UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED: September 30, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
COMMISSION FILE NUMBER: 33-94288
THE FIRST BANCSHARES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
| MISSISSIPPI | 64-0862173 | |
| (STATE OF INCORPORATION) | (I.R.S. EMPLOYER IDENTIFICATION NO.) |
| 6480 U.S. HIGHWAY 98 WEST HATTIESBURG, MISSISSIPPI |
39404-5549 | |
| (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) | (ZIP CODE) |
(601) 268-8998
(ISSUER’S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
(FORMER NAME, ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE ISSUER: (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 ¨
ON SEPTEMBER 30, 2005, 1,187,350 SHARES OF THE ISSUER’S COMMON STOCK, PAR VALUE $1.00 PER SHARE, WERE OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): Yes ¨ No x
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT.): YES ¨ NO x
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FIRST BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
| ($ amounts in thousands)
|
(Unaudited) September 30, 2005 |
December 31, 2004 |
||||||
| ASSETS |
||||||||
| Cash and due from banks |
$ | 8,137 | $ | 5,577 | ||||
| Interest-bearing deposits with banks |
734 | 650 | ||||||
| Federal funds sold |
26,248 | 919 | ||||||
| TOTAL CASH AND CASH EQUIVALENTS |
35,119 | 7,146 | ||||||
| Securities held-to-maturity, at amortized cost |
14 | 14 | ||||||
| Securities available-for-sale, at fair value |
30,669 | 26,351 | ||||||
| Other Securities |
2,492 | 2,156 | ||||||
| Loans held for sale |
4,186 | 3,073 | ||||||
| Loans |
193,621 | 161,302 | ||||||
| Allowance for loan losses |
(2,281 | ) | (1,659 | ) | ||||
| LOANS, NET |
191,340 | 159,643 | ||||||
| Premises and equipment |
8,370 | 8,670 | ||||||
| Interest receivable |
1,551 | 1,088 | ||||||
| Cash surrender value |
5,006 | 3,320 | ||||||
| Other assets |
1,822 | 935 | ||||||
| $ | 280,569 | $ | 212,396 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Liabilities: |
||||||||
| Deposits: |
||||||||
| Noninterest-bearing |
$ | 44,656 | $ | 30,365 | ||||
| Time, $100,000 or more |
46,636 | 29,769 | ||||||
| Other interest-bearing |
124,849 | 96,696 | ||||||
| TOTAL DEPOSITS |
216,141 | 156,830 | ||||||
| Interest payable |
440 | 191 | ||||||
| Borrowed funds |
37,719 | 30,850 | ||||||
| Subordinated debentures |
7,217 | 7,217 | ||||||
| Other liabilities |
1,083 | 568 | ||||||
| TOTAL LIABILITIES |
262,600 | 195,656 | ||||||
| SHAREHOLDERS’ EQUITY: |
||||||||
| Common stock, $1 par value. Authorized 10,000,000 shares; 1,213,844 issued at September 30, 2005 and 1,194,940 issued at December 31, 2004. |
1,214 | 1,195 | ||||||
| Preferred stock, par value $1 per share, 10,000,000 shares authorized; no shares issued and outstanding |
— | — | ||||||
| Treasury stock, at cost, 26,494 shares at September 30, 2005 and December 31, 2004 |
(464 | ) | (464 | ) | ||||
| Additional paid-in capital |
13,221 | 12,986 | ||||||
| Retained earnings |
4,049 | 3,019 | ||||||
| Accumulated other comprehensive income |
(51 | ) | 4 | |||||
| TOTAL SHAREHOLDERS’ EQUITY |
17,969 | 16,740 | ||||||
| $ | 280,569 | $ | 212,396 | |||||
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
| ($ amounts in thousands except earnings per share)
|
(Unaudited) | (Unaudited) | ||||||||||
| Three Months September 30, |
Nine Months Ended September 30, | |||||||||||
| 2005 |
2004 |
2005 |
2004 | |||||||||
| INTEREST INCOME: |
||||||||||||
| Loans, including fees |
$ | 3,783 | $ | 2,601 | $ | 10,232 | $ | 7,279 | ||||
| Securities: |
||||||||||||
| Taxable |
211 | 127 | 632 | 445 | ||||||||
| Tax exempt |
46 | 39 | 134 | 100 | ||||||||
| Federal funds sold |
61 | 7 | 123 | 17 | ||||||||
| Other |
— | 35 | — | 63 | ||||||||
| TOTAL INTEREST INCOME |
4,101 | 2,809 | 11,121 | 7,904 | ||||||||
| INTEREST EXPENSE: |
||||||||||||
| Deposits |
1,122 | 490 | 2,750 | 1,417 | ||||||||
| Other borrowings |
371 | 302 | 1,090 | 837 | ||||||||
| TOTAL INTEREST EXPENSE |
1,493 | 792 | 3,840 | 2,254 | ||||||||
| NET INTEREST INCOME |
2,608 | 2,017 | 7,281 | 5,650 | ||||||||
| PROVISION FOR LOAN LOSSES |
313 | 213 | 750 | 501 | ||||||||
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |
2,295 | 1,804 | 6,531 | 5,149 | ||||||||
| NONINTEREST INCOME: |
||||||||||||
| Service charges on deposit accounts |
$ | 295 | $ | 378 | $ | 964 | $ | 1,103 | ||||
| Other service charges, commissions and fees |
73 | 53 | 296 | 236 | ||||||||
| Gain on sale of properties |
— | — | 152 | |||||||||
| TOTAL NONINTEREST INCOME |
368 | 431 | 1,260 | 1,491 | ||||||||
| NONINTEREST EXPENSES: |
||||||||||||
| Salaries and employee benefits |
1,221 | 1,040 | 3,519 | 2,970 | ||||||||
| Occupancy and equipment expense |
298 | 300 | 806 | 868 | ||||||||
| Other operating expenses |
536 | 455 | 1,567 | 1,408 | ||||||||
| TOTAL NONINTEREST EXPENSES |
2,055 | 1,795 | 5,892 | 5,246 | ||||||||
| INCOME BEFORE INCOME TAXES |
608 | 440 | 1,899 | 1,394 | ||||||||
| INCOME TAXES |
203 | 152 | 635 | 477 | ||||||||
| NET INCOME |
$ | 405 | $ | 288 | $ | 1,264 | $ | 917 | ||||
| EARNINGS PER SHARE - BASIC |
$ | .34 | $ | .25 | $ | 1.07 | $ | .79 | ||||
| EARNINGS PER SHARE - ASSUMING DILUTION |
$ | .33 | $ | .24 | $ | 1.02 | $ | .77 | ||||
| DIVIDENDS PER SHARE |
$ | — | $ | — | $ | .20 | $ | .15 | ||||
THE FIRST BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
| Common Stock |
Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income |
Treasury Stock |
Total |
||||||||||||||||
| Balance, January 1, 2004 |
1,192 | $ | 12,949 | $ | 1,950 | $ | 23 | $ | (464 | ) | $ | 15,650 | |||||||||
| Net earnings |
— | — | 917 | — | — | 917 | |||||||||||||||
| Net change in unrealized gain (loss) on available- for-sale securities, net of tax |
— | — | — | 26 | — | 26 | |||||||||||||||
| Cash dividend declared, $.15 per share |
— | — | (175 | ) | — | — | (175 | ) | |||||||||||||
| Balance, September 30, 2004 |
1,192 | $ | 12,949 | $ | 2,692 | $ | 49 | $ | (464 | ) | $ | 16,418 | |||||||||
| Balance, January 1, 2005 |
1,195 | $ | 12,986 | $ | 3,019 | $ | 4 | $ | (464 | ) | $ | 16,740 | |||||||||
| Net earnings |
— | — | 1,264 | — | — | 1,264 | |||||||||||||||
| Net change in unrealized gain (loss) on available-for-sale securities, net of tax |
— | — | — | (55 | ) | — | (55 | ) | |||||||||||||
| Exercise of stock Options |
19 | 235 | — | — | — | 254 | |||||||||||||||
| Cash dividend declared, $.20 per share |
— | — | (234 | ) | — | — | (234 | ) | |||||||||||||
| Balance, September 30, 2005 |
1,214 | $ | 13,221 | $ | 4,049 | (51 | ) | (464 | ) | $ | 17,969 | ||||||||||
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| (Unaudited) | ||||||||
| ($ Amounts in Thousands)
|
Nine Months Ended September 30, |
|||||||
| 2005 |
2004 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| NET INCOME |
$ | 1,264 | $ | 917 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
420 | 421 | ||||||
| Loss on disposal of assets |
61 | — | ||||||
| Provision for loan losses |
750 | 501 | ||||||
| Changes in: |
||||||||
| Interest receivable |
(463 | ) | (171 | ) | ||||
| Loans held-for-sale |
(1,113 | ) | (2,498 | ) | ||||
| Interest payable |
249 | 4 | ||||||
| Other, net |
(372 | ) | 465 | |||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
796 | (361 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Maturities and calls of securities available-for-sale |
7,230 | 13,471 | ||||||
| Maturities and calls of held-to-maturity securities |
— | — | ||||||
| Purchases of securities available-for-sale |
(11,939 | ) | (7,154 | ) | ||||
| Net increase in loans |
(32,447 | ) | (36,729 | ) | ||||
| Purchases of premises and equipment |
(181 | ) | (699 | ) | ||||
| Increase in cash surrender value |
(1,686 | ) | (114 | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES |
(39,023 | ) | (31,225 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Increase in deposits |
59,311 | 19,358 | ||||||
| Net increase (decrease) in borrowed funds |
6,869 | 13,889 | ||||||
| Issuance of common stock |
254 | — | ||||||
| Purchase of treasury stock |
— | — | ||||||
| Dividends paid on common stock |
(234 | ) | (175 | ) | ||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
66,200 | 33,072 | ||||||
| NET INCREASE (DECREASE) IN CASH |
27,973 | 1,486 | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
7,146 | 5,865 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 35,119 | $ | 7,351 | ||||
| CASH PAYMENTS FOR INTEREST |
$ | 3,591 | $ | 2,250 | ||||
| CASH PAYMENTS FOR INCOME TAXES |
882 | 329 | ||||||
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A — BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2005, are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-KSB for the year ended December 31, 2004.
NOTE B — SUMMARY OF ORGANIZATION
The First Bancshares, Inc., Hattiesburg, Mississippi (the “Company”), was incorporated June 23, 1995, under the laws of the State of Mississippi for the purpose of operating as a bank holding company with respect to a then proposed de novo bank, The First National Bank of South Mississippi, Hattiesburg, Mississippi (the “Hattiesburg Bank”). The Hattiesburg Bank opened for business on August 5, 1996, with a total capitalization of $5.2 million.
On August 10, 1998, the Company filed a registration statement on Form SB-2 relating to the issuance of up to 533,333 shares of Common Stock in connection with the formation of the First National Bank of the Pine Belt (Laurel Bank). The offering was closed on December 31, 1998, with 428,843 shares subscribed with an aggregate purchase price of $6.4 million. On January 19, 1999, the Laurel Bank received approval from its banking regulator to begin banking operations, and the Company used $5 million of the net proceeds to purchase 100% of the capital stock of the Laurel Bank. Simultaneously, the 428,843 shares subscribed to in the offering were issued.
In January, 2004, the two banks merged to become The First, a National Banking Association (“The First”). The banks were merged to take advantage of operating efficiencies and marketing opportunities. The First engages in general commercial banking business, emphasizing in its marketing the Bank’s local management and ownership. The First offers a full range of banking services designed to meet the basic financial needs of its customers. These services include checking accounts, NOW accounts, money market deposit accounts, savings accounts, certificates of deposit, and individual retirement accounts. The First also offers short to medium-term commercial, mortgage, and personal loans. At September 30, 2005, The First had locations in Hattiesburg, Purvis, Laurel, Picayune, and Pascagoula, Mississippi.
At September 30, 2005, the Company had approximately $280.6 million in consolidated assets, $197.8 million in consolidated loans, $216.1 million in consolidated deposits, and $18.0 million in consolidated shareholders’ equity. For the nine months ended September 30, 2005, the Company reported a consolidated net income of $1,264,000.
In the first quarter of 2004 and 2005, the Company declared and paid dividends of $.15 and $.20 per common share, respectively.
NOTE C — EARNINGS PER COMMON SHARE
Basic per share data is calculated based on the weighted-average number of common shares outstanding during the reporting period. Diluted per share data includes any dilution from potential common stock outstanding, such as exercise of stock options.
| For the Three Months Ended September 30, 2005 | ||||||||
| Net Income (Numerator) |
Shares (Denominator) |
Per Share Data | ||||||
| Basic per share |
$ | 405,000 | 1,186,287 | $ | .34 | |||
| Effect of dilutive shares: |
||||||||
| Stock options |
— | 61,050 | ||||||
| Diluted per share |
$ | 405,000 | 1,247,337 | $ | .33 | |||
| For the Nine Months Ended September 30, 2005 | ||||||||
| Net Income (Numerator) |
Shares (Denominator) |
Per Share Data | ||||||
| Basic per share |
$ | 1,264,000 | 1,179,154 | $ | 1.07 | |||
| Effect of dilutive shares: |
||||||||
| Stock options |
— | 61,050 | ||||||
| Diluted per share |
$ | 1,264,000 | 1,240,204 | $ | 1.02 | |||
| For the Three Months Ended September 30, 2004 | ||||||||
| Net Income (Numerator) |
Shares (Denominator) |
Per Share Data | ||||||
| Basic per share |
$ | 288,000 | 1,165,165 | $ | .25 | |||
| Effect of dilutive shares: |
||||||||
| Stock options |
— | 31,852 | ||||||
| Diluted per share |
$ | 288,000 | 1,197,017 | $ | .24 | |||
| For the Nine Months Ended September 30, 2004 | ||||||||
| Net Income (Numerator) |
Shares (Denominator) |
Per Share Data | ||||||
| Basic per share |
$ | 917,000 | 1,165,165 | $ | .79 | |||
| Effect of dilutive shares: |
||||||||
| Stock options |
— | 31,852 | ||||||
| Diluted per share |
$ | 917,000 | 1,197,017 | $ | .77 | |||
NOTE D - STOCK-BASED COMPENSATION
The Company has a stock-based employee compensation plan which is accounted for under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all stock options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of Financial Accounting Standards Board (“FASB”) SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
| ($ amounts in thousands except for per share data)
|
Quarter Ended September 30, |
|||||||
| 2005 |
2004 |
|||||||
| Net income, as reported |
$ | 405 | $ | 288 | ||||
| Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |
(3 | ) | — | |||||
| Pro forma net income |
$ | 402 | $ | 288 | ||||
| Earnings per share: |
||||||||
| Basic - as reported |
$ | .34 | $ | .25 | ||||
| Basic - pro forma |
.34 | .25 | ||||||
| Diluted - as reported |
.33 | .24 | ||||||
| Diluted - pro forma |
.32 | .24 | ||||||
| Nine Months Ended September 30, |
||||||||
| 2005 |
2004 |
|||||||
| Net income, as reported |
$ | 1,264 | $ | 917 | ||||
| Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |
(4 | ) | (3 | ) | ||||
| Pro forma net income |
$ | 1,260 | $ | 914 | ||||
| Earnings per share: |
||||||||
| Basic - as reported |
$ | 1.07 | $ | .79 | ||||
| Basic - pro forma |
1.07 | .78 | ||||||
| Diluted - as reported |
1.02 | .77 | ||||||
| Diluted - pro forma |
1.02 | .76 | ||||||
NOTE E - COMPREHENSIVE INCOME
The following table discloses Comprehensive Income for the periods reported in the Consolidated Statements of Income:
(In thousands)
| Quarter Ended September 30, | |||||||
| 2005 |
2004 | ||||||
| Net Income |
$ | 405 | $ | 288 | |||
| Other Comprehensive Income (loss) net of tax: |
|||||||
| Unrealized holding gains (losses) on securities during the period, net of taxes |
(9 | ) | 103 | ||||
| Comprehensive Income |
$ | 396 | $ | 391 | |||
| Accumulated Comprehensive Income(Loss) |
$ | (51 | ) | $ | 49 | ||
| Nine Months Ended September 30, | |||||||
| 2005 |
2004 | ||||||
| Net Income |
$ | 1,264 | $ | 917 | |||
| Other Comprehensive Income (Loss) net of tax: |
|||||||
| Unrealized holding gains (losses) on securities during the period, net of taxes |
(55 | ) | 26 | ||||
| Comprehensive Income |
$ | 1,209 | $ | 943 | |||
| Accumulated Comprehensive Income (Loss) |
$ | (51 | ) | $ | 49 | ||
ITEM NO. 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The following discussion contains “forward-looking statements” relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. The words “expect,” “estimate,” “anticipate,” and “believe,” as well as similar expressions, are intended to identify forward-looking statements. 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 SB-2 (Registration Number 333-61081) as filed with and declared effective by the Securities and Exchange Commission.
The First represents the primary asset of the Company. The First reported total assets of $278.9 million at September 30, 2005, compared to $210.9 million at December 31, 2004. Loans increased $33.4 million, or 20.3%, during the first nine months of 2005. Deposits at September 30, 2005, totaled $219.1 million compared to $161.2 million at December 31, 2004. For the nine month period ended September 30, 2005, The First reported net income of $1,470,000 compared to $970,000 for the nine months ended September 30, 2004.
NONPERFORMING ASSETS AND RISK ELEMENTS. Diversification within the loan portfolio is an important means of reducing inherent lending risks. At September 30, 2005, The First had no concentrations of ten percent or more of total loans in any single industry nor any geographical area outside their immediate market areas.
At September 30, 2005, The First had loans past due as follows:
| ($ In Thousands)
| |||
| Past due 30 through 89 days |
$ | 2,130 | |
| Past due 90 days or more and still accruing |
669 | ||
The accrual of interest is discontinued on loans which become ninety days past due (principal and/or interest), unless the loans are adequately secured and in the process of collection. Nonaccrual loans totaled $374,000 at September 30, 2005. Any other real estate owned is carried at fair value, determined by an appraisal. Other real estate owned totaled $161,000 at September 30, 2005. A loan is classified as a restructured loan when the interest rate is materially reduced or the term is extended beyond the original maturity date because of the inability of the borrower to service the debt under the original terms. The First had no restructured loans at September 30, 2005.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is considered adequate with cash and cash equivalents of $35.1 million as of September 30, 2005. In addition, loans and investment securities repricing or maturing within one year or less exceeded $120.1 million at September 30, 2005. Approximately $26.7 million in loan commitments are expected to be funded within the next six months and other commitments, primarily standby letters of credit, totaled $1.4 million at September 30, 2005.
There are no known trends or any known commitments of uncertainties that will result in The First’s liquidity increasing or decreasing in a material way. In addition, The First is not aware of any recommendations by any regulatory authorities which would have a material effect on its liquidity, capital resources or results of operations.
Total consolidated equity capital at September 30, 2005, is $18.0 million, or approximately 6.4% of total assets. The First currently has adequate capital positions to meet the minimum capital requirements for all regulatory agencies. The capital ratios as of September 30, 2005, are as follows:
| Tier 1 leverage |
8.55 | % | |
| Tier 1 risk-based |
11.89 | % | |
| Total risk-based |
13.51 | % |
On March 26, 2002, The First Bancshares Statutory Trust 1 (the Trust), a wholly-owned subsidiary trust of the Company, issued $7,000,000 of redeemable cumulative trust preferred securities. The Trust used the funds to acquire floating rate subordinated debentures from the Company. The debentures bear an interest rate of the 3-month LIBOR plus 3.60%. The debentures have a maturity of 30 years but are callable 5 years after issuance. Presently, the trust preferred securities qualify as Tier 1 capital up to 25% of other components of Tier 1 capital. The Federal Reserve Board has issued a proposed rule that would retain trust preferred securities in Tier 1 capital but with stricter quantitative limits and clearer qualitative standards. In accordance with FIN 46, “Consolidation of Variable Interest Entities” the statutory trust is not included in the consolidated financial statements. Instead the subordinated debentures due to the statutory trust are included in the consolidated liabilities of the Company.
RESULTS OF OPERATIONS - QUARTERLY
The Company had a consolidated net income of $405,000 for the three months ending September 30, 2005, compared with consolidated net income of $288,000 for the same period last year. During the quarter, the Company had a loss on the disposal of assets related to Hurricane Katrina of $61,000. At this time, other losses are not readily determinable. The company also has had charges of $25,000 related to waiving of fees.
Net interest income increased to $2,608,000 from $2,017,000 for the three months ending September 30, 2005, or an increase of 29.3% as compared to the same period in 2004. Earning assets through September 30, 2005, increased $29.0 million and interest-bearing liabilities also increased $31.8 million when compared to June 30, 2005, reflecting increases of 12.7% and 16.8%, respectively.
Noninterest income for the three months ending September 30, 2005, was $368,000 compared to $431,000 for the same period in 2004, reflecting a decrease of $63,000 or 14.6%. Included in noninterest income is service charges on deposit accounts, which for the three months ended September 30, 2005, totaled $295,000, compared to $378,000 for the same period in 2004.
The provision for loan losses was $313,000 for the three months in 2005 compared with $213,000 for the same period in 2004 and the additional provision reflects the continued growth of the loan portfolio and $140,000 as it relates to losses from Hurricane Katrina. The long term impact of the hurricane on the Company cannot be determined at this point.
Noninterest expense increased by $260,000 or 14.4% for the three months ended September 30, 2005, when compared with the same period in 2004. The increase is primarily due to the continued growth and the related services being offered.
RESULTS OF OPERATIONS - YEAR-TO-DATE
The Company had a consolidated net income of $1,264,000 for the nine months ending September 30, 2005, compared with consolidated net income of $917,000 for the same period last year.
Net interest income increased to $7,281,000 from $5,650,000 for the first nine months ending September 30, 2005, or an increase of 28.9% as compared to the same period in 2004. Earning assets through September 30, 2005, increased $77.4 million and interest-bearing liabilities also increased $82.2 million when compared to September 30, 2004, reflecting increases of 42.9% and 59.4%, respectively.
Noninterest income for the nine months ending September 30, 2005, was $1,260,000 compared to $1,491,000 for the same period in 2004, reflecting a decrease of $231,000 or 15.5%. Included in noninterest income is service charges on deposit accounts, which for the nine months ended September 30, 2005, totaled $964,000, compared to $1,103,000 for the same period in 2004.
The provision for loan losses was $750,000 in the first nine months of 2005 compared with $501,000 for the same period in 2004. The allowance for loan losses of $2.3 million at September 30, 2005 (approximately 1.18% of loans) is considered by management to be adequate to cover losses inherent in the loan portfolio. The level of this allowance is dependent upon a number of factors, including the total amount of past due loans, general economic conditions, and management’s assessment of potential losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant change. Ultimately, losses may vary from current estimates and future additions to the allowance may be necessary. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the loan loss allowance will not be required. Management evaluates the adequacy of the allowance for loan losses quarterly and makes provisions for loan losses based on this evaluation.
Noninterest expense increased by $646,000 or 12.3% for the nine months ended September 30, 2005, when compared with the same period in 2004. The increase is primarily due to the continued growth and the related services being offered.
ITEM 3. - CONTROLS AND PROCEDURES
As of the end of the period covered by this report, an evaluation under the direction and with the participation of our principal executive officer and principal financial officer was performed to determine the effectiveness of the design and operation of the disclosure controls and procedures. The principal executive officer and the principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports. There have been no significant changes in the Corporation’s internal controls or in other factors subsequent to the date of the evaluation that could significantly affect these controls.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT 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
(a) Exhibits
| Exhibit No. |
||
| 31.1 | Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of principal executive officer pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification of principal financial officer pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
(b) Form 8-K
A Form 8-K was filed to announce that M. Ray “Hoppy” Cole, President of the Picayune office and Regional Manager of The Gulf Coast Division, has been named President of The First Bancshares, Inc. The website posting was made available to the public on August 8, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| THE FIRST BANCSHARES, INC. | ||
| (Registrant) | ||
| November 9, 2005 (Date) |
/S/ DAVID E. JOHNSON | |
| David E. Johnson, | ||
| Chief Executive Officer | ||
| November 9, 2005 (Date) |
/S/ DONNA T. RUTLAND | |
| Donna T. Rutland, | ||
| Executive Vice President | ||
| Chief Financial Officer | ||