UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 2001
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: 33-58832
FIRST CENTRAL BANCSHARES, INC.
(Exact name of small business issue as specified in its charter)
Tennessee
(State or other jurisdiction of incorporation or organization)
725 Highway 321 North, Lenoir City, Tennessee
(Address of principal executive office)
62-1482501
(I.R.S. Employer Identification No.)
37771-0230
(Zip Code)
Registrant's telephone number, including area code: (865) 986-1300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock (par
value $5.00 per share)
Indicate by 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 by mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13, or (15d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes [ ] No [ ]
The number of outstanding shares of the registrant's Common Stock, par
value $5.00 per share, was 557,034 on October 30, 2001.
Page 1
FORM 10-QSB
Index
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 2001(Unaudited)and December 31, 2000..........................................3
Condensed Consolidated Statements of Income for the three
months and nine months ended September 30, 2001
and 2000(Unaudited).........................................................................4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2001 and 2000(Unaudited)....................................5
Condensed Consolidated Statements of Comprehensive Income for
the three months and nine months ended September 30,
2001 and 2000(Unaudited)....................................................................6
Notes to Condensed Consolidated Financial Statements for the
for the nine month periods ended September 30, 2001
and 2000 (Unaudited) .....................................................................7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................................9-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..........................................................................14
Item 2. Changes in Securities......................................................................14
Item 3. Defaults upon Senior Securities............................................................14
Item 4. Submission of Matters to a Vote
of Securities Holders......................................................................14
Item 5. Other Information..........................................................................14
Item 6. Exhibits and Reports on Form 8-K...........................................................14
Signatures...................................................................................................15
Page 2
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
September 30, December 31,
2001 2000
------ ------
- -ASSETS-
Cash and Due from Banks $ 3,968 $ 5,409
Federal Funds Sold 15,464 5,360
-------- -------
Total Cash and Cash Equivalents 19,432 10,769
Investment Securities Available for Sale 30,122 33,614
Loans, Net 84,684 76,070
Premises and Equipment (Net) 4,552 4,769
Accrued Interest Receivable 745 1,038
Other Assets 179 320
--------- -----
TOTAL ASSETS $139,714 $126,580
========= =========
- -LIABILITIES AND STOCKHOLDERS' EQUITY-
Liabilities:
Deposits
Non-Interest Bearing $ 20,996 $ 18,541
Interest Bearing 105,284 96,518
--------- --------
Total Deposits 126,280 115,059
Securities Sold Under Agreement to Repurchase 873 258
Accrued Interest Payable 538 529
Other Liabilities 306 185
----- -----
Total Liabilities 127,997 116,031
--------- ---------
Stockholders' Equity:
Common Stock - Par Value $5.00, Authorized;
2,000,000 Shares; Issued 564,361 Shares
Outstanding 557,034 (559,361 in 2000) 2,822 2,822
Additional Paid-in Capital 5,430 5,430
Treasury Stock (191) (130)
Retained Earnings 3,362 2,608
Accumulated Other Comprehensive Income (Loss) 294 (181)
----- ------
Total Stockholders' Equity 11,717 10,549
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $139,714 $126,580
========= =========
See accompanying notes to financial statements.
Page 3
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income
(Unaudited)
(In Thousands Except
per Share Information)
-------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
--------------- ----------------
2001 2000 2001 2000
------ ------ ------ ------
INTEREST INCOME
Loans $1,852 $1,778 $5,567 $5,125
Investment Securities 429 575 1,447 1,661
Federal Funds Sold 107 4 320 38
---- --- ---- ----
Total Interest Income 2,388 2,357 7,334 6,824
------ ------ ------ ------
INTEREST EXPENSE
Deposits 1,214 1,141 3,720 3,264
Securities Sold Under
Agreements to Repurchase 4 3 17 27
Federal Funds Purchased 0 14 0 36
--- --- --- ---
Total Interest Expense 1,218 1,158 3,737 3,327
------ ------ ------ ------
Net Interest Income 1,170 1,199 3,597 3,497
PROVISION FOR LOAN LOSSES 46 31 163 185
--- ---- ---- ----
Net Interest Income After
Provision for Loan Losses 1,124 1,168 3,434 3,312
NONINTEREST INCOME
Service Charges on
Demand Deposits 252 161 765 480
Loan Fees and Other
Service Charges 129 84 376 241
Gain on Sale of Branch 0 5 0 435
Other 8 44 25 41
----- ----- ---- ----
Total Noninterest Income 389 294 1,166 1,297
------ ---- ------ ------
NONINTEREST EXPENSE
Salaries and Employee
Benefits 635 552 1,865 1,550
Occupancy 110 81 323 325
Data Processing Fees 128 112 387 327
Furniture and Equipment 85 80 260 219
Federal Insurance Premiums 12 12 36 35
Advertising and Promotion 24 50 67 109
Office Supplies and Postage 66 65 197 160
Other 85 67 255 190
---- --- ----- ----
Total Noninterest Expense 1,145 1,019 3,390 2,915
------ ------ ------ ------
INCOME BEFORE INCOME TAX 368 443 1,210 1,694
INCOME TAXES 134 197 456 656
---- ---- ---- ----
NET INCOME $ 234 $ 246 $ 754 $1,038
===== ===== ====== ======
BASIC EARNINGS PER COMMON
SHARE $ 0.42 $ 0.44 $ 1.35 $ 1.87
====== ====== ====== ======
See accompanying notes to financial statements.
Page 4
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
Nine Months Ended
September 30,
-------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 754 $ 1,038
------ --------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 163 185
Depreciation 218 220
Loss on Sale of Fixed Assets 14 -0-
(Increase) Decrease in Interest Receivable 293 (100)
Increase in Interest Payable 9 81
Amortization of Premiums (Discounts) on
Investment Securities, Net (96) 41
FHLB Stock Dividends (21) (19)
Gain on Sale of Branch -0- (435)
(Increase) Decrease in Other Assets (150) 188
Increase in Other Liabilities 121 (84)
----- -----
Total Adjustments 551 77
----- --------
Net Cash Provided by Operating Activities 1,305 1,115
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Maturities, Principal Paydowns and
Redemption of Investment Securities Available
for Sale 19,937 739
Purchases of Investment Securities Available
for Sale (15,562) (4,919)
Increase in Loans (8,777) (4,629)
Purchases of Premises and Equipment (34) (730)
Sales of Premises and Equipment 19 1,223
---- -------
Net Cash Used in Investing Activities (4,417) (8,316)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES
Increase in Deposits 11,221 5,573
Increase (Decrease)in Securities Sold
Under Agreement to Repurchase 615 (2,285)
Increase in Federal Funds Purchased -0- 1,200
Purchases of Common Stock (191) (130)
Sale of Treasury Stock 130 -0-
----- -------
Net Cash Provided by Financing Activities 11,775 4,358
-------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,663 (2,843)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,769 8,501
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,432 $ 5,658
========= ========
Supplementary Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest $ 3,728 $ 3,246
Income Taxes $ 511 $ 802
Supplementary Disclosures of Noncash Investing Activities:
Change in Unrealized Gain/Loss on Investment Securities $ 766 $ 320
Change in Deferred Income Taxes Associated with
Unrealized Gain/Loss on Investment Securities $ 291 $ 122
Change in Net Unrealized Gain/Loss on Investment
Securities $ 475 $ 198
Issuance of Common Stock Dividend:
Par $ 0 $ 256
Additional Paid-in Capital $ 0 $ 1,073
Reduction in Retained Earnings Due to Issuance of
Common Stock $ 0 $ 1,329
See accompanying notes to financial statements.
Page 5
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------- ----------------
2001 2000 2001 2000
------ ------ ------ ------
Net Income $ 234 $ 246 $ 754 $1,038
------ ------ ------ -------
Other Comprehensive Income,
Net of Tax:
Unrealized Gains/Losses on
Investment Securities 253 440 766 320
Less Income Taxes Related
to Unrealized Gains/Losses
on Investment Securities (96) (167) (291) (122)
----- ------ ------ ------
Other Comprehensive Income,
Net of Tax 157 273 475 198
----- ----- ----- -----
Comprehensive Income $ 391 $ 519 $1,229 $1,236
====== ====== ======= =======
See accompanying notes to financial statements.
Page 6
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2001 and 2000
NOTE 1 - ORGANIZATION AND BUSINESS
First Central Bancshares, Inc. (the Company) was incorporated in 1993 for the
purpose of becoming a one bank holding company. On April 3, 1993, the Company
acquired 100% of First Central Bank (the Bank) through a share exchange
agreement approved by the shareholders of the Bank. The investment in First
Central Bank represents virtually all of the assets of First Central Bancshares,
Inc.
The consolidated financial statements include the accounts of First Central
Bancshares, Inc. and its wholly owned subsidiary, First Central Bank. All
significant intercompany transactions and balances have been eliminated.
The Company's subsidiary, First Central Bank, formed a new subsidiary, FCB
Financial Services, Inc. in 2000. This new subsidiary is a financial services
company authorized by the State of Tennessee to sell insurance and investments.
FCB Financial Services, Inc. has had no activity as of September 30, 2001.
Certain amounts in the condensed consolidated financial statements for the prior
year have been reclassified to conform to current year classifications.
NOTE 2 - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by the
Company. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of the Company's
management, the disclosures made are adequate to make the information presented
not misleading, and the consolidated financial statements contain all
adjustments necessary to present fairly the financial position as of September
30, 2001, results of operations for the three months and nine months ended
September 30, 2001 and 2000, and cash flows for the nine months ended September
30, 2001 and 2000.
The results of operations for the three months and nine months ended September
30, 2001 are not necessarily indicative of the results to be expected for the
full year.
NOTE 3 - TREASURY STOCK
During the quarter ended September 30, 2001, the Company repurchased 7,327
shares of its common stock at a total cost of $191,000.
NOTE 4 - STOCK OPTION PLAN
On April 20, 2000, the stockholders of the Company approved a stock option plan
which reserves 25,000 shares of the Company's common stock for present and
future employees as an incentive for long-term employment. As of September 30,
2001, the plan has not been implemented and no options have been awarded.
NOTE 5 - EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of shares
outstanding during the period. For the three months ended September 30, 2001 and
2000 the weighted average number of shares was 560,035 and 559,361. For the nine
months ended September 30, 2001 and 2000 the weighted average number of shares
was 560,467 and 554,107, respectively. During the periods ending September 30,
2001 and 2000 the Company did not have any dilutive securities.
Page 7
NOTE 6 - RECENT REGULATORY AND ACCOUNTING PRONOUNCEMENTS
In September 2000, the FASB issued Statement of Financial Accounting Standards
No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities. This Statement replaces FASB Statement No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities. It revises the standards for accounting for securitization and
other transfers of financial assets and collateral and requires certain
disclosures, but it carries over most of Statement No. 125's provisions. The
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities occurring after
March 31, 2001. This Statement is effective for recognition and reclassification
of collateral and for disclosure related to securitization transactions and
collateral for fiscal years ending after December 15, 2000. Since the Bank does
not currently engage in securitization and other transfers of financial assets
and collateral, this Statement is not expected to affect the financial condition
or results of operations at the present time.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 141, Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS 141 requires that the purchase method
of accounting be used for all business combinations initiated after June 30,
2001. SFAS 142 requires that goodwill and other intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for
impairment annually. SFAS No. 142 is effective on January 1, 2002. However, it
is not expected that this statement will have an impact on the Company's
consolidated financial position or results of operations.
Page 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FORWARD-LOOKING STATEMENTS
The following is a discussion of our financial condition as of and for the three
and nine month periods ended September 30, 2001. These comments should be read
in conjunction with our consolidated financial statements and accompanying
footnotes appearing in this report.
This report contains "forward-looking statements" relating to, without
limitation, future economic performance, plans and objective of management for
future operations, and projections of revenues and other financial items that
are based on the beliefs of management, as well as assumptions made by and
information currently available to management. The words "expect," "anticipate,"
and "believe," as well as similar expressions, are intended to identify
forward-looking statements. Our actual results may differ materially from the
results discussed in the forward-looking statements.
BALANCE SHEET ANALYSIS - COMPARISON AT SEPTEMBER 30, 2001 TO DECEMBER 31, 2000
Assets totaled $139.7 million as of September 30, 2001, as compared to $126.6
million as of December 31, 2000, an increase of 10.35%.
INVESTMENT SECURITIES
Investment securities were $30.1 million or 21.5% of total assets, as of
September 30, 2001 a decrease of $3.5 million from $33.6 million as of December
31, 2000. During the nine month period there were $19.9 million in calls,
maturities, and principal paydowns offset primarily by the purchase of $15.6
million in agency and mortgage-backed securities and an increase in the market
value of the investment portfolio of $766,000.
The investment portfolio is comprised of U.S. Government and federal agency
obligations and mortgage-backed securities issued by various federal agencies.
Mortgage-backed issues comprised 29.29% of the portfolio as of September 30,
2001 and 11.68% as of December 31, 2000.
As of September 30, 2001 and December 31, 2000, the Bank's entire investment
portfolio was classified as available for sale and reflected on the consolidated
balance sheets at fair value with unrealized gains and losses reported in the
consolidated statements of comprehensive income (loss), net of any deferred tax
effect. The net unrealized gain on securities available for sale, net of tax was
approximately $294,000 as of September 30, 2001, a change of approximately
$475,000 from December 31, 2000, a result of considerable improvement in the
bond market. The fair value of securities fluctuates with the movement of
interest rates. Generally, during periods of decreasing interest rates, the fair
values increase whereas the opposite may hold true during a rising interest rate
environment.
LOANS
During the first nine months of 2001, total gross loans outstanding increased by
approximately $8.5 million to $85.7 million as of September 30, 2001 from $77.2
million as of December 31, 2000 attributable primarily to $30.1 million in
originated loans offset by amortization and payoffs of approximately $21.6
million. As of September 30, 2001 and December 31, 2000, net loans outstanding
represented 60.6% and 60.1% of total assets, respectively. Table 1 summarizes
the Bank's loan portfolio by major category as of September 30, 2001 and
December 31, 2000.
Table 1 - Loan Portfolio by Category
(In Thousands)
----------------
September 30, December 31,
2001 2000
------- ------
Loans secured by real estate:
Commercial properties $18,412 $9,024
Construction and land development 17,121 9,633
Residential and other properties 25,630 22,082
-------- --------
Total loans secured by real estate 61,163 40,739
Commercial and industrial loans 13,530 16,135
Consumer loans 10,673 19,245
Other loans 286 1,050
----- -------
85,652 77,169
Less: Allowance for loan losses (789) (739)
Unearned interest (137) (342)
Unearned loan fees (42) (18)
----- -----
Loans, Net $84,684 $76,070
======== ========
Page 9
As of September 30, 2001, there were outstanding commitments to advance
construction funds and to originate loans in the amount of $9.8 million and
commitments to advance existing home equity, letters of credit and other credit
lines in the amount of $17.5 million.
Loans are carried net of the allowance for loan losses. The allowance is
maintained at a level to absorb possible losses within the loan portfolio. As of
September 30, 2001 and December 31, 2000, the allowance had a balance of
approximately $789,000 and $739,000, respectively. There were approximately $-0-
and $11,000 of loans on which the accrual of interest had been discontinued as
of September 30, 2001 and December 31, 2000, respectively. There were
approximately $1,163,000 in loans specifically classified as impaired as of
September 30, 2001 as defined by SFAS No. 114 compared to $944,000 as of
December 31, 2000. Table 2 summarizes the allocation of the loan loss reserve by
major categories and Table 3 summarizes the activity in the loan loss reserve
for the nine month period.
Table 2 - Allocation of the Loan Loss Reserve (in Thousands)
9-30-01 % to 12-31-00 % to
Balance applicable to: $ Amount Total $ Amount Total
-------- ------- -------- -------
Commercial, financial, and agricultural $233 29.53% $152 20.57%
Real Estate - Construction 186 23.57% 123 16.64%
Real Estate - Mortgages 128 16.22% 205 27.74%
Installment - Consumers 208 26.36% 255 34.51%
Other 34 4.32% 4 0.54%
---- ------ ---- -------
Total $789 100.00% $739 100.00%
==== ======= ==== =======
Table 3 - Analysis of Loan Loss Reserve
(In Thousands) 9-30-01 9-30-00
------ ------
Balance, beginning of period $739 $618
---- ----
Charge-offs:
Commercial, financial, and agricultural 10 17
Real estate - construction -0- -0-
Real estate - mortgages -0- -0-
Installment - customers 143 94
Other -0- -0-
Recoveries:
Commercial, financial, and agricultural -0- 13
Real estate - construction -0- -0-
Real estate - mortgages -0- -0-
Installment - consumers 40 30
Other -0- -0-
---- ----
Net charge-offs 113 68
Additions to loan loss reserve 163 185
---- ----
Balance, end of period $789 $735
==== ====
Ratio of net charge-offs to average loans outstanding .14% .09%
DEPOSITS
Deposits increased by $11.2 million to $126.3 million as of September 30, 2001
from $115.1 million as of December 31, 2000, an increase of 9.73%. Demand
deposits, which include regular, money market, NOW and demand deposits, were
$51.9 million, or 41.1% of total deposits, at September 30, 2001. Core deposits
were 24.5% of total deposits at September 30, 2001. During the nine month
period, the Bank had increases in the balances in the demand deposit category of
$4.2 million to $51.9 million as of September 30, 2001.
Page 10
Term deposit accounts were $74.4 million at September 30, 2001, an increase of
$7.0 million compared to $67.4 million as of December 31, 2000. Table 4
summarizes the Bank's deposits by major category as of September 30, 2001 and
December 31, 2000.
Table 4 - Deposits by Category
(In Thousands)
-----------------
September 30, December 31,
2001 2000
------ ------
Demand Deposits:
Noninterest-bearing accounts $ 20,996 $ 18,541
NOW and MMDA accounts 24,492 23,768
Savings accounts 6,426 5,374
------ ------
Total Demand Deposits 51,914 47,683
------- -------
Term Deposits:
Less than $100,000 55,029 49,809
$100,000 or more 19,337 17,567
------- -------
Total Deposits 74,366 67,376
------ ------
$126,280 $115,059
======== ========
CAPITAL
During the nine month period ended September 30, 2001, stockholders' equity
increased by $1,168,000 to $11.7 million, due to net income for the period of
$754,000, the increase in value of securities available for sale of $475,000,
purchases of treasury stock for $191,000, offset by sales of treasury stock for
$130,000.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's primary sources of liquidity are deposit balances, available-for-sale
securities, principal and interest payments on loans and investment securities
and FHLB advances.
As of September 30, 2001, the Bank held $30.1 million in available-for-sale
securities and during the first nine months of 2001 the Bank received $19.9
million in proceeds from maturities, redemptions and principal payments on its
investment portfolio. Deposits increased by $11.2 million during the same nine
month period.
The Bank is a member of the Federal Home Loan Bank of Cincinnati (FHLB) and is
eligible to obtain both short and long term credit advances. Borrowing capacity
is limited to the Bank's available qualified collateral which consists primarily
of certain 1-4 family residential mortgages and certain investment securities.
The Bank had no advances outstanding from the FHLB at September 30, 2001.
The Bank can also enter into repurchase agreement transactions should the need
for additional liquidity arise. At September 30, 2001, the Bank had $873,000 of
repurchase agreements outstanding.
As of September 30, 2001, the Bank had capital of $11.7 million, or 8.4% of
total assets, as compared to $10.5 million, or 8.3%, at December 31, 2000.
Tennessee chartered banks that are insured by the FDIC are subject to minimum
capital requirements. Regulatory guidelines define the minimum amount of
qualifying capital an institution must maintain as a percentage of risk-weighted
assets and total assets.
Page 11
Table 5 - Regulatory Capital
(Dollars in Thousands)
--------------------------------------------
Minimum
September 30, December 31, Regulatory
2001 2000 Ratios
------ ------ --------
Tier 1 Capital as a Percentage
of Risk-Weighted Assets 12.1% 12.5% 4.00%
Total Capital as a Percentage
of Risk-Weighted Assets 13.0% 13.3% 8.00%
Leverage Ratio 8.5% 8.8% Up to 5.00%
Total Risk-Weighted Assets $94,092 $85,943
As of September 30, 2001 and December 31, 2000, the Bank exceeded all of the
minimum regulatory capital ratio requirements.
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30,
2001 AND 2000
GENERAL
The Bank reported net income of $754,000, or $1.35 per share for the nine month
period ended September 30, 2001 as compared with $1,038,000 or $1.87 per share
for the same period in 2000, a decrease of 27.4%. The decrease was due to the
sale of a branch in the prior year.
NET INTEREST INCOME
Net interest income increased by $100,000 to $3.6 million for the nine month
period in 2001 from the comparable period in 2000. Contributing to this increase
was an increase in average interest earning assets. Average interest earning
assets at a yield of 7.99% totaled $122.8 million as of September 30, 2001. In
comparison in 2000, average interest earning assets, at a yield of 8.45%,
totaled $107.7 million.
Interest income increased by $510,000 for the nine month period in 2001 compared
to the same period in 2000. This improvement is primarily attributable to an
increase of approximately $15.1 million, or 14.0%, in the volume of average
earning assets during the nine month period ended September 30, 2001 compared to
the nine month period ended September 30, 2000. Interest income on loans
increased by $442,000 over the same two periods primarily as a result of an
increase of approximately $7.8 million in average loans outstanding. Over the
same two periods, interest on investments decreased by $214,000 due to an
decrease of approximately $1.8 million or 5.7% in the average balance of
investments during the nine month period. Interest income on Federal Funds Sold
increased by $282,000 due to an increase in the average balance outstanding of
$9.2 million over the same period in 2000.
Total interest expense increased $410,000 for the nine month period ended
September 30, 2001 compared to the same period in 2000. Interest on deposits
increased as a result of an increase of approximately $10.9 million in average
deposits over the same period in 2000. The average rate on interest-bearing
liabilities increased to 4.96% for the nine month period in 2000 from 4.88% in
the comparable period of 2000.
Page 12
Table 6 - Average Balances, Interest and Average Rates
September 30
------------------------------------------------------------------------
2001 (in thousands) 2000
------------------------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
Assets:
Federal Funds Sold $ 10,014 $ 320 4.27% $ 846 $ 38 5.99%
Investments:
Securities--Taxable 27,588 1,366 6.62% 29,887 1,598 7.13%
Securities--Non-Taxable 2,863 81 3.78% 2,400 63 3.50%
Total Loans, Including
Amortized Fees 82,301 5,567 9.04% 74,535 5,125 9.17%
-------- ------ ----- -------- ------ -----
Total Interest Earning
Assets 122,766 7,334 7.99% 107,668 6,824 8.45%
--------- ---------
Cash and Due From Banks 4,364 4,001
All Other Assets 5,645 6,120
Loan Loss Reserve/
Unearned Fees (1,010) (1,306)
-------- --------
TOTAL ASSETS $131,765 $116,483
========= =========
Liabilities and Stockholders Equity:
Interest Bearing Deposits:
Time Deposits $ 70,351 $3,111 5.91% $ 58,313 $2,496 5.71%
Other 29,886 609 2.72% 31,056 768 3.30%
Repurchase Agreements 541 17 4.20% 849 27 4.24%
Federal Funds
Purchased 0 0 N/A 648 36 7.41%
----- ---- ---- ----- ----- -----
Total Interest-Bearing
Liabilities 100,778 3,737 4.96% 90,866 3,327 4.88%
--------- ------ ----- -------- ------ -----
Net Interest Income $3,597 $3,497
====== ======
Non-Interest Bearing
Deposits 19,154 16,599
Total Cost of Funds 4.17% 4.13%
All Other Liabilities 669 28
Stockholders Equity 11,109 9,982
Unrealized Gain/Loss on
Securities 55 (992)
-------- ------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $131,765 $116,483
========= =========
Net Interest Yield 3.03% 3.57%
Net Interest Margin 3.92% 4.33%
Table 7 - Interest Rate Sensitivity
(In Thousands) September 30, 2001
-------------------------------------------------------------
Less One Year Greater Non-
Than Through Than Interest
1 Year 5 Years 5 Years Bearing Total
-------- -------- ------- --------- -------
Assets:
Federal Funds Sold $ 15,464 $ 15,464
Investments 1,666 7,359 21,097 30,122
Loans 42,725 42,378 549 85,652
Non-Interest Earning Assets
and Unearned Assets/Loan
Loss Reserve 8,476 8,476
- - - -------- -------
59,855 49,737 21,646 8,476 139,714
-------- -------- ------- -------- --------
Liabilities and Stockholders' Equity:
Interest-Bearing Deposits 76,310 28,974 105,284
Non-Interest Bearing Deposits 20,996 20,996
Repurchase Agreements 873 873
Noninterest Bearing Liabilities
and Stockholders' Equity 12,561 12,561
- - - -------- -------
Total 77,183 28,974 -0- 33,557 139,714
-------- -------- ---- -------- --------
Interest Rate Sensitivity Gap (17,328) 20,763 21,646 (25,081) -0-
--------- -------- ------- --------- ----
Cumulative Interest Rate
Sensitivity Gap $(17,328) $ 3,435 $25,081 $ -0- $ -0-
========= ======= ======= ====== =====
Page 13
NONINTEREST INCOME
Total noninterest income was $1,166,000 for the nine month period ended
September 30, 2001 as compared to $1,297,000 for the same period in 2000, a
decrease of $131,000. Noninterest income is comprised primarily of customer
service fees, loan fees, and other items. The decrease in noninterest income was
primarily due to the sale of a branch office in the second quarter of 2000 for a
gain of $435,000 offset by an increase in deposit fees of $285,000 during the
nine months ended September 30, 2001. Deposit fees were restructured, and a new
overdraft protection checking account was introduced.
NONINTEREST EXPENSE
Total noninterest expense was $3,390,000, or 2.57% of average total assets, for
the nine month period ended September 30, 2001 as compared to $2,915,000, or
2.50%, for the same period in 2000. Salaries and employee benefits, equipment,
data processing, and supplies expenses all increased when comparing the two
periods. The increase in the percentage of operating expenses resulted from the
opening of a new full service branch in Alcoa, Tennessee in August 2000.
INCOME TAXES
The Bank recognizes income taxes using the Financial Accounting Standards Board
Statement No. 109, Accounting for Income Taxes. Under this method, deferred tax
assets and liabilities are established for the temporary differences between the
accounting basis and the tax basis of the Bank's assets and liabilities at
enacted tax rates expected to be in effect when the amounts related to such
temporary differences are realized or settled. The Bank's deferred tax asset is
reviewed quarterly and adjustments to such asset are recognized as deferred
income tax expense or benefit based on management's judgment relating to the
realizability of such asset.
During the nine month period ending September 30, 2001, the Bank recorded
$456,000 in tax expense which resulted in an approximate effective rate of
37.7%. Comparably, in 2000, the Bank recorded $656,000 in tax expense, resulting
in an approximate effective rate of 38.7%.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults 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
None.
Page 14
FORM 1O-QSB
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRST CENTRAL BANCSHARES, INC.
Date: November 13, 2001 By: /s/ Ed F. Bell
---------------------------
Ed F. Bell, Chairman
and Chief Executive Officer
Date: November 13, 2001 By: /s/ Joseph Hamdi
---------------------------
Joseph Hamdi, President
Date: November 13,2001 By: /s/ Ralph Micalizzi
---------------------------
Ralph Micalizzi, Vice
President, Cashier and
Controller, First Central
Bank
Page 15