First National Bancshares, the holding company for Spartanburg-based First National Bank of the South, could go out of business if it is unable to raise capital this year, a banking industry expert told The Spartanburg Herald-Journal Friday.
First National expects to report a loss of $37.3 million for 2008 — much of it from an accounting charge from writing off portions of the purchase of Columbia-based Carolina National Bank.
The bank is in violation of three loan covenants and is awaiting approval of an extension of a waiver of defaults on that credit line, which would carry through to the end of the year., according to The Herald-Journal.
“It’s a very difficult situation, but it’s certainly not unique. We have sick banks all over the Carolinas,” said Tony Plath, associate professor of finance at the University of North Carolina-Charlotte. “We’re going to have to see how (First National) does, but they need capital to survive.”
First National has delayed filing its year-end financial reports because it is negotiating with Nexity Bank of Birmingham, Ala., to avoid defaulting on a loan it used to purchase Carolina National in February 2008.
First National has grown rapidly since it was founded in 1999. Its stock has traded as high as $10.45 a share over the past year and as low as 91 cents. It closed Friday at $1.25 a share.
A tip o’ the hat to Don Boudreaux of the George Mason University Economics Department for a recent letter he wrote to The New York Times:
27 March 2009
Editor, The New York Times
620 Eighth Avenue
New York, NY 10018
To the Editor:
A headline about New York Senator Kirsten Gillibrand reads “As New Lawyer, Senator Defended Big Tobacco” (March 27). I ask: Are you capable of writing “tobacco” without prefacing it with the word “big”? Similarly, can you write “oil” without the same ominous preface?
These industries indeed are big, but each is a dwarf compared to Uncle Sam.
So why do you not routinely describe government as “big government”? The menacing overtones of such a description are especially appropriate for the state because, unlike “big tobacco” and “big oil,” government uses violence against persons who refuse to fund its budget and otherwise do its bidding.
Donald J. Boudreaux
Let’s hope he isn’t holding his breath waiting for a response.