1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period of ____________ to ____________
Commission file number 33-94288
THE FIRST BANCSHARES, INC.
(Exact name of the registrant as specified in its charter)
MISSISSIPPI 64-0862173
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization)
Identification No.)
6424 U.S. Highway 98 West
Suite A
Hattiesburg, MS 39402
(Address of Principal (Zip Code)
executive offices)
(601) 268 - 8998
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if
changed since last report)
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,
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 issuer's
classes of common stock, as of the latest practicable date.
Shares Outstanding at
Class of Common Stock March 31, 1998
$1 par value 721,848
Transitional small business disclosure format (check one): Yes
NO X
THE FIRST BANCSHARES, INC.
FORM 10-QSB
INDEX
Page
Part I. Financial Information Number
Item 1. Financial Statement (UNAUDITED)
Condensed Consolidated Balance Sheets as of 3
March 31, 1998 and December 31, 1997
Condensed Consolidated Statement of Operations
for Three Months March 31, 1998 and 1997 4
Condensed Consolidated Statement of 5
Comprehensive Income(Loss) for Three Months
Ended March 31, 1998
Condensed Consolidated Statement of Cash Flows
for Three Months ended March 31, 1998 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis or Plan
of Operations 8 - 9
Part II. Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10 - 11
Signatures
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
THE FIRST BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS Dec. 31, 1997 March 31, 1998
(In thousands) (In thousands)
Cash and due from banks $990 $406
Investments $4,304 $5,286
Fed Funds Sold $1,850 $2,450
Loans Net Unearned $17,487 $21,968
Loan Loss Reserve ($194) ($236)
Deposits on Land $0 $0
Fixed Assets, Net $2,092 $2,077
Accrued Income $842 $408
Organization Costs $53 $44
Other Assets $109 $1,873
TOTAL ASSETS $27,534 $34,276
============ ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Deposits
Non-interest Bearing $2,479 $2,790
Other interest bearing $18,579 $24,981
Accounts payable and accrued exp. $108 $139
Note payable bank $0 $0
Total Liabilities $21,166 $27,910
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock par value
$1 per share; 10,000,000 shares
authorized; 634,061 shares issued
and outstanding $722 $722
Preferred stock par value
$1 per share; 10,000,000 shares
authorized; no shares issued
and outstanding $0 $ 0
Additional paid in capital $6,451 $6,451
Accumulated Deficit ($818) ($817)
Unrealized Gain (Loss) on Sec. $12 $10
____________ ____________
Total Liabilities and Capital $27,534 $34,276
=========== ===========
See accompanying Notes to Consolidated Financial Statements
THE FIRST BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR
THREE MONTHS ENDED MARCH 31, 1997
AND THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
INCOME ` March 31, 1997 March 31,
1998
Interest Income: (In Thousands) (In Thousands)
Interest and Fees on Loans $138 $553
Interest Income on Balances
Due From Banks $19 $13
Interest on U.S. Treasury and
U.S. Agency and Corp $63 $63
Interest on Obligation of States
and Political Subdivisions $0 $0
Interest on Other Securities $0 $16
Interest on Fed Funds Sold and Sec.
Purchased under Agreements
to Resell $29 $11
========= ==========
Total Interest Income $ 249 $656
Interest Expense:
Interest on Time Certificates
of Deposit of $100,000 or More $ 6 $60
Interest on Other Deposits $98 $243
Interest on Fed Funds Purchased
and Securities Sold Under Agreement
to Repurchase $0 $1
Interest on Demand notes Issued
to the U.S.Treasury and on Other
Borrowed Money $0 $4
Total Interest Expense $104 $308
========== ========
Net Interest Income $145 $348
Provision for Possible Loan Losses $46 $43
NON-INTEREST INCOME:
Income from Fiduciary Activities $0 $0
Service Charge on Deposit Accounts $3 $7
Other Non-interest Income $14 $33
Total Non-interest Income $17 $40
====== ====
Gains (losses) on Securities $0 $0
NON-INTEREST EXPENSE:
Salaries and Employee Benefits $138 $182
Expense of Premises and Fixed Assets $37 $54
Legal and Professional Expense $3 $0
Other Non-interest Expense $81 $108
Total Non-interest Expense $259 $344
======= ========
Income Before Income Taxes ($144) $1
Applicable Income Taxes $0 $0
Income Before Extraordinary items and
Other Adjustments ($144) $1
NET INCOME ($144) $1
Net Earnings Per Share ($.20) $0.00
See accompanying Notes to Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME(LOSS)
FOR THE PERIOD JANUARY 1, 1997 TO MARCH 31, 1997
AND JANUARY 1, 1998 TO MARCH 31, 1998
(UNAUDITED)
MARCH 31, 1997 MARCH 31, 1998
(In Thousands) (In Thousands)
--------------------------------
Net Profit (Loss) ($146) $1
Other comprehensive income, net of tax:
Net change in unrealized gain on securities
Available for Sale ($8) ($2)
Comprehensive Income (Loss) ($154) ($1)
=============== ===========
See accompanying Notes to Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1997 TO MARCH 31, 1997
AND JANUARY 1, 1998 TO MARCH 31, 1998
(UNAUDITED)
March 31, 1997 March 31, 1998
(In Thousands) (In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit (Loss) ($146) $1
Adjustment to reconcile net profit
to net cash used in operating activities:
Depreciation $24 $46
Provision for Loan Losses $46 $43
Amortization and Accretion $32 $9
Increase(Decrease) in Interest Receivable ($28) $434
Increase (Decrease) in Other Assets ($8) ($1,764)
Increase (Decrease) in accts
payable and accrued expenses $17 $31
Increase (Decrease) in Other Liabilities $0 $0
Net cash used in operating activities ($ 63) ($1,202)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Available for Sale Securities $0 ($1,943)
Proceeds from Maturities and Calls AFS Sec. $50 $959
Increase in Loans ($3,292) ($4,482)
Acquisition of premises and equipment ($ 483) ($31)
Net Cash Used in Investing Activities ($3,725) ($5,497)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Deposits $3,133 $6,713
(Decrease)Increase in Borrowed Funds $0 $0
Proceeds from the sale of common stock $0 $0
Proceeds from Note Payable $0 $0
Payments on debt obligations $0 $0
Increase in organizational and
deferred registration costs $0 $0
Net cash from financing activities $5,667 $6,713
Net increase(decrease) in cash and
cash equivalents ($655) $16
Cash and cash equivalents at
beginning of period $3,770 $2,840
Cash and cash equivalents at
end of period $3,115 $2,856
============= ===========
See accompanying Notes to Consolidated Financial Statements
The First Bancshares, Inc.
Notes to Consolidated Financial Statements
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 Forest 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
January1, 1998 through March 31, 1998 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, 1997
has been derrived 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 on
Form 10-K for the year ended December 31, 1997.
Item 2. Management's Discussion and Analysis or Plan of
Operation
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
Statement 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 March 31, 1998 compared to December 31, 1997.
The Bank completed its first full year of operations in 1997 and
has grown substantially since opening in August 1996.
Comparisons of the Bank's results for the periods presented
should be made with an understanding of the Bank's short history.
The following discussion should be read in conjunction with the
Company's condensed consolidated financial statements and
accompanying footnotes appearing in this report.
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 public 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 First
National Bank of South Mississippi received its national bank
charter and commenced operations on August 5, 1996.
On August 27, 1996, the Company terminated the initial stock
offering after selling 721,848 shares and raising gross proceeds
of $7,218,480.
This discussion will concentrate on the three months period
ended March 31, 1998 with comparisons provided for the same
period of 1997. At March 31, 1998, the Company had total assets
of $34,275,764 , the principal components of which included
investments of $5,286,320, fed funds sold of $2,450,000, loans
(net of unearned income) of $21,967,886, fixed assets (net of
depreciation) of $1,625,675, and other assets of $1,872,903. The
Company's liabilities at March 31, 1998 were $27,908,464, the
principal components of which included deposits of $27,771,171
and accounts payable and accrued expenses of $136,750 . The
Company had capital of $6,367,300 and during the period ended
March 31, 1998 the Company recorded a quarterly operating net
profit of $764.
The Company's net income was $764, or $.0010 per common
share, for the three months ended March 31, 1998 as compared to a
loss of ($144,000), or ($.20) per common share, for the three
months ended March 31, 1997. The 1998 totals reflect an increase
in the non-interest expense categories as a result of the
addition of a Mortgage Department and growth of the Bank. The
1998 totals also reflect an increase in net interest income of
$204,000 during the three months ended March 31, 1998, which
offset the increase in non-interest expense. The increase in net
interest income was attributable to higher earning assets, which
grew from $14.571 million during the three months ended March 31,
1997 to $29.704 million for the same period of 1998.
During the first quarter of 1998, net interest income
increased to $348,000 from $145,000 in the first quarter of 1997.
This increase in net income was the result of a $407,000 increase
in interest income and a $204,000 increase in interest expense
associated with the Bank's continued development of its deposit
and loan base. The net interest spread for the first quarter was
4.85% in 1998 compared to 2.26% in 1997. The net interest margin
was 4.68% for the first quarter of 1998 and was 3.98% in the same
period of 1997.
The provision for loan losses was $43,000 for the period ended
March 31, 1998, down from $46,000 in the period ended March 31,
1997. The company's allowance for loan losses as a percentage of
its period end loans was 1.07% and 1.10% at March 31, 1998 and
1997, respectively. The Company had no non-performing loans at
March 31, 1998 and 1997. There were no net charge-offs in the
first quarter of 1998 or 1997.
Non-interest Income was $40,000 for the period ended March 31,
1998, which was an increase of $23,000 over the same period of
1997. This was due primarily to growth in service fees on
deposit accounts resulting from a $17.1 million growth in
deposits since March 31, 1997 and mortgage company loan service
fees.
Non-interest expense was $344,000 for the period ended March
31, 1998, which was an increase of $85,000 over the same period
of 1997. The increase in non-interest expense reflects an
increase in all non-interest expense categories as a result of
increased costs associated with the addition of a mortgage
department and the growth of the bank.
A comparison of The Company's progress for three months (since
December 31, 1997) and twelve months (since March 31, 1997)
reveals significant growth on both sides of the balance sheet.
Asset growth has occurred primarily in earning assets.
Investments increased $982,734 since December 31, 1997 and
$1,160,356 since March 31, 1997. Fed Funds Sold increased
$600,000 since December 31, 1997 and declined by $458,811 since
March 31, 1997 , as the Bank shifted more of its earning assets
into loans. Loans net of unearned income increased $4,480,460
since December 31, 1997 and $14,362,758 since March 31, 1997.
The reserve for loan losses at March 31, 1998 was $236,171, which
represents an increase of $42,606 since December 31, 1997 and
$167,168 since March 31, 1997. Other assets grew to $1,872,903
as of March 31, 1998, which is an increase of $1,763,461 since
December 31, 1997 and $1,756,690 since March 31, 1997. The
increase in other assets reflects the growth in mortgage funds
receivable from $0 at March 31, 1997 to $1,755,917 at March 31,
1998. Mortgage Funds Receivable is comprised of mortgage loans
which have been sold pending receipt of payment from the buyer.
Total assets increased $6,741,704 since December 31, 1997 and
$17,102,475 since March 31, 1997, reflecting the growth of the
Bank. Deposit growth has been steady with increases in non-
interest bearing deposits of $311,275 since December 31, 1997 and
$1,466,233 since March 31, 1997. Interest bearing deposits
increased $6,402,053 since December 31, 1997 and $15,665,551
since March 31, 1997.
The Company intends to devote the remainder of this fiscal
year to the operation of the Bank, the opening of one branch
facility inside the city of Hattiesburg, Mississippi, and
developing the other business activities of the Company. These
other activities may include an on-line Internet banking product.
The Company believes that the Bank will generate sufficient
income from operations to fund its activities for at least the
next 12 months.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material legal proceedings to which the Company
is a party or of which any of their property is subject.
Item 2. Changes in Securities.
(a) Not applicable.
(b) 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 security holders for a vote
during the three months ended March 31, 1998.
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. 33-94288.)
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 S-1,
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. 33-94288.)
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, 1997, 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 fiscal
year ended December 31, 1996, No. 33-94288).
27.1 Financial Data Schedule
The Company did not file any reports on Form 8-K during the three
months ended March 31, 1998.
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)
/s/ DAVID E. JOHNSON
May 14, 1998 DAVID E. JOHNSON
Date President and CEO
/s/ CHARLES T. RUFFIN
CHARLES T. RUFFIN
Executive Vice President
and Chief Operating Officer