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 June 30, 2002
[ ] 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: 000-23924
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 [ ]
The number of outstanding shares of the registrant's Common Stock, par
value $5.00 per share, was 547,228 on July 31, 2002.
FORM 10-QSB
Index
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2002
(Unaudited) and December 31, 2001 ............................ 3
Consolidated Statements of Income for the three
months and six months ended June 30, 2002
and 2001(Unaudited)............................................4
Consolidated Statements of Cash Flows for the
six months ended June 30, 2002 and 2001(Unaudited).............5
Consolidated Statements of Comprehensive Income
for the three months and six months ended June 30,
2002 and 2001(Unaudited).......................................6
Notes to Consolidated Financial Statements
for the six month periods ended June 30, 2002
and 2001(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......................................14-15
Item 5. Other Information.............................................15
Item 6. Exhibits and Reports on Form 8-K..............................15
Signatures....................................................................16
2
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
June 30, December 31,
2002 2001
------------ ------------
- -ASSETS-
Cash and Due from Banks $ 5,196 $ 5,698
Federal Funds Sold 10,332 11,758
--------- ---------
Total Cash and Cash Equivalents 15,528 17,456
Investment Securities Available for Sale 35,117 31,559
Loans, Net 90,426 89,509
Premises and Equipment, Net 4,432 4,484
Accrued Interest Receivable 737 714
Other Assets 314 306
--------- ---------
TOTAL ASSETS $146,554 $144,028
========= =========
- -LIABILITIES AND SHAREHOLDERS' EQUITY-
Liabilities:
Deposits
Noninterest-Bearing $ 27,154 $ 22,184
Interest-Bearing 106,119 108,846
--------- ---------
Total Deposits 133,273 131,030
Securities Sold Under Agreement to Repurchase 391 820
Accrued Interest Payable 356 467
Other Liabilities 238 230
--------- ---------
Total Liabilities 134,258 132,547
--------- ---------
Shareholders' Equity:
Common Stock - Par Value $5.00, Authorized
2,000,000 Shares; Issued 564,361 Shares 2,822 2,822
Additional Paid-in Capital 5,430 5,430
Treasury Stock, at Cost; 17,133 Shares
(17,333 Shares at December 31, 2001) (426) (431)
Retained Earnings 4,101 3,641
Accumulated Other Comprehensive Income 369 19
--------- ---------
Total Shareholders' Equity 12,296 11,481
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $146,554 $144,028
========= =========
See accompanying notes to financial statements.
3
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
(In Thousands Except
per share Information)
-------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ---------------------------
2002 2001 2002 2001
------ ------ ------ ------
INTEREST INCOME
Loans $1,635 $1,885 $3,251 $3,715
Investment Securities 491 488 952 1,018
Federal Funds Sold 28 104 75 213
------ ------ ------ ------
Total Interest Income 2,154 2,477 4,278 4,946
------ ------ ------ ------
INTEREST EXPENSE
Deposits 863 1,239 1,797 2,506
Securities Sold Under
Agreement to Repurchase 2 4 8 13
------ ------ ------ ------
Total Interest Expense 865 1,243 1,805 2,519
------ ------ ------ ------
Net Interest Income 1,289 1,234 2,473 2,427
PROVISION FOR LOAN LOSSES 130 66 185 117
------ ------ ------ ------
Net Interest Income After
Provision for Loan Losses 1,159 1,168 2,288 2,310
------ ------ ------ ------
NONINTEREST INCOME
Service Charges on
Demand Deposits 256 275 484 513
Loan Fees and Other
Service Charges 91 64 185 121
Net Gain on Sales of Loans 71 80 166 126
Gain on Sales of Securities 21 0 21 0
Other 8 2 20 17
------ ------ ------ ------
Total Noninterest Income 447 421 876 777
------ ------ ------ ------
NONINTEREST EXPENSE
Salaries and Employee
Benefits 732 637 1,382 1,230
Occupancy 115 105 231 213
Data Processing Fees 127 149 252 259
Furniture and Equipment 78 84 155 175
Federal Insurance Premiums 14 12 29 24
Advertising and Promotion 32 26 63 43
Office Supplies and Postage 62 66 136 131
Other 83 86 192 170
------ ------ ------ ------
Total Noninterest Expense 1,243 1,165 2,440 2,245
------ ------ ------ ------
INCOME BEFORE INCOME TAX 363 424 724 842
INCOME TAXES 140 161 264 322
------ ------ ------ ------
NET INCOME $ 223 $ 263 $ 460 $ 520
====== ====== ====== ======
BASIC EARNINGS PER COMMON
SHARE $ 0.41 $ 0.46 $ 0.84 $ 0.92
====== ====== ====== ======
See accompanying notes to financial statements.
4
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
------------------------
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES -------- ------
Net Income $ 460 $ 520
-------- ------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 185 117
Depreciation 126 145
(Gain) on Sales of Investment Securities (21) -0-
Loss on Sale of Fixed Assets -0- 14
Net (Gain) on Sales of Loans (166) (126)
Decrease (Increase) in Interest Receivable (23) 135
(Decrease) in Interest Payable (111) (19)
Amortization of Premiums (Discounts) on
Investment Securities, Net 71 (25)
FHLB Stock Dividends (9) (14)
(Increase) in Other Assets (8) (48)
(Decrease) in Other Liabilities (206) (26)
--------- --------
Total Adjustments (162) 153
--------- --------
Net Cash Provided by Operating Activities 298 673
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Maturities, Principal Paydowns and
Redemption of Investment Securities Available
for Sale 8,834 12,541
Proceeds From Sales of Investment Securities
Available for Sale 2,771 -0-
Purchase of Investment Securities Available
for Sale (14,640) (6,941)
Net (Increase) in Loans (22,398) (27,905)
Proceeds from Sales of Loans 21,462 20,172
Purchase of Premises and Equipment (74) (21)
Sales of Premises and Equipment -0- 19
--------- ---------
Net Cash Used in Investing Activities (4,045) (2,135)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Deposits 2,243 8,287
Decrease in Securities Sold Under
Agreement to Repurchase (429) (49)
Sale of Treasury Stock 5 130
--------- ---------
Net Cash Provided by Financing Activities 1,819 8,368
--------- ---------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,928) 6,906
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,456 10,769
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,528 $ 17,675
========= =========
Supplementary Disclosures of Cash Flow Information:
Cash Paid During the Period For:
Interest $ 1,916 $ 2,538
Income Taxes $ 378 $ 360
Supplementary Disclosures of Noncash Investing Activities:
Change in Unrealized Gain(Loss) on Investment Securities $ 564 $ 513
Change in Deferred Income Tax Benefit Associated with
Unrealized Gain(Loss) on Investment Securities $ 214 $ 195
Change in Net Unrealized Gain(Loss) on
Investment Securities $ 350 $ 318
See accompanying notes to financial statements.
5
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2002 2001 2002 2001
------ ------ ------ ------
Net Income $ 223 $263 $ 460 $ 520
------ ------ ------ ------
Other Comprehensive Income
(Loss), Net of Tax:
Unrealized Gains/Losses on
Investment Securities 815 (2) 585 513
Reclassification Adjustment
for Gains Included in
Net Income (21) -0- (21) -0-
Income Taxes Related to
Unrealized Gains/Losses
on Investment Securities (302) 1 (214) (195)
------ ------ ------ ------
Other Comprehensive Income
(Loss), Net of Tax 492 (1) 350 318
------ ------ ------ ------
Comprehensive Income $ 715 $262 $ 810 $ 838
====== ====== ====== ======
See accompanying notes to financial statements.
6
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2002 and 2001
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 the Bank
represents virtually all of the assets of First Central Bancshares, Inc.
The consolidated financial statements include the accounts of First Central
Bancshares, Inc., its wholly owned subsidiary, First Central Bank, and the
Bank's subsidiary, FCB Financial Services, Inc. All significant intercompany
transactions and balances have been eliminated.
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 accounting principles generally
accepted in the United States of America 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 June 30, 2002, results of operations and comprehensive income for
the three months and six months ended June 30, 2002 and 2001, and cash flows for
the six months ended June 30, 2002 and 2001.
The results of operations for the three months and six months ended June 30,
2002 are not necessarily indicative of the results to be expected for the full
year.
NOTE 3 - STOCK OPTION PLAN
On April 20, 2000, the shareholders 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 June 30, 2002,
the plan has not been implemented and no options have been awarded.
NOTE 4 - EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of shares
outstanding during the period. For the six months ended June 30, 2002 and 2001
the weighted average number of shares outstanding was 547,167 and 564,361,
respectively. For the three months ended June 30, 2002 and 2001, the weighted
average number of shares outstanding was 547,228 and 564,361, respectively.
During the periods ended June 30, 2002 and 2001 the Company did not have any
dilutive securities.
NOTE 5 - RECENT REGULATORY AND ACCOUNTING PRONOUNCEMENTS
The Bank is state chartered and federally insured, and is subject to the rules
and regulations of the Tennessee Department of Financial Institutions (TDFI) and
the Federal Deposit Insurance Corporation (FDIC). The holding company is also
subject to the rules and regulations of the Federal Reserve Bank (FRB) and the
Securities and Exchange Commission (SEC).
7
NOTE 5 - RECENT REGULATORY AND ACCOUNTING PRONOUNCEMENTS, continued
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) 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. Since the Company has not purchased any other banks or entities, this
statement is not expected to have any impact on the Company's consolidated
financial statements. 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 142 is effective January 1, 2002. Since the
Company does not have any goodwill or other intangible assets, this statement is
not expected to have any impact on its consolidated financial position or
results of operations.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard, No. 143, Accounting for Asset Retirement
Obligations. SFAS 143 applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and/or the normal operation of a long-lived asset except for certain
obligations of lessees. SFAS No. 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002. Since the Company does
not have any legal obligations as described above, this statement is not
expected to have any impact on the Company's consolidated financial position or
results of operations.
In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Standard No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This statement supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, and
the accounting and reporting provisions of APB Opinion No. 30, Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business (as previously defined
in that Opinion). SFAS No. 144 is effective for financial statements issued for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years. This statement is not expected to have a significant impact on the
Company's consolidated financial position or results of operations.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
BALANCE SHEET ANALYSIS - COMPARISON AT JUNE 30, 2002 TO DECEMBER 31, 2001
Assets totaled $146.6 million as of June 30, 2002, as compared to $144.0 million
as of December 31, 2001, an increase of 1.80%.
INVESTMENT SECURITIES
Investment securities were $35.1 million or 23.9% of total assets, as of June
30, 2002, which is an increase of $3.5 million from $31.6 million as of December
31, 2001. During the six month period ended June 30, 2002, there were $8.8
million in calls, maturities, and principal paydowns and $2.8 million in sales
of investment securities offset primarily by the purchase of $14.6 million in
investment securities and an increase in the market value of the investment
portfolio of $564,000.
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 50.61% of the portfolio as of June 30, 2002 and
57.13% as of December 31, 2001.
As of June 30, 2002 and December 31, 2001, 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, net of any deferred tax effect.
The net unrealized gain on securities available for sale, net of tax was
approximately $369,000 as of June 30, 2002, a change of approximately $350,000
from December 31, 2001, a result of a recovery 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 six months of 2001, total gross loans outstanding increased by
approximately $0.8 million to $91.4 million as of June 30, 2002 from $90.6
million as of December 31, 2001. The Bank originated and sold approximately
$21.3 million of loans during the first six months of the year. As of June 30,
2002 and December 31, 2001, net loans outstanding represented 61.7% and 62.1% of
total assets, respectively. Table 1 summarizes the Bank's loan portfolio by
major category as of June 30, 2002 and December 31, 2001.
Table 1 - Loan Portfolio by Category
(In Thousands)
-----------------------------
June 30, December 31,
2002 2001
-------- --------
Loans secured by real estate:
Commercial properties $35,658 $30,472
Construction and land development 12,888 14,341
Residential and other properties 23,130 26,058
-------- --------
Total loans secured by real estate 71,676 70,871
Commercial and industrial loans 11,200 10,092
Consumer loans 8,303 9,311
Other loans 175 347
-------- --------
91,354 90,621
Less: Allowance for loan losses (865) (967)
Unearned interest (54) (101)
Unearned loan fees (9) (44)
-------- --------
Loans, Net $90,426 $89,509
======== ========
9
Table 1 - Loan Portfolio by Category, continued
As of June 30, 2002, there were outstanding commitments to advance construction
funds and to originate loans in the amount of $6.3 million and commitments to
advance existing home equity, letters of credit and other credit lines in the
amount of $18.5 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
June 30, 2002 and December 31, 2001, the allowance had a balance of
approximately $865,000 and $967,000, respectively. There were approximately
$381,000 and $305,000 of loans on which the accrual of interest had been
discontinued as of June 30, 2002 and December 31, 2001, respectively. There were
approximately $1,983,000 in loans specifically classified as impaired as of June
30, 2002 as defined by SFAS No. 114 compared to $1,472,000 as of December 31,
2001. 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
six month period.
Table 2 - Allocation of the Loan Loss Reserve (in Thousands)
June 30, December 31,
2002 % to % of 2001 % to % of
Balance applicable to: $ Amount Total Portfolio $ Amount Total Portfolio
-------- ------- --------- ---------- ------- ---------
Commercial properties $235 27.17% 39.03% $221 22.85% 33.63%
Construction and land
development 102 11.79 14.11 104 10.75 15.83
Residential and other
properties 141 16.30 25.32 150 15.51 28.75
Commercial and industrial
loans 120 13.87 12.26 189 19.54 11.14
Consumer loans 226 26.13 9.09 269 27.82 10.27
Other loans 41 4.74 .19 34 3.53 .38
---- ------- ------- ---- ------ --------
Total $865 100.00% 100.00% $967 100.00% 100.00%
==== ======= ======= ==== ======= ========
Table 3 - Analysis of Loan Loss Reserve (in Thousands)
June 30, June 30,
2002 2001
------- -------
Balance, beginning of period $967 $739
------- -------
Charge-offs:
Commercial, financial,
and agricultural 82 10
Real estate, construction -0- -0-
Real estate, mortgages 19 -0-
Installment, customers 217 91
Other -0- -0-
Recoveries:
Commercial, financial,
and agricultural -0- -0-
Real estate, construction -0- -0-
Real estate, mortgages -0- -0-
Installment, consumers 31 27
Other -0- -0-
------- -------
Net charge-offs 287 74
Additions to loan loss reserve 185 117
---- -------
Balance, end of period $865 $782
======= =======
Ratio of net charge-offs to average loans outstanding .33% .09%
DEPOSITS
Deposits increased by $2.3 million to $133.3 million as of June 30, 2002 from
$131.0 million as of December 31, 2001, an increase of 1.76%. Demand deposits,
10
which include regular, money market, NOW and demand deposits, were $67.9
million, or 50.9% of total deposits, at June 30, 2002. Core deposits were 30.6%
of total deposits at June 30, 2002. During the six month period, the Bank had
increases in the balances in the demand deposit category of $7.6 million to
$67.9 million as of June 30, 2002. Term deposit accounts were $65.4 million at
June 30, 2002, a decrease of $5.3 million compared to $70.7 million as of
December 31, 2001. Table 4 summarizes the Bank's deposits by major category as
of June 30, 2002 and December 31, 2001.
Table 4 - Deposits by Category
(In Thousands)
------------------------------
June 30, December 31,
2002 2001
Demand Deposits:
Noninterest-bearing accounts $ 27,154 $ 22,184
NOW and MMDA accounts 33,234 31,715
Savings accounts 7,484 6,417
-------- ------
Total Demand Deposits 67,872 60,316
-------- --------
Term Deposits:
Less than $100,000 46,931 51,722
$100,000 or more 18,470 18,992
-------- --------
Total Deposits 65,401 70,714
-------- --------
$133,273 $131,030
======== ========
CAPITAL
During the six month period ended June 30, 2002, shareholders' equity increased
by $815,000 to $12.3 million, due to net income for the period of $460,000, the
net increase in value of securities available for sale of $350,000, and the sale
of $5,000 in treasury stock.
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 June 30, 2002, the Bank held $35.1 million in available-for-sale
securities and during the first six months of 2002 the Bank received $11.6
million in proceeds from sales, maturities, and principal payments on its
investment portfolio. Deposits increased by $2.3 million during the same six
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 June 30, 2002.
The Bank can also enter into repurchase agreement transactions should the need
for additional liquidity arise. At June 30, 2002, the Bank had $391,000 of
repurchase agreements outstanding.
As of June 30, 2002, the Bank had capital of $12.3 million, or 8.4% of total
assets, as compared to $11.5 million, or 8.0%, at December 31, 2001. 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.
11
Table 5 - Regulatory Capital
(Dollars in Thousands)
-----------------------------------------------
Minimum
June 30, December 31, Regulatory
2002 2001 Ratios
-------- -------- ----------
Tier 1 Capital as a Percentage
of Risk-Weighted Assets 11.7% 11.7% 4.00%
Total Capital as a Percentage
of Risk-Weighted Assets 12.6% 12.7% 8.00%
Leverage Ratio 8.4% 8.1% Up to 5.00%
Total Risk-Weighted Assets $101,514 $97,627
As of June 30, 2002 and December 31, 2001, the Bank exceeded all of the minimum
regulatory capital ratio requirements.
RESULTS OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
GENERAL
The Bank reported net income of $460,000, or $0.84 per share for the six month
period ended June 30, 2002 as compared with $520,000 or $0.92 per share for the
same period in 2001, a decrease of 11.5%.
NET INTEREST INCOME
Net interest income increased $46,000 to $2.5 million for the six month period
in 2002 from the comparable period in 2001. Contributing to this increase was an
increase in average interest earning assets. Average interest earning assets at
a yield of 6.49% totaled $132.9 million as of June 30, 2002. In comparison to
2001, average interest earning assets, at a yield of 8.24%, totaled $121.0
million.
Total interest income decreased $668,000 for the six month period ended June 30,
2002 compared to the same period in 2001, while the average balance in interest
earning assets increased approximately $11.9 million, or 9.8%, compared to the
six month period ended June 30, 2001. Interest income on loans decreased
$464,000 over the same two periods due to a lower interest rate environment,
while average loans outstanding increased approximately $7.2 million. The
average yield on loans decreased from 9.26% for the six month period ended June
30, 2001 to 7.44% for the six month period ended June 30, 2002. Over the same
two periods, interest on investments decreased $66,000 due to a decrease in the
yield on investments. The yield on taxable investments decreased from 6.82% to
5.50% and the yield for nontaxable investments decreased from 3.85% to 3.63% for
the six month period ended June 30, 2002 compared to the same period in 2001.
The average balance of investments increased approximately $4.5 million or 14.2%
for the six month period ended June 30, 2002, compared to the same period in
2001. Interest income on Federal Funds Sold decreased by $138,000 due to a
decrease in the yield on Federal Funds Sold from 4.95% during the six months
ended June 30, 2001 to 1.68% for the same quarter in 2002, offset by an increase
in average balance outstanding of $307,000 over the same period in 2001.
Total interest expense decreased $714,000 for the six month period ended June
30, 2002 compared to the same period in 2001. Interest on deposits decreased as
a result of a decrease in the yield on deposits over the same period in 2001.
The average rate on interest-bearing liabilities decreased to 3.41% for the six
month period in 2002 from 5.08% in the comparable period of 2001, while the
average balance on interest-bearing liabilities increased by approximately $6.8
million from $100.0 million to $106.8 million.
12
Table 6 - Average Balances, Interest and Average Rates
June 30
------------------------------------------------------------------------
2002 (in thousands) 2001
------------------------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- -------
Assets:
Federal Funds Sold $ 8,989 $ 75 1.68% $ 8,682 $ 213 4.95%
Investments:
Taxable Securities 33,088 903 5.50% 28,426 962 6.82%
Tax-Free Securities 2,725 49 3.63% 2,932 56 3.85%
Total Loans, Including
Amortized Fees 88,143 3,251 7.44% 80,938 3,715 9.26%
-------- ------ ------- --------- ------- -------
Total Interest Earning
Assets 132,945 4,278 6.49% 120,978 4,946 8.24%
-------- ---------
Cash and Due From Banks 4,351 4,426
All Other Assets 5,429 5,677
Loan Loss Reserve/
Unearned Fees (1,033) (1,030)
-------- ---------
TOTAL ASSETS $141,692 $130,051
======== =========
Liabilities and Shareholders' Equity:
Interest-Bearing Deposits:
Term Deposits $ 68,635 1,520 4.47% $ 69,275 2,081 6.06%
Other Deposits 37,312 277 1.50% 30,088 425 2.85%
Repurchase Agreements 839 8 1.92% 587 13 4.47%
-------- ------ ------ --------- ------- -------
Total Interest-Bearing
Liabilities 106,786 1,805 3.41% 99,950 2,519 5.08%
-------- ------ ------ --------- ------- -------
Net Interest Income $2,473 $ 2,427
====== =======
Noninterest-Bearing
Deposits 22,605 18,499
Total Cost of Funds 2.81% 4.29%
All Other Liabilities 518 888
Shareholders' Equity 11,694 10,712
Unrealized Gain/Loss on
Securities 89 2
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $141,692 $130,051
========= =========
Net Interest Yield 3.08% 3.16%
Net Interest Margin 3.75% 4.05%
Table 7 - Interest Rate Sensitivity
(In Thousands) June 30, 2002
------------------------------------------------------------
Less One Year Greater Non-
Than Through Than Interest
1 Year 5 Years 5 Years Bearing Total
-------- -------- ------- --------- -------
Assets:
Federal Funds Sold $ 10,332 $ 10,332
Investments 10,285 $ 8,813 $16,019 35,117
Loans 65,616 24,336 474 90,426
Noninterest-Earning Assets $10,679 10,679
-------- -------- ------- ------- --------
86,233 33,149 16,493 10,679 146,554
-------- -------- ------- ------- --------
Liabilities and Shareholders'
Equity:
Interest-Bearing Deposits 84,525 21,594 106,119
Noninterest-Bearing Deposits 27,154 27,154
Repurchase Agreements 391 391
Noninterest-Bearing Liabilities
and Shareholders' Equity 12,890 12,890
-------- -------- ------- -------- --------
Total 84,916 21,594 -0- 40,044 146,554
-------- -------- ------- -------- --------
Interest Rate Sensitivity Gap 1,317 11,555 16,493 (29,365) -0-
--------- -------- ------- -------- --------
Cumulative Interest Rate
Sensitivity Gap $ 1,317 $12,872 $29,365 $ -0- $ -0-
========= ======== ======= ======== ========
13
NONINTEREST INCOME
Total noninterest income was $876,000 for the six month period ended June 30,
2002 as compared to $777,000 for the same period in 2001, an increase of
$99,000. Noninterest income is comprised primarily of customer service fees,
loan fees, gain on sales of loans, and other items. The increase in noninterest
income is due primarily to an increase in gains on the sales of loans of
$40,000, an increase in loan fees and other service charges of $64,000 and gains
on sales of investment securities of $21,000, offset by a decrease in service
charges on demand deposits of $29,000.
NONINTEREST EXPENSE
Total noninterest expense was $2.44 million, or 1.72% of average total assets,
for the six month period ended June 30, 2002 as compared to $2.25 million, or
1.73%, for the same period in 2001. Salaries and employee benefits, occupancy,
advertising and promotion, office supplies, postage, and other noninterest
expense are categories of expenses which increased when comparing the two
periods. The percentage of operating expenses remained level as average total
assets increased approximately $11.6 million for the year ended June 30, 2002.
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 six month period ending June 30, 2002, the Bank recorded $264,000 in
tax expense which resulted in an approximate effective rate of 36.5%.
Comparably, in 2001, the Bank recorded $322,000 in tax expense, resulting in an
approximate effective rate of 38.2%.
FIRST CENTRAL BANCSHARES, INC. AND SUBSIDIARY
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
On April 18, 2002, First Central Bancshares, Inc. held its
2002 Annual Meeting of Shareholders. The following is a
brief description of each matter voted upon and the results of the
voting.
14
1. Election of Directors
Nominee For Withheld
------------- ------- -------
Barry H. Gordon 331,668 11,023
Robert D. Grimes 342,691 -0-
Joseph Hamdi 342,691 -0-
Benny L. Shubert 342,691 -0-
Ted L. Wampler, Jr. 331,668 11,023
There were no abstentions or broker non-votes.
The terms of the Office of Directors Ed F. Bell, Gary
Kimsey, G. Bruce Martin, Peter G. Stimpson and James W.
Wilburn III continued after the meeting.
2. The shareholders also approved the appointment of Pugh &
Company, P.C. as independent auditors for 2002. 331,522
shares were voted in favor of the appointment and 11,169
shares were voted against the appointment.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed
by Ed F. Bell, Chairman and Chief Executive Officer of First
Central Bancshares, Inc. on August 12, 2002.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed
by Joseph Hamdi, the President of First Central Bancshares, Inc.
on August 12, 2002.
99.3 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,signed
by Ralph Micalizzi, Vice President, Cashier and Controller of
First Central Bancshares, Inc. on August 12, 2002.
(b) Reports on Form 8-K
None.
15
FORM 10-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: August 12, 2002 By:/s/ Ed F. Bell
--------------------------
Ed F. Bell, Chairman and
Chief Executive Officer
Date: August 12, 2002 By:/s/ Joseph Hamdi
--------------------------
Joseph Hamdi, President
and Chief Executive Officer
Date: August 12, 2002 By:/s/ Ralph Micalizzi
-------------------------
Ralph Micalizzi,Vice President,
Cashier and Controller,
First Central Bank
16
EXHIBIT 99.1
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, and in connection with the quarterly report
on Form 10-Q of First Central Bancshares, Inc. (the "Company") for the quarter
ended June 30, 2002, as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), the undersigned, Ed F. Bell, the Chairman and Chief
Executive Officer of the Company, hereby certifies that (1) the Report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, and (2) the information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
This Certification is signed on August 12, 2002.
/s/ Ed F. Bell
-----------------------------------
Ed F. Bell
Chairman and
Chief Executive Officer
EXHIBIT 99.2
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, and in connection with the quarterly report
on Form 10-Q of First Central Bancshares, Inc. (the "Company") for the quarter
ended June 30, 2002, as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), the undersigned, Joseph Hamdi, the President of the
Company, hereby certifies that (1) the Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
and (2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
This Certification is signed on August 12, 2002.
/s/ Joseph Hamdi
-----------------------------------
Joseph Hamdi
President
EXHIBIT 99.3
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, and in connection with the quarterly report
on Form 10-Q of First Central Bancshares, Inc. (the "Company") for the quarter
ended June 30, 2002, as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), the undersigned, Ralph Micalizzi, the Vice
President, Cashier and Controller of the Company, hereby certifies that (1) the
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, and (2) the information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
This Certification is signed on August 12, 2002.
/s/ Ralph Micalizzi
-----------------------------------
Ralph Micalizzi
Vice President, Cashier
and Controller