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.