 $0
Total Interest Income: $457 $115
Interest Expense:
Deposits ($207) ($27)
Federal funds purchased $0 N/A
Total Interest Expense: ($207) ($27)
Net Interest Income $250 $88
Provision for loan losses ($38) ($6)
Net interest income
after provision for loan losses $212 $82
Other Income:
Service charges on deposits $5 $4
Other operating income $130 N/A
Securities gains (losses) net $0 N/A
Total other income $135 $4
Other Expense:
Salaries and employee benefits ($163) ($108)
Net occupancy and equipment expense ($47) ($46)
Other operating expense ($110) ($95)
Total other expense ($320) ($249)
Profit before income taxes $27 ($163)
Income tax expense $0 N/A
Net Income (loss) $27 ($163)
Earnings per common share $.04 ($.23)
See accompanying notes to Consolidated Financial Statements.
FIRST BANCSHARES, INC. and Subsidiary
Consolidated Statements of Cash Flows
(UNAUDITED)
(In Thousands $)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net profit(LOSS) ($227) ($188)
Adjustments to reconcile net
income net cash:
Depreciation $90 N/A
Provision for loan losses $122 N/A
Amortization and Accretion, Net $105 N/A
Net decrease (increase) Accrued Income ($612) N/A
Net decrease (increase) other assets ($21) N/A
Net (decrease) increase accrd int. pay. $105 N/A
Net (decrease) increase other liab. $2 $17
Net cash provided/(used) by operations ($436) ($171)
Cash flows from investing activities:
Purchase of held-to-maturity invest. $0 N/A
Purchase of AFS investments ($4,950) N/A
Proceeds maturities held-to-maturity sec. $0 N/A
Proceeds maturities of AFS investments $4,505 N/A
Proceeds from sale of AFS investments $250 N/A
Net (increase) decrease in loans ($10,183) ($1,440)
Purchase of fixed assets ($504) ($829)
Net cash (used) by investing activities ($10,882 ($2,269)
Cash flows from financing activities:
Net increase (decrease) in deposits $10,233 $3,355
Proceeds from issuance of common stock $0 $7,218
Net cash provided (used) by financing
activities $10,233 $10,573
Net incr./(decr.) in cash and cash equiv. ($1,085) $8,133
Cash and cash equiv. beginning/period $3,767 $561
Cash and cash equiv. at end of period $2,685 $8,694
================
Supplemental disclosures of cash paid for:
Interest $364 N/A
Income Taxes $0 N/A
See accompanying Notes to Consolidated Financial Statements
FIRST BANCSHARES, INC. and Subsidiary
Notes to Consolidated Financial Statements
(UNAUDITED)
Note 1. Basis of Presentation
Organization and Consolidation - The First Bancshares, Inc. (the
"Company") is a bank holding company. Through its subsidiary,
The First National Bank of South Mississippi, the Company
provides banking services to domestic markets principally in
Lamar County and Forrest County, Mississippi. The Bank commenced
operations on August 5, 1996. The consolidated financial
statements include the accounts of the parent company and its
wholly owned subsidiary after elimination of all significant
intercompany balances and transactions.
Basis of Presentation - The accompanying consolidated financial
statements have been prepared in accordance with the requirements
for interim financial statements and, accordingly, they are
condensed and omit disclosures which are normally required by
generally accepted accounting principles for complete financial
statements. The financial statements for the interim period of
January 1, 1997 through September 30, 1997 are unaudited and, in
the opinion of management, include all adjustments ( consisting
of normal recurring accruals) considered necessary for a fair
presentation. The financial information as of December 31, 1996
has been derived from audited financial statements as of that
date. For further information, refer to the financial statements
and notes included in The First Bancshares, Inc. Annual Report.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in the forward-
looking statements, and the Company's operating performance each
quarter is subject to various risks and uncertainties that are
discussed in detail in the Company's filings with the Securities
and Exchange Commission, including the "Risk Factors" section in
the Company's Registration Statements on Form S-1 (Registration
Number 33-94288) as filed with and declared effective by the
Securities and Exchange Commission.
The following is a discussion of the Company's financial
condition as of September 30, 1997 compared to December 31, 1996.
These comments should be read in conjunction with the Company's
condensed consolidated financial statements and accompanying
footnotes appearing in this report.
Results of Operations
The Company was organized on June 23, 1995 (the "Inception
Date"). From the Inception Date through August 2, 1996, the
Company's principal activities related to its organization, the
conducting of its initial stock offering, and pursuit of approval
from the Office of the Comptroller of the Currency ("OCC") for
its application to charter its subsidiary bank, The First
National Bank of South Mississippi (the "Bank"). The Bank
received its national bank charter and commenced operations on
August 5, 1996.
At September 30, 1997, the company had demonstrated significant
growth on the balance sheet. Total assets grew from $14,176,760
on December 31, 1996 to $24,302,868 on September 30, 1997, or
71.4%, with most of this growth occurring in the loan portfolio.
As of September 30, 1997, total assets were comprised of the
following: Cash and Due From Banks - $1,124,721; Investments
and Fed Funds Sold - $5,879,433; Loans Net of Unearned -
$14,510,182; Allowance for Loan Losses - ($159,364); Fixed Assets
,net of Depreciation - $2,106,182; Accrued Income - $647,700; and
Other Assets- $194,012. Total Deposits at September 30, 1997 were
$17,740,016. During the three month period between June 30, 1997
and September 30, 1997, deposits grew $3,108,866, or 24.2%. An
analysis of the composition of total deposits at September 30,
1997 reveals the following: Non-Interest Bearing Checking -
$2,178,470; Interest-Bearing Checking - $2,150,684; Money Market
and Savings Accounts -$5,128,075; and Time Deposits - $9,743,355.
During this nine months of operation, gross income of $1,234,707
was generated by the Company, with the majority of this being
composed of interest income from loans and investments. Total
expenses of $1,461,306 were incurred during the same period
resulting in a net loss of ($226,599), year to date. The Net
Interest Margin during this period of operation was calculated to
be 3.83% with a Return on Average Assets of (1.18%). For the
three months ended September, 1997, net interest income was
$250,000 and net income was $27,000, or $0.04 per share, as the
Company reported its first profitable quarter, as compared to net
interest income of $88,000 and a net loss of $163,000, or ($0.23
per share, for the three months ended September 30, 1996.
The Bank had the following Capital Ratios as of September 30,
1997: Risked Base Capital Ratio - $23.31%; Tier 1 Capital/Net
Risk-Weighted Assets - 22.52%; Leverage Ratio - 20.57%; and
Tangible Equity Ratio - 20.57%. Based upon the preceding ratios,
this institution would be assigned to the Well Capitalized
category.
The Company intends to devote its efforts during the remainder of
1997 to growing both asset and liability sides of the balance
sheet. The Bank's tremendous growth to date is a reflection of
the fact that the Bank just opened for business on August 5,
1996, and the Company does not expect to maintain or duplicate
this growth rate in the long term. The Board also intends to
increase the amount of capital in the Bank during the fourth
quarter of 1997 by transferring a combination of land and cash to
the Bank in anticipation of the construction of a new branch on
the corner of 28th Avenue and Lincoln Road within the city of
Hattiesburg, MS during 1998. This infusion of capital is
intended to provide for the construction of the new facility with
no decline of current capital ratios and provide the Bank the
ability to increase its legal lending limit, while maintaining
$1,000,000 reserve capital in the Company. The Company's
management closely monitors and seeks to maintain appropriate
levels of interest earning assets and interest bearing
liabilities so that maturities of assets are such that adequate
funds are provided to meet customer withdrawals and loan demand.
Management expects asset and liability growth to continue at a
rapid pace during the coming months, with the growth tapering
off to a slower, more deliberate and controllable pace over the
long term, and believes capital should continue to be adequate.
However, no assurances can be given in this regard, as rapid
growth, deterioration in loan quality and poor earnings, or a
combination of these factors, could change the company's capital
position in a relatively short period of time. The Bank will
attempt to solicit high quality loans generally in the $50,000 to
$300,000 range, and to grow the investment portfolio primarily
with Treasury and Agency securities with maturities in the 6
month to 5 year time frame, to facilitate liquidity while
increasing our net interest margin. The primary funding source
for growth of these assets will be from deposit gathering
activities in the Bank's primary market. Emphasis will be given
to attracting non-interest bearing deposits in conjunction with
loan requests. Management believes that the location of the
Bank's main office coupled with the significant commercial growth
occurring at this location should facilitate the Bank's ablility to
attract commercial deposits. Special time deposit promotions for
maturities of 1 - 3 years will continue to be offered over short
periods of time. By attracting its deposits within these ranges,
the Bank will attempt to improve our GAP position, fund loan
demand, and accomplish this at a cost which is significantly less
than could be achieved through the use of brokered deposits.
However, no assurances can be given that the bank will be able to
solicit sufficient non-interest or low-interest bearing deposits
to accommodate the Bank's anticipated loan growth, nor can any
assurances be given that the bank's loan demand will continue to
increase at such a rapid pace.
At December 31, 1996, the allowance for loan losses amounted to
$37,000. By September 30, 1997 the allowance had grown to
$159,364. The allowance for loan losses, as a percentage of
gross loans, grew from .86% to 1.10% during the nine month period
ended September 30, 1997. The loan portfolio is periodically
reviewed to evaluate the outstanding loans and to measure both
the performance of the portfolio and the adequacy of the
allowance for loan losses. This analysis includes a review of
delinquency trends, actual losses, and internal credit ratings.
Management's judgment as to the adequacy of the allowance is
based upon a number of assumptions about future events which it
believes to be reasonable, but which may or may not be
reasonable. However, because of the inherent uncertainty of
assumptions made during the evaluation process, there can be no
assurance that loan losses in future periods will not exceed the
allowance for loan losses or that additional allocations to the
allowance will not be required.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which the
Company or the Bank is a party or of which any of their property
is the subject.
Item 2. Changes in Securities.
Not Applicable
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders
during the third quarter of 1997.
Item 5. Other Information.
Item 6. Exhibits and Reports on form 8-k.
(a) Exhibits
3.1 Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the
Registration Statement on Form S-1, File No. 3394288.)
3.2 Bylaws of the Company (incorporated by reference
to Exhibit 3.2 of the Registration Statement on Form S
1, File No. 33-94288.)
4.1 Provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders
of the Company's common Stock (incorporated by
reference to Exhibit 4.1 of the Registration Statement
on Form S-1, File No. 33-94288.)
10.3 Contract for the Purchase and assignment of 16th
Section Leasehold, dated June 26, 1995 by and between
the proposed bank and Department of Public Safety,
State of Mississippi (incorporated by reference to
Exhibit 10.4 of the Registration Statement on Form S1,
File No. 33-94288.)
10.4 Option to purchase, dated May 23, 1995, among
proposed bank, John Hudson, and La Carroll Hudson
(incorporated by reference to Exhibit 10.4 of the
Registration Statement on Form S-1, File No. 3394288.)
10.5 Lease agreement, dated June 21, 1995, among Joel
S. Thoms, individually, Thoms Enterprises, Inc. and the
Company (incorporated by reference to Exhibit 10.5 of
the Registration Statement on Form S-1, File No. 33
94288.)
10.7 Amended and restated employment agreement dated
November 20, 1995, between David E. Johnson and the
Company (incorporated by reference to Exhibit 10.7 of
the Company's Form 10-KSB for the fiscal year ended
December 31, 1995, File No. 33-94288).
10.8 1997 Stock Option Plan (incorporated by reference
to Exhibit 10.7 of the company's Form 10-KSB for the
fiscal year ended December 31, 1996, No. 33-94288).
27.1 Financial Data Schedule (For SEC Use Only)
The Company did not file any reports on Form 8-K during the three
months ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registration has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
THE FIRST BANCSHARES, INC.
(Registrant)
DAVID E. JOHNSON
November 13, 1997 DAVID E. JOHNSON
Date President and CEO
CHARLES T. RUFFIN
CHARLES T. RUFFIN
Executive Vice President
and Chief Operating Officer