First Bancshares, Inc. (“Company”) (NASDAQ - FstBksh : FBSI),
the holding company for First Home Savings Bank (“Bank”), today
announced earnings for the third quarter of its fiscal year ending
June 30, 2010.
For the quarter ended March 31, 2010, the Company had a net loss
of $109,000, or $(0.07) per share – diluted, compared to a net loss
of $243,000, or $(0.16) per share – diluted for the comparable
period in 2009. The decreased loss in the third quarter of fiscal
2010 compared to the loss in the third quarter of fiscal 2009 was
primarily attributable to a decrease in the provision for loan
losses between the quarters from $642,000 in 2009 to $63,000 in
2010. Additionally, net interest income increased by $2,000, while
non-interest expense decreased by $43,000. These items were
partially offset by a decrease of $386,000 in non-interest income
and by a decrease of $105,000 in the income tax benefit recorded in
the 2010 period compared to an income tax benefit recorded in the
2009 period.
Net interest income increased by $2,000 during the quarter ended
March 31, 2010 compared to the same period in the prior year. This
was the result of a decrease of $594,000, or 43.5%, in interest
expense from $1.4 million in the third quarter of fiscal 2009 to
$773,000 in the comparable quarter of fiscal 2010, which was
partially offset by a decrease of $592,000, or 20.1%, in interest
income from $2.9 million in the fiscal 2009 quarter to $2.4 million
in the fiscal 2010 quarter. The decrease in interest expense was
the result of a decrease in the average cost on interest-bearing
liabilities from 2.69% in the 2009 period to 1.75% in the 2010
period, and by a decrease of $16.9 million in the average balance
of interest-bearing liabilities from $203.8 million in 2009 to
$176.9 million in 2010. The decrease in interest income was the
result of a decrease in the average yield on interest-earning
assets from 5.41% in the 2009 period to 4.86% in the 2010 period,
and by a decrease in the average balance of interest-earning assets
of $23.9 million from $218.1 million in 2009 to $194.2 in 2009. The
changes in yields and costs are the result of the general decline
in market interest rates that has accompanied the financial and
general economic crisis that has evolved over the past two
years.
During the quarter ended March 31, 2010, the Company recorded a
provision for loan losses of $63,000, compared to a provision for
loan losses of $643,000 for the same quarter in 2009. This
represents a decrease of $580,000, or 89.1%, between the two
periods. During the quarter ended March 31, 2010, there was only
one loan that required an additional loss provision. The loan
related to the 2004 sale of a line of business by SCMG, Inc., a
wholly-owned subsidiary of the Company, to a third party. As part
of the sale SCMG, Inc. took a note secured by real estate. When
SCMG, Inc. foreclosed on the loan, it was determined that the
remaining net loan balance exceeded the fair value of the real
estate by approximately $63,000 which resulted in the provision.
This is in contrast to the quarter ended March 31, 2009, when a
significant number of businesses, to whom the Bank had extended
credit, experienced slow payment or non-payment from existing
customers, reductions in business from existing customers and a
lack of new business. The resulting cash flow problems resulted in
delinquencies, bankruptcies and other issues for these loan
customers. Accordingly, during the quarter ended March 31, 2009,
the Bank recorded a provision for loan losses of $643,000.
There was a decrease of $386,000 in non-interest income during
the quarter ended March 31, 2010 compared to the quarter ended
March 31, 2009. The $386,000 decrease between the two periods
resulted primarily from a decrease in service charges and other fee
income of $108,000, a decrease in profit on the sale of loans of
$143,000, a decrease of $20,000 in income from Bank Owned Life
Insurance, and a decrease of $2,000 in other non-interest income.
In addition, during the 2009 period there was a profit on the sale
of investments of $143,000, which did not recur during the 2010
period, and there was a net loss of $13,000 on gain (loss) on the
sale of property and equipment and real estate owned during the
2010 period compared to a net gain of $5,000 in the 2009 period.
These items were partially offset by a decrease of $47,000 in the
provision for losses on real estate owned between periods. The
decrease in service charges and other fee income seems to be
indicative of the financial services industry as a whole with
account holders taking greater care that they do not incur
overdraft charges on their accounts. The decrease in gain on the
sale of loans resulted from the closing of the loan production
office in the quarter ended June 30, 2009. While the Company still
originates loans for sale in the secondary market, no loans were
sold during the quarter ended March 31, 2010. The reduction in
income on BOLI was attributable to the surrender of the BOLI
policies, the final proceeds of which were received in September
2009.
Non-interest expense decreased by $42,000 during the quarter
ended March 31, 2010 compared to the same quarter one year earlier.
There were decreases in compensation and benefits, occupancy and
equipment expense and professional fees of $173,000, $36,000 and
$11,000, respectively. These decreases were partially offset by an
increase of $71,000 in deposit insurance premiums and by an
increase in other expense of $107,000. The decreases in
compensation and benefits and occupancy and equipment expense are
primarily the result of ongoing cost reduction and containment
efforts begun by current management. The increase in deposit
insurance premiums was the result of increased rates on deposit
insurance. The increase in other operating expense was the result
of a loss of $124,000 related to a deposit account transaction.
While management believes the amount will be recovered, it was
necessary to record the transaction as a loss until recovery takes
place.
During the quarter ended March 31, 2010, an income tax benefit
of $52,000 was recorded, compared to an income tax benefit of
$156,000 for the quarter ended March 31, 2009. The difference in
the provision between the two periods was primarily due to the
difference in pre-tax loss.
For the nine months ended March 31, 2010, the Company had net
income of $137,000, or $0.09 per share – diluted, compared to a net
loss of $3.0 million, or $(1.94) per share – diluted for the
comparable period in 2009. Net income in the first nine months of
fiscal 2010 compared to a net loss in the first nine months of
fiscal 2009 was primarily attributable to a provision for loan
losses of $63,000 in the 2010 period compared to a provision of
$5.0 million in the 2009 period. In addition, there was a decrease
of $692,000 in non-interest expense. These items were partially
offset by decreases of $359,000 in net interest income and $951,000
in non-interest income between the periods and a $1.2 million shift
in income taxes from a benefit of $1.0 million in the 2009 period
to a tax provision of $198,000 in the 2010 period.
Net interest income decreased by $359,000 during the nine months
ended March 31, 2010 compared to the comparable period in the prior
year. This was the result of a decrease of $2.1 million, or 21.6%,
in interest income from $9.6 million in the first nine months of
fiscal 2009 to $7.5 million in the first nine months of fiscal
2010. This was partially offset by a decrease of $1.7 million, or
40.0%, in interest expense from $4.3 million in the fiscal 2009
period to $2.6 million in the fiscal 2010 period. The decrease in
interest income was the result of a decrease in the average yield
on interest-earning assets from 5.74% in the 2009 period to 5.00%
in the 2010 period and by a decrease in the average balance of
interest-earning assets of $21.9 million from $221.4 million in
2009 to $199.5 in 2010. The decrease in interest expense was the
result of a decrease in the average cost on interest-bearing
liabilities from 2.79% in the 2009 period to 1.87% in the 2010
period and by a decrease of $20.9 million in the average balance of
interest-bearing liabilities from $202.9 million in 2009 to $182.0
million in 2010. The changes in yields and costs are the result of
the general decline in market interest rates that has accompanied
the financial and general economic crisis that has evolved over the
past two years.
The provision for loan losses for the nine months ended March
31, 2010 was $63,000 compared to $5.0 million for the nine months
ended March 31, 2009. The $5.0 million provision for the nine
months ended March 31, 2009 was the result of an in depth review
and analysis of the Bank’s loan portfolio brought about by a
continually deteriorating economy, a change in management and the
departure of several loan officers. The review, which began in
November 2008 and continue through the quarter ended March 31,
2009, focused primarily on commercial real estate loans,
multi-family real estate loans, development loans and commercial
business loans. During the nine month period ended March 31, 2010,
there was only one loan which required recording an additional
reserve. For information regarding this loan, see the above
discussion regarding the provision for losses during the three
months ended March 31, 2010.
There was a decrease of $951,000 in non-interest income during
the nine months ended March 31, 2010 compared to the same period in
the prior year. This was the result of decreases in service charges
and other fee income, gain on the sale of loans and income from
BOLI of $319,000, $301,000 and $116,000, respectively. In addition,
there was an increase in the provision for loss on real estate
owned increased from $64,000 during the 2009 period to $135,000
during the 2010 period, and there was a gain on the sale of
investments available-for-sale of $143,000 during the 2009 period
which did not recur during the 2010 period. These reductions in
non-operating income were partially offset a gain of $38,000 on the
sale of property and equipment and real estate owned. The decrease
in gain on the sale of loans resulted from the closing of the loan
production office in the quarter ended June 30, 2009. The reduction
in income on BOLI was attributable to the surrender of the BOLI
policies, the final proceeds of which were received in September
2009.
Non-interest expense decreased by $692,000 during the nine
months ended March 31, 2010 to $5.7 million compared to $6.4
million for the same period one year earlier. The decrease resulted
from decreases in compensation and benefits, occupancy and
equipment expense, professional fees and other operating expense of
$563,000, $213,000, $9,000 and $188,000, respectively. The
decreases in compensation and benefits and occupancy and equipment
expense are primarily the result of cost reduction and containment
efforts begun by current management. The increase in deposit
insurance premiums was due to increased rates on deposit
insurance.
During the nine months ended March 31, 2010, the Company
recorded a tax provision of $198,000, compared to a benefit of $1.0
million during the nine months ended March 31, 2009. The difference
was primarily attributable to the difference in pre-tax income.
However, the pre-tax loss of $4.0 million during the nine months
ended March 31, 2009 was reduced on an after tax basis as a result
of the decision to cash in the Bank’s BOLI, which required an
offsetting tax provision of approximately $562,000. This increase
in the tax provision was required because income recorded on the
BOLI had been non-taxable, so no tax provision had been previously
recorded.
Total consolidated assets at March 31, 2010 were $213.8 million,
compared to $229.9 million at June 30, 2009, representing a
decrease of $16.1 million, or 7.0%. Stockholders’ equity at March
31, 2010 was $24.0 million, or 11.2% of assets, compared with $23.8
million, or 10.3% of assets, at June 30, 2009. Book value per
common share increased to $15.47 at March 31, 2010 from $15.32 at
June 30, 2009. The increase in equity was primarily attributable to
net income of $137,000 for the nine month period. There was also an
increase of $75,000, net of taxes, in the market value of
available-for-sale securities.
Net loans receivable decreased $19.7 million, or 14.8%, to
$113.5 million at March 31, 2010 from $133.2 million at June 30,
2009. The decrease in net loans receivable was due to a general
decrease in the demand for loans resulting from more challenging
economic conditions both nationally and within the Bank’s primary
market area. In addition, $2.1 million in loans were charged off
during the nine month period and $3.7 million of loans was
transferred to real estate owned or repossessed assets during the
period. Customer deposits decreased $8.6 million, or 4.5%, to
$180.6 million at March 31, 2010 from $189.2 million at June 30,
2009. Retail repurchase agreement balances decreased by $178,000,
or 3.1%, to $5.5 million at March 31, 2010 from $5.7 million at
June 30, 2009.
Non-performing assets increased by $150,000 to $5.2 million
during the first nine months of fiscal 2010 from $5.0 million at
June 30, 2009. There were increases of $2.3 million in real estate
owned and repossessed assets and $136,000 in loans delinquent 90
days or more and still accruing. These increases were partially
offset by a decrease of $2.3 million non-accrual loans. While there
was a 3.0% increase in non-performing assets during the nine months
ended March 31, 2010, management believes that there was no single
item or group of items the resolution of which will result in
material loss to the Company. Based on its analysis of delinquent
loans, non-performing loans and classified loans, management
believes that the Company’s allowance for loan losses of $2.0
million at March 31, 2010 was adequate to absorb known and inherent
risks in the loan portfolio at that date. At March 31, 2010 the
allowance for loan losses was 183.5% of non-performing loans as
compared to 132.6% at June 30, 2009.
As was discussed in the Company’s Annual Report on Form 10-K,
filed with the Securities and Exchange Commission (“SEC”) on
September 28, 2009, the Company and the Bank are operating under
Cease and Desist Orders with the Office of Thrift Supervision. In
management’s opinion, all items required by the Company and the
Bank under these orders through the nine month period ended March
31, 2010 have been completed and/or complied with.
As of March 31, 2010 the Bank continues to meet all applicable
regulatory capital requirements and the Bank remains “well
capitalized” under applicable regulations.
First Bancshares, Inc. is the holding company for First Home
Savings Bank, a FDIC-insured savings bank chartered by the State of
Missouri that conducts business from its home office in Mountain
Grove, Missouri, and ten full service offices in Marshfield, Ava,
Gainesville, Sparta, Springfield, Theodosia, Crane, Galena, Kissee
Mills and Rockaway Beach, Missouri.
The Company and its wholly-owned subsidiaries, First Home
Savings Bank and SCMG, Inc. may from time to time make written or
oral “forward-looking statements,” including statements contained
in its filings with the SEC, in its reports to stockholders, and in
other communications by the Company, which are made in good faith
by the Company pursuant to the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements with respect
to the Company’s beliefs, expectations, estimates and intentions
that are subject to significant risks and uncertainties, and are
subject to change based on various factors, some of which are
beyond the Company’s control. Such statements address the following
subjects: future operating results; customer growth and retention;
loan and other product demand; earnings growth and expectations;
new products and services; credit quality and adequacy of reserves;
results of examinations by our bank regulators, our compliance with
the Cease and Desist Orders, technology, and our employees. The
following factors, among others, could cause the Company’s
financial performance to differ materially from the expectations,
estimates and intentions expressed in such forward-looking
statements: the strength of the United States economy in general
and the strength of the local economies in which the Company
conducts operations; the effects of, and changes in, trade,
monetary, and fiscal policies and laws, including interest rate
policies of the Federal Reserve Board; inflation, interest rate,
market, and monetary fluctuations; the timely development and
acceptance of new products and services of the Company and the
perceived overall value of these products and services by users;
the impact of changes in financial services’ laws and regulations;
technological changes; changes in consumer spending and savings
habits; the demand for mortgage loans; and the success of the
Company at managing and collecting assets of borrowers in default
and managing the risks of the foregoing.
The foregoing list of factors is not exclusive. Additional
discussion of factors affecting the Company’s business and
prospects is contained in the Company’s reports filed with the SEC,
including the Annual Report on Form 10K for the fiscal year ended
June 30, 2009 with the SEC. The Company does not undertake, and
expressly disclaims any intent or obligation, to update any
forward-looking statement, whether written or oral, that may be
made from time to time by or on behalf of the Company.
Financial Highlights (In thousands, except per share
amounts)
Quarter Nine Months
Ended March 31, Ended March 31, 2010
2009 2010 2009 Operating Data:
Total interest income $ 2,351 $ 2,942 $ 7,509 $ 9,575 Total
interest expense 773 1,367 2,564 4,271 Net interest income 1,578
1,575 4,945 5,304 Provision for loan losses 63 643 63 5,023
Net interest income after
provision for loan losses
1,515 932 4,882 281 Non-interest income 337 723 1,203 2,154
Non-interest expense 2,012 2,054 5,749 6,440 Income (loss) before
income tax (160) (399) 336 (4,005) Income tax expense (benefit)
(51) (156) 199 (1,002) Net income $ (109) $ (243) $ 137 $ (3,003)
Net income per share-basic $ (0.07) $ (0.16) $ 0.09 $ (1.94) Net
income per share-diluted $ (0.07) $ (0.16) $ 0.09 $ (1.94)
At At March 31, June 30, Financial
Condition Data: 2010 2009 Total assets $
213,794 $ 229,915 Loans receivable, net 113,512 133,162
Non-performing assets 5,169 5,019
Cash and cash equivalents,
including interest-bearing deposits
16,075 29,218 Investment securities 69,587 53,536 Customer deposits
180,648 189,218 Borrowed funds 8,536 15,713 Stockholders' equity
23,984 23,764 Book value per share $ 15.47 $ 15.32
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