How bad are things for First National Bancshares Inc. of Spartanburg? Not only did the company lose nearly $1.4 million in the first quarter of the year, which comes on the heels of a $44.8 million loss last year, it’s been turned down for federal bailout funds, as well.
According to First National’s 10-Q for the first three months of 2009, filed Wednesday, “Our application for participation in the TARP Capital Purchase Program has not been accepted. Therefore, we have withdrawn our application.”
First National’s $1.36 million loss represents a sharp drop from a year earlier when the company earned $735,000. First National reported its non-performing assets were $73.9 million as of March 31, 2009, compared to $25.6 million year earlier.
There’s been no shortage of bad news for First National recently.
Following a recent examination by the Office of the Comptroller of the Currency, subsidiary First National Bank of the South is no longer classified as “well capitalized” and has entered into a consent order with the OCC which will require it to “to raise additional capital, limit our growth, and/or sell assets to increase our capital ratios within 120 days of the execution of the consent order to meet these standards set forth by the OCC,” according to information filed with The Securities and Exchange Commission on May 1.
Specifically, the consent order requires the bank, among other things:
- to achieve and maintain Tier 1 capital at least equal to 11 percent of risk-weighted assets and at least equal to 9% of adjusted total assets by Aug. 25, 2009;
- to develop, by July 26, 2009, a three-year capital plan for the bank, which shall include, among other things, specific plans for maintaining adequate capital, a discussion of the sources and timing of additional capital, as well as contingency plans for alternative sources of capital;
- to develop, by July 26, 2009, a strategic plan covering at least a three-year period, which shall, among other things, include a specific description of the strategic goals and objectives to be achieved, the targeted markets, the specific bank personnel who are responsible and accountable for the plan, and a description of systems to monitor the bank’s progress.
- to revise and maintain, by June 26, 2009, a liquidity risk management program, which assesses, on an ongoing basis, the bank’s current and projected funding needs, and ensures that sufficient funds exist to meet those needs. The plan must include specific plans for how the bank plans to comply with regulatory restrictions which limit the interest rates the bank can offer to depositors;
- to revise, by June 26, 2009, the bank’s loan policy, a commercial real estate concentration management program. The bank also must establish a new loan review program to ensure the timely and independent identification of problem loans and modify its existing program for the maintenance of an adequate allowance for loan and lease losses;
- to take immediate and continuing action to protect the bank’s interest in certain assets identified by the OCC or any other bank examiner by developing a criticized assets report covering the entire credit relationship with respect to such assets;
- to develop, by July 26, 2009, an independent appraisal review and analysis process to ensure that appraisals conform to appraisal standards and regulations, and to order, within 30 days following any event that triggers an appraisal analysis, a current independent appraisal or updated appraisal on loans secured by certain properties; and
- to develop, by May 27, 2009, a revised OREO program to ensure that the OREO properties are managed in accordance with certain applicable banking regulations.
- to ensure the bank has competent management in place on a full-time basis to carry out the board’s policies and operate the bank in a safe and sound manner.
If the bank fails to comply with the capital and liquidity funding requirements in the consent order, or suffer a continued deterioration in our financial condition, “we may be subject to being placed into a federal conservatorship or receivership by the OCC, with the FDIC appointed as conservator or receiver,” the company stated in its May 1 SEC filing.
Also, First National’s independent registered public accounting firm has stated “that the uncertainty created by our inability to repay or replace our holding company’s line of credit or to obtain a waiver of covenant defaults on that line of credit through December 31, 2009 raises substantial doubt about our ability to continue as a going concern,” according to the SEC filing.
First National’s stock closed Wednesday at $1.25 a share. It’s 52-week high is $10.