##### Table of Contents



FORM 10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



---



QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2001

FIRST NATIONAL BANCSHARES, INC.
(exact name of registrant as specified in its charter)

|                                                                           |  |                                             
|-------------------------------------------------------------------------- |  | --------------------------------------------
|Florida(Jurisdiction of Organization)                                      |  | 06-1522028I.R.S. Employer
Identification No.
|                                                                          
|5817 Manatee Avenue West, Bradenton, Florida
(Address of principal office) |  | 34209
(Zip Code)                            

Registrants telephone number, including area code: (941) 794-6969

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 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 of the past 90 days.

Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

|                                       |  |                                   
|-------------------------------------- |  | ----------------------------------
|Common stock, par value $.10 per share |  | 1,748,780 shares                  
|                                       |  |                                   
|(class)                                |  | Outstanding as of November 1, 2001





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FIRST NATIONAL BANCSHARES, INC.
Index to Form 10-Q
For the quarter Ended September 30, 2001


TABLE OF CONTENTS



|                              |                                                                                        |                            |  |  |  |  |  | 
|----------------------------- | -------------------------------------------------------------------------------------- | -------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                          
|                              |                                                                                        | Consolidated Balance Sheet
|                              |                                                                                        | Statement of Income       
|                              |                                                                                        | STATEMENTS OF CASH FLOWS  
|                              | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|Part II. Other Information   
|                              | Item 1: Legal Proceedings Against the Bank  None.                                    
|                              | Item 2: Changes in Securities and Use of Proceeds  None.                             
|                              | Items 3: Defaults under 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                                              
|Exhibits                     



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##### Table of Contents



|                              |                                                                                              |                                                                                                                     |  |    |   |  |  | 
|----------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- |  | -- | - |  |  | 
|                              |                                                                                              | Page                                                                                                               
|                             
|                             
|                             
|                             
|PART I. FINANCIAL INFORMATION |                                                                                              |                                                                                                                     |  |   
|                             
|                             
|                             
|                             
|                              | Item 1. Financial Statements                                                                 |                                                                                                                     |  |    |  
|                             
|                             
|                             
|                             
|                              |                                                                                              | Condensed Consolidated Balance Sheets,
September 30, 2001 and December 31, 2000                                     |  |    | 1 | 
|                             
|                             
|                             
|                             
|                              |                                                                                              | Condensed Consolidated Statements
of Income for the nine months ended
September 30, 2001 and September 30, 2000     |  |    | 3 | 
|                             
|                             
|                             
|                             
|                              |                                                                                              | Condensed Consolidated Statements of
Cash Flows for the nine months ended
September 30, 2001 and September 30, 2000 |  |    | 4 | 
|                             
|                             
|                             
|                             
|                              | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                                                                                     |  | 6  |  
|                             
|                             
|                             
|                             
|                              | Item 3. Quantitative and Qualitative Disclosure
About Market Risk                            |                                                                                                                     |  | 10 |  
|                             
|                             
|                             
|                             
|PART II. OTHER INFORMATION    |                                                                                              |                                                                                                                     |  |   
|                             
|                             
|                             
|                             
|                              | Item 1. Legal Proceedings                                                                    |                                                                                                                     |  | 12 |  
|                             
|                             
|                             
|                             
|                              | Item 2. Changes in Securities and Use of Proceeds                                            |                                                                                                                     |  | 12 |  
|                             
|                             
|                             
|                             
|                              | Item 3. Defaults under Senior Securities                                                     |                                                                                                                     |  | 12 |  
|                             
|                             
|                             
|                             
|                              | Item 4. Submission of Matters to a vote of Security
Holders                                  |                                                                                                                     |  | 12 |  
|                             
|                             
|                             
|                             
|                              | Item 5. Other Information                                                                    |                                                                                                                     |  | 12 |  
|                             
|                             
|                             
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     |                                                                                                                     |  | 12 |  
|                             
|                             
|                             
|                             
|SIGNATURES                    |                                                                                              |                                                                                                                     |  | 12 |  
|                             
|                             
|                             
|                             
|Exhibit Index                 |                                                                                              |                                                                                                                     |  |    |   | 





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##### Table of Contents






PART I. FINANCIAL INFORMATION

Item 1. Financial Statements




FIRST NATIONAL BANCSHARES, INC.
Consolidated Balance Sheet

Assets (000s)




|                                  |  |              |         |             |  |   |         |  
|--------------------------------- |  | ------------ | ------- | ----------- |  | - | ------- | -
|                                  |  | September 30 |         | December 31
|                                  |  |              |         |            
|                                  |  | 2001         |         | 2000       
|                                  |  |              |         |            
|                                  |  | (Unaudited)  |         | **         
|Cash and Due from Banks           |  |              | 4,791   |             |  |   | 4,496   |  
|                                 
|                                 
|                                 
|                                 
|Interest Bearing Bank Balances    |  |              | 7,600   |             |  |   | 5,897   |  
|                                 
|                                 
|                                 
|                                 
|Federal Funds Sold                |  |              | 0       |             |  |   | 0       |  
|                                 
|                                 
|                                 
|                                 
|Investment Securities,            |  |              | 40,884  |             |  |   | 41,401  |  
|                                 
|                                 
|                                 
|                                 
|Unrecognized securities gains     |  |              | 945     |             |  |   | (341    | )
|                                 
|                                 
|                                 
|                                 
|Loans                             |  |              | 141,276 |             |  |   | 137,365 |  
|                                 
|                                 
|                                 
|                                 
|Less allowance for credit losses  |  |              | (1,441  | )           |  |   | (1,373  | )
|                                 
|                                 
|                                 
|                                 
|Deferred Loan Fees (earned)       |  |              | (64     | )           |  |   | (60     | )
|                                 
|                                 
|                                 
|                                 
|Premises and Equip, Net           |  |              | 6,386   |             |  |   | 6,160   |  
|                                 
|                                 
|                                 
|                                 
|Accrued Interest Rec              |  |              | 1,045   |             |  |   | 1,153   |  
|                                 
|                                 
|                                 
|                                 
|Other Assets                      |  |              | 964     |             |  |   | 807     |  
|                                 
|                                 
|                                 
|                                 
|Deferred Income Tax Charges       |  |              | (10     | )           |  |   | 473     |  
|                                 
|                                 
|                                 
|                                 
|Other R.E. and other assets owned |  |              | 627     |             |  |   | 1,065   |  
|                                  |  |              |         |             |  |   |         |  
|Total Assets                      |  | $            | 203,003 |             |  | $ | 197,043 |  
|                                  |  |              |         |             |  |   |         |  

1



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##### Table of Contents



Liabilities and Stockholders Equity

|                                                                                                             |                          |                                       |                |        |              |         |             |        |         |         | 
|------------------------------------------------------------------------------------------------------------ | ------------------------ | ------------------------------------- | -------------- | ------ | ------------ | ------- | ----------- | ------ | ------- | ------- | 
|                                                                                                             |                          |                                       |                |        | September 30 |         | December 31
|                                                                                                             |                          |                                       |                |        |              |         |            
|                                                                                                             |                          |                                       |                |        | 2001         |         | 2000       
|                                                                                                             |                          |                                       |                |        |              |         |            
|Liabilities                                                                                                  |                          |                                       |                |        |              |         |             |       
|                                                                                                             | Deposits                 |                                       |                |        |              |         |             |        |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                          | Demand,
non-interest bearing          |                |        | 20,644       |         |             |        | 23,181  |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                          | Demand int. bearing                   |                |        | 22,334       |         |             |        | 21,169  |        
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                             |                          | Time (CDs, MMs, &
Savings Accounts) |                |        | 128,903      |         |             |        | 125,911 |        
|                                                                                                             |                          |                                       |                |        |              |         |             |       
|                                                                                                             |                          |                                       | TOTAL DEPOSITS |        |              | 171,881 |             |        |         | 170,271 | 
|                                                                                                             |                          |                                       |                |        |              |         |             |       
|Repurchase Agreements                                                                                        |                          |                                       | 7,202          |        |              |         | 4,918       |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Capital Lease Obligation                                                                                     |                          |                                       | 426            |        |              |         | 462         |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Accrued Interest Payable                                                                                     |                          |                                       | 1,716          |        |              |         | 1,531       |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Accounts Payable and other Liabilities                                                                       |                          |                                       | 135            |        |              |         | 226         |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Fed Funds Purchased and other
Short Term Borrowings                                                          |                          |                                       | 5,000          |        |              |         | 5,000       |       
|                                                                                                             |                          |                                       |                |        |              |         |             |       
|                                                                                                             |                          | TOTAL LIABILITIES                     |                |        | 186,360      |         |             |        | 182,408 |        
|                                                                                                             |                          |                                       |                |        |              |         |             |       
|Stockholders Equity:                                                                                        |                          |                                       |                |        |              |         |             |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Common stock, par value $.10 per share;
Authorized 2,500,000 shares;
Issued and outstanding 1,748,780 shares |                          |                                       | 174            |        |              |         | 166         |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Capital Surplus                                                                                              |                          |                                       | 12,194         |        |              |         | 10,925      |       
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Unrecognized securities gains                                                                                |                          |                                       | 590            |        |              |         | (213        | )     
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Retained Earnings                                                                                            |                          |                                       | 3,685          |        |              |         | 3,757       |       
|                                                                                                             |                          |                                       |                |        |              |         |             |       
|                                                                                                             | Net stockholders equity |                                       |                | 16,643 |              |         |             | 14,635 |        
|                                                                                                             |                          |                                       |                |        |              |         |             |       
|Total Liab. & stkhldrs equity                                                                               |                          | $                                     | 203,003        |        |              | $       | 197,043     |       
|                                                                                                             |                          |                                       |                |        |              |         |             |       

2



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##### Table of Contents



FIRST NATIONAL BANCSHARES, INC.

Statement of IncomeFor the Period January 1 through September 30 (000s)




|                                         |                                |                           |                              |                                  |       |                |       |              |       |        |       | 
|---------------------------------------- | ------------------------------ | ------------------------- | ---------------------------- | -------------------------------- | ----- | -------------- | ----- | ------------ | ----- | ------ | ----- | 
|                                         |                                |                           |                              |                                  |       | 9 months ended
|                                         |                                |                           |                              |                                  |       |               
|                                         |                                |                           |                              |                                  |       | September 30   |       | September 30
|                                         |                                |                           |                              |                                  |       | 2001           |       | 2000        
|                                         |                                |                           |                              |                                  |       |                |       |             
|Interest Income:                         |                                |                           |                              |                                  |       |                |       |             
|                                        
|                                        
|                                        
|                                        
|                                         | Loans (excluding fees)         |                           |                              | 8,687                            |       |                |       | 8,292        |      
|                                        
|                                        
|                                        
|                                        
|                                         | Loan Fees                      |                           |                              | 118                              |       |                |       | 130          |      
|                                        
|                                        
|                                        
|                                        
|                                         | Investment securities:         |                           |                              |                                  |       |                |       |              |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                | Taxable                   |                              |                                  | 1,307 |                |       |              | 1,412 |       
|                                        
|                                        
|                                        
|                                        
|                                         |                                | Exempt from Federal Taxes |                              |                                  | 282   |                |       |              | 275   |       
|                                        
|                                        
|                                        
|                                        
|                                         | Federal funds sold             |                           |                              | 0                                |       |                |       | 0            |      
|                                        
|                                        
|                                        
|                                        
|                                         | Interest Bearing Bank Balances |                           |                              | 316                              |       |                |       | 129          |      
|                                         |                                |                           |                              |                                  |       |                |       |             
|                                         |                                |                           | Total Interest Income        |                                  |       | 10,710         |       |              |       | 10,238 |      
|                                        
|                                        
|                                        
|                                        
|Interest expense                         |                                |                           | 5,360                        |                                  |       |                | 5,325 |             
|                                         |                                |                           |                              |                                  |       |                |       |             
|                                         |                                |                           | Net Interest Income          |                                  |       | 5,350          |       |              |       | 4,913  |      
|                                        
|                                        
|                                        
|                                        
|Provision for credit loss                |                                |                           | 109                          |                                  |       |                | 119   |             
|                                         |                                |                           |                              |                                  |       |                |       |             
|Net after Provision for Losses           |                                |                           | 5,241                        |                                  |       |                | 4,794 |             
|                                        
|                                        
|                                        
|                                        
|Other operating income:                  |                                |                           |                              |                                  |       |                |       |             
|                                        
|                                        
|                                        
|                                        
|                                         | Service charges on accounts    |                           |                              | 360                              |       |                |       | 302          |      
|                                        
|                                        
|                                        
|                                        
|                                         | Investment sec. gains          |                           |                              | 2                                |       |                |       | 0            |      
|                                        
|                                        
|                                        
|                                        
|                                         | Financial Services Fees        |                           |                              | 568                              |       |                |       | 531          |      
|                                        
|                                        
|                                        
|                                        
|                                         | Merchant Services              |                           |                              | 60                               |       |                |       | 50           |      
|                                        
|                                        
|                                        
|                                        
|                                         | Other Income                   |                           |                              | 125                              |       |                |       | 103          |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                |                           |                              |                                  |       |                |       |             
|                                         |                                |                           | Total Other Operating Income |                                  |       | 1,115          |       |              |       | 986    |      
|                                        
|                                        
|                                        
|                                        
|Other operating expenses:                |                                |                           |                              |                                  |       |                |       |             
|                                        
|                                        
|                                        
|                                        
|                                         | Salaries and employee benefits |                           |                              | 2,582                            |       |                |       | 2,314        |      
|                                        
|                                        
|                                        
|                                        
|                                         | Occupancy & Equipment expenses |                           |                              | 946                              |       |                |       | 811          |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                | Other expenses            |                              |                                  | 1,082 |                |       |              | 1,039 |       
|                                        
|                                        
|                                        
|                                        
|                                         |                                |                           |                              |                                  |       |                |       |             
|                                         |                                |                           | Total Other operating exp.   |                                  |       | 4,610          |       |              |       | 4,164  |      
|                                        
|                                        
|                                        
|                                        
|                                         |                                |                           |                              | Profit Before Tax                |       |                | 1,746 |              |       |        | 1,715 | 
|Estimated State and Federal
Income Taxes |                                |                           | 571                          |                                  |       |                | 500   |             
|                                         |                                |                           |                              |                                  |       |                |       |             
|                                         |                                |                           |                              | Profit After Tax                 |       | $              | 1,175 |              |       | $      | 1,158 | 
|                                         |                                |                           |                              | Earnings per Share               |       | $              | .67   |              |       | $      | .70   | 
|                                         |                                |                           |                              | Earnings per Share fully diluted |       | $              | .62   |              |       | $      | .67   | 

3



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##### Table of Contents






STATEMENTS OF CASH FLOWS
(000s)
Nine Months ended September 30

|                                                                                            |                                                    |   |        |        |      |   |        |         |   |  | 
|------------------------------------------------------------------------------------------- | -------------------------------------------------- | - | ------ | ------ | ---- | - | ------ | ------- | - |  | 
|                                                                                            |                                                    |   |        |        | 2001 |   | 2000  
|                                                                                            |                                                    |   |        |        |      |   |       
|Operating activities                                                                        |                                                    |   |        |        |      |   |        |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net Income                                                                                  |                                                    |   | 1,175  |        |      |   | 1,158  |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Adjustments to reconcile net income to
cash provided by operating activities:               |                                                    |   |        |        |      |   |        |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Depreciation & leasehold amortization              |   |        | 388    |      |   |        | 324     |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Allowance for loan losses net of charge offs       |   |        | 68     |      |   |        | 103     |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Deferred income taxes                              |   |        | 0      |      |   |        | (137    | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Decrease in accrued interest receivable            |   |        | 108    |      |   |        | (91     | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Increase (decrease) in accrued interest payable    |   |        | 185    |      |   |        | 203     |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Increase in accounts payable and other liabilities |   |        | (91    | )    |   |        | 181     |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Decrease (increase) in other assets                |   |        | (153   | )    |   |        | (1,134  | )
|                                                                                            |                                                    |   |        |        |      |   |        |        
|Net cash provided by operating activities                                                   |                                                    |   | 1,680  |        |      |   | 607    |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Investing activities                                                                        |                                                    |   |        |        |      |   |        |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Purchase of securities                             |   |        | 517    |      |   |        | 2,572   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Loans originated, net of principal collections     |   |        | (3,911 | )    |   |        | (13,648 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Capital expenditures                               |   |        | (614   | )    |   |        | (293    | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Proceeds from sale of other real estate owned      |   |        | 438    |      |   |        | 0       |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Increase (decrease) in overnight funds purchased   |   |        | 0      |      |   |        | 1,700   |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | Decrease (increase) in overnight funds sold        |   |        | (1,703 | )    |   |        | (699    | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            |                                                    |   |        |        |      |   |        |        
|                                                                                            | Net cash provided (used) by investing activities   |   |        | (5,273 | )    |   |        | (10,368 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Financing activities                                                                        |                                                    |   |        |        |      |   |        |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net increase (decrease) in demand deposits, NOW
accounts, money market and savings accounts |                                                    |   | 5,453  |        |      |   | 7,504  |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Net increase (decrease)  certificates of deposit                                           |                                                    |   | (3,843 | )      |      |   | (634   | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Increase (decrease) in securities sold under
agreements to repurchase                       |                                                    |   | 2,284  |        |      |   | 1,151  |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Dividends paid                                                                              |                                                    |   | (8     | )      |      |   | (5     | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Proceeds from issuance of common stock                                                      |                                                    |   | 38     |        |      |   | 75     |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Retirement of common stock                                                                  |                                                    |   | 0      |        |      |   | 0      |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Principal payments under capital lease obligation                                           |                                                    |   | (36    | )      |      |   | (32    | )      
|                                                                                            |                                                    |   |        |        |      |   |        |        
|Net cash (used) provided by financing activities                                            |                                                    |   | 3,888  |        |      |   | 8,059  |        
|                                                                                            |                                                    |   |        |        |      |   |        |        
|Net increase in cash and due from banks                                                     |                                                    |   | 295    |        |      |   | (1,702 | )      
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Cash and due from banks at beginning of year                                                |                                                    |   | 4,496  |        |      |   | 6,549  |        
|                                                                                            |                                                    |   |        |        |      |   |        |        
|Cash and due from banks at end of quarter                                                   |                                                    | $ | 4,791  |        |      | $ | 3,749  |        
|                                                                                            |                                                    |   |        |        |      |   |        |        
|Schedule of non-cash investing activities                                                   |                                                    |   |        |        |      |   |        |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Loans transferred to other real estate owned                                                |                                                    | $ | 95     |        |      | $ | 0      |        
|                                                                                            |                                                    |   |        |        |      |   |        |        

4



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##### Table of Contents



NOTES TO CONDENSED FINANCIAL STATEMENTS

Note 1  Basis of Financial Reporting

The accompanying unaudited condensed financial statements have been prepared in
accordance with instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all normal
and recurring adjustments necessary for fair presentation of such financial
statements have been included. For further information, refer to the
consolidated financial statements and the notes thereto included in the Banks
annual report on Form 10-K for the year ended December 31, 2000.

Results for the nine month period ended September 30, 2001, may not necessarily
be indicative of those to be expected for the entire year.

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Managements Discussion and Analysis of Financial Condition and Results of
Operations.

Overview.

The First National Bank of Manatee (the Bank) commenced operations on July
18, 1986. The Banks activities since inception have consisted of accepting
deposits, originating a variety of loans. The Banks first branch was opened
on Anna Maria Island (5 miles west of the main office) in October, 1994. The
second branch was opened in May of 1996 on State Road 64 (5 miles east of the
main office). In January of 1997 year, the bank opened its third branch on
State Road 70 (8 miles southeast of the main office). In December of 1997, the
bank acquired a site at University Blvd. and Lakewood Ranch Blvd. for a future
branch. The Bank opened its fourth branch in November of 2000 at the corner of
US 301 and Old Tampa Road in Ellenton (Manatee County). The bank also opened a
Trust Department in March of 1995. The Bank, as a local independent bank,
follows a philosophy of developing its equity and deposit base and focusing its
lending activities within its community. The Banks underlying lending policy
has been and is anticipated to continue being directed toward
better-than-normal credit risks.

On January 1, 1999 the Bank was merged into First National Bancshares,
Inc., a Florida corporation (the Holding Company). The Holding Company was
formed specifically for the purpose of having the Bank merged into it. At the
time of the merger, the Holding Company had assets of $128,000 and a net worth
of ($55,000). The Holding Company is now a one bank holding company with no
other subsidiaries than the Bank. Therefore, there are no significant
adjustments from the financial information of the Bank to the consolidated
financial information for the Holding Company.

The following discussion and analysis is based on the Holding Companys
financial condition and results of operations for the period from January 1,
2001 through September 30, 2001. This discussion and analysis should be read
in conjunction with the financial statement summaries of the Holding Company,
included elsewhere in this quarterly report.

Results of Operations.

Earnings in the first three quarters of 2001 were up $17,000 or 1.5%
compared to earnings in the same period last year This was a direct result of
net interest income increasing by $437,000. This increased net interest income
was offset by a $446,000 increase in overhead which was softened by a $129,000
increase in other operating revenues. The Banks contribution of $109,000 to
loan loss reserve was $10,000 lower than last year and was the result of more
modest loan growth. The increase in operating expenses from last year was due
mostly to the new branch opened in November of 2000 and increased salary
expenses as a result of increased staffing to support growth.

Net Interest Income. The major component of the Banks earning capacity is net
interest income, which represents the difference or spread between interest
income on earning assets and interest bearing liabilities, primarily deposits.
The spread is considered positive when rate-sensitive assets exceed
rate-sensitive liabilities, and negative when rate-sensitive liabilities

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exceed
rate sensitive assets. Net interest income is also affected by changes in
interest rates earned and paid, and by changes in the volume of
interest-earning assets and interest-bearing liabilities. To the extent
possible, the Bank follows a strategy intended to insulate the Banks interest
rate spread from adverse changes in interest rates by maintaining spreads
through the adjustability of its earning assets and interest-bearing
liabilities. On September 30, 2001, the Banks loan portfolio had a reasonable
ratio of repriceability within one year.

The Bank had good growth in its loan portfolio and this has significantly
increased net interest income. Net interest income for nine months in 2001 was
$5,350,000 compared to $4,913,000 in 2000.

Interest Earning Assets. Real estate related loans at September 30, 2001,
accounted for a majority of the banks loan portfolio. Most of the mortgages
are variable rate loans and are adjustable each one to five years. Thus,
volatile interest rates can result in the real estate loans lagging market
conditions. In the first half of 2000, rates were stabile allowing the
portfolio to keep pace with market rates. In the second half of 2000, rates
began to fall dramatically and accelerated later in the year and continued into
2001. This had a temporary negative impact on in the banks net interest
income until rates stabilized and the banks balance sheet repriced to the new
market rates. The banks interest margin was much improved in the second and
third quarters of the year compared to the first quarter.

The Banks investment portfolio is concentrated primarily in U.S.
Government agencies and corporations. About 17% of the Banks investment
portfolio re-prices in one year. Due to falling interest rates, the Banks
Available-for-Sale portfolio has a market value of about $945,000 above book
value.

Non-interest Earning Assets. Non-interest earning assets accounted for 7% of
total assets on September 30, 2001, and primarily consisted of cash and due
from banks, capitalized lease, equipment and branches, deferred taxes, and
accrued interest receivable.

Funding Sources. The primary source of funds for the Banks lending and
investment activities is deposits. At September 30, 2001 the Banks total
deposits were $172 million plus $7.2 million in repurchase agreements. The
Banks deposits are highly concentrated in interest-bearing accounts, which is
typical for the Banks market area. The Bank has 13% of its deposits in NOW
Accounts and 75% of its deposits in Savings, MMAs and CD deposits. Despite
the high concentration of certificates of deposit, the Bank does not anticipate
the maturity of such certificates to affect the Banks liquidity, as management
believes that the high concentration was primarily due to customer
relationships and not higher than market rates. The Bank is not in the
practice of paying above market rates on deposits.

Non-interest Income. The Banks non-interest income for the nine month period
ended September 30, 2001 was $1,115 including $568,000 from its Financial
Services and Trust Department. Periodic

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security transactions generate
investment gains or losses and are primarily a result of tax management
considerations and liquidity requirements. The bank has had only $2,000 in
security gains in 2001. The other significant items of non-interest income
represented service charges on deposit accounts, annuity/mutual fund sales, and
merchant credit card account income.

Non-interest Expense. The Banks non-interest expense for the nine month
period ended September 30, 2001 was $4,610,000 including $2,582,000 of salaries
and employee benefits. The Banks occupancy and equipment expenses for the
period ended September 30, 2001 were $946,000. Non-interest expense was up
from $4,164,000 in 2000. The increase in expense is primarily due to the
Banks increased staff to support the banks growth and the new branch opened
in November of 2000.

Allowance for Credit Losses. The allowance for credit losses is established
through a provision for credit losses charged to expenses. Loans are charged
against the allowance for credit losses when management believes that the
collectability of the principal is unlikely. The allowance is an amount that
management believes will be adequate to absorb losses inherent in existing
loans and commitments to extend credit based on evaluations of the
collectability and prior loan loss experience of loans and commitments to
extend credit. The evaluations take into consideration such factors as changes
in the nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, and current economic conditions that may
affect the borrowers ability to pay.

An allowance for loan loss expense of $109,000 was charged to operating
expenses for the nine month period ended September 30, 2001. The Bank had net
charge offs during this period of $40,000. The Bank has a total of $1,441,000
reserved for future loan losses.

Loans on which the accrual of interest has been discontinued are
designated as non-accrual loans. Accrual of interest on loans is discontinued
either when reasonable doubt exists as to the full, timely collection of
interest or when a loan becomes contractually past due by 90 days or more with
respect to interest or principal. When a loan is placed on non-accrual status,
all interest previously accrued but not collected is reversed against current
period interest income unless it is adequately secured. Income on such loans
is then recognized only to the extent that cash is received and the future
collection of principal is probable. Interest accruals are resumed on such
loans only when they are brought fully current with respect to interest and
principal and when in the judgment of management, the loans are estimated to be
fully collectible as to both principal and interest. The bank had two
non-accrual real estate loan at September 30, 2001 totaling $351,000. Where
appropriate, the Bank makes specific reserves for future losses on
non-performing loans. The Bank has set up specific reserves of $28,000 on
these loans.

The bank also had other real estate owned $534,000 at September 30, 2000.
The OREO is comprised of completed residential condominium units. The original
balance of the loan was $1,500,000. The bank has been systematically selling
units and reducing its balance. The bank expects to recover all of its
principal from the sale of the property.

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Capital Resources. In the normal course of business, the capital position of
the Bank is reviewed by management and regulatory authorities. The Comptroller
of the Currency has specified guidelines for purposes of evaluating a banks
capital adequacy. Currently, banks must maintain a minimum primary capital
ratio of capital-to-assets of 4%. Primary capital includes the Banks
stockholders equity, subordinated debt, and the allowance for credit losses.
At September 30, 2001, the Banks primary capital ratio was approximately 8.6%.
In 1991, the Comptroller began evaluating banks capital on a risk basis i.e.
more capital will be required for commercial loans than for residential real
estate loan and even less will be required for government bonds. The
Comptroller will require a minimum of an 8% capital ratio under this risk based
method. Currently the Bank has a risk based capital ratio in excess of 12.5%.

Liquidity. Management of the Bank continually evaluates its liquidity
position. Management believes that the Banks investment portfolio, when
combined with interest bearing bank balances and Fed Funds sold, provides
adequate liquidity to meet the Banks needs. As noted in Funding Sources
above, management believes that the high concentration of time deposits is
primarily due to customer relationships and not to higher-than-market rates
and, thus, do not present any unusual liquidity risk. In addition, the bank has
established borrowing lines with correspondent banks, and with the Federal Home
Loan Bank to cover liquidity needs.

Impact of Inflation and Changing Prices. Unlike most industrial companies,
virtually all of the Banks assets and liabilities are monetary in nature. As
a result, interest rates have a more significant impact on the Banks
performance than do the effects of inflation. Interest rates do not
necessarily move in the same direction or with the same magnitude as the prices
of goods and services, since such prices are affected by inflation. In the
current interest rate environment, liquidity and the maturity structure of a
financial institutions assets and liabilities are also critical to the
maintenance of acceptable performance levels.

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Quantitative and Qualitative Disclosure About Market Risk

The Bank periodically performs asset/liability analysis to assess the
Banks sensitivity to changing market conditions.

The primary functions of asset/liability management is to assure adequate
liquidity and maintain an appropriate balance between interest-sensitive
earning assets and interest-bearing liabilities. Liquidity management involves
the ability to meet the cash flow requirements of customers who may be either
depositors wanting to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs. Interest rate
sensitivity management seeks to avoid fluctuating net interest margins and to
enhance consistent growth of net interest income through periods of changing
interest rates.

Marketable investment securities, particularly those of shorter
maturities, are a principal source of asset liquidity. Securities maturing or
expected to be called within one year or less amounted to $4,800,000 at
September 30, 2001 representing 12% of the investment securities portfolio.

Federal funds and lines of credit with other banks also provide the bank
with sources of funds for meeting its liquidity needs. At year-end, the bank
had lines of credit established with other banking institutions totaling
$23,500,000.

Brokered deposits are deposit instruments, such as certificates of
deposit, bank investment contracts and certain municipal investment contracts
that are issued through brokers who then offer and/or sell these deposit
instruments to one or more investors. The Bank does not currently purchase or
sell brokered deposits.

Maturities of time certificates of deposit and other time deposits of
$100,000 or more,
outstanding at September 30, 2001, are summarized as follows:

|                         |  |   |                        |  | 
|------------------------ |  | - | ---------------------- |  | 
|                         |  |   | Time Deposits         
|                         |  |   |                       
|                         |  |   | (thousands
of dollars)
|3 months or less         |  | $ | 10,251                 | 
|                        
|                        
|                        
|                        
|Over 3 through 12 months |  |   | 10,725                 | 
|                        
|                        
|                        
|                        
|Over 12 months           |  |   | 4,083                  | 
|                         |  |   |                        | 
|Total                    |  | $ | 20,976                 | 

Interest rate sensitivity varies with different types of interest earning
assets and interest-bearing liabilities. Overnight federal funds on which rates
change daily and loans which are tied to the prime rate differ considerably
from long-term investment securities and fixed-rate loans. Similarly, time
deposits over $100,000 and money market accounts are much more interest rate
sensitive than savings accounts. The shorter term interest rate sensitivities
are key to measuring the interest sensitivity gap, or excess interest-sensitive
earning assets over interest-bearing liabilities.

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The following table shows the interest sensitivity gaps for four different
time intervals as of June 30, 2001. For the first year, interest-sensitive
assets exceed liabilities by $5,707,000. For the next two years, liabilities
reprice more rapidly than assets lowering the banks asset sensitive position
to an essentially balanced position for the three year period. The excess of
interest-bearing liabilities over interest-earning assets for the one-to-three
year period is primarily related to the longer maturities of CDs and NOW and
MMA accounts that are regarded as much less rate sensitive.

|                               |  |                        |        |        |  |       |        |        |  |   |         |   |  |   |        | 
|------------------------------ |  | ---------------------- | ------ | ------ |  | ----- | ------ | ------ |  | - | ------- | - |  | - | ------ | 
|                               |  | As of June 30         
|                               |  | (thousands of dollars)
|                               |  |                       
|                               |  | 0-90                   |        | 91-365 |  | 1-3   |        | Over 3
|                               |  | Days                   |        | Days   |  | Years |        | Years 
|                               |  |                        |        |        |  |       |        |       
|Interest-sensitive assets      |  | $                      | 49,704 |        |  | $     | 49,285 |        |  | $ | 51,811  |   |  | $ | 32,483 | 
|                              
|                              
|                              
|                              
|Interest-sensitive liabilities |  |                        | 45,918 |        |  |       | 47,364 |        |  |   | 62,234  |   |  |   | 1,893  | 
|                               |  |                        |        |        |  |       |        |        |  |   |         |   |  |   |        | 
|Interest sensitivity gap       |  |                        | 3,786  |        |  |       | 1,928  |        |  |   | (10,424 | ) |  |   | 30,590 | 
|                              
|                              
|                              
|                              
|Cumulative gap                 |  | $                      | 3,786  |        |  | $     | 5,707  |        |  |   | ($4,717 | ) |  | $ | 25,873 | 

The primary interest sensitive assets and liabilities in the one-year
maturity range are loans and time deposits. Trying to minimize this gap while
maintaining earnings is a continual challenge in a changing interest rate
environment and one of the objectives of the Banks asset/liability management
strategy.

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##### Table of Contents






Part II. Other Information




Item 1: Legal Proceedings Against the Bank  None.




Item 2: Changes in Securities and
Use of Proceeds  None.




Items 3: Defaults under 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




Exhibits

|   |  |                                                                             
|-- |  | ----------------------------------------------------------------------------
|a) |  | Plan of acquisition, reorganization, arrangement,
liquidation, or succession
|  
|  
|  
|  
|   |  | None                                                                        
|  
|  
|  
|  
|b) |  | Articles of incorporation and by-laws                                       

|   |  |                                                                                                                                         
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|1) |  | A copy of the Amended and Restated
Articles of Incorporation of the Registrant is included
as Exhibit 3.A to the Registration Statement.
|  
|  
|  
|  
|2) |  | A copy of the Bylaws of the
Registrant is included as Exhibit 3.B to this
Registration Statement.                                       

|   |  |                                                                             
|-- |  | ----------------------------------------------------------------------------
|c) |  | Instruments defining the rights of securities
holders, including indentures.
|  
|  
|  
|  
|   |  | None                                                                        
|  
|  
|  
|  
|d) |  | Published report regarding matters submitted to
vote of security holders.   
|  
|  
|  
|  
|   |  | None                                                                        

Reports on Form 8-K - None

| |  |                                                                             
| |  | ----------------------------------------------------------------------------
| |  | FIRST NATIONAL BANCSHARES, INC.                                             
|
| |  | /s/ Glen W. Fausset
Glen W. Fausset
President and Director
November 13, 2001

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