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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 MARCH 31, 2005 FIRST NATIONAL BANCSHARES, INC.  Florida
    
    333-60283
    
    06-1522028(Jurisdiction of Organization)
    
    Commission
    
    I.R.S. EmployerFile Number
    
    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 þ No o 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
    
    3,306,757 shares(class)
    
    Outstanding as of April 30, 2005




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FIRST NATIONAL BANK OF MANATEE
Index to Form 10-Q
For the quarter Ended March 31, 2005 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets, March 31, 2005 and December 31, 2004
    
    
    1Condensed Consolidated Statements of Income for the three months ended March 31, 2005 and 2004
    
    
    3Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and March 31, 2004
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    6Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    10Item 4. Disclosure of Evaluation of Disclosure Controls and Procedures
    
    
    12PART II. OTHER INFORMATION.Item 1. Legal Proceedings
    
    
    13Item 2. Changes in Securities and Use of Proceeds
    
    
    13Item 3. Defaults under Senior Securities
    
    
    13Item 4. Submission of Matters to a vote of Security Holders
    
    
    13Item 5. Other Information.
    
    
    13Item 6. Exhibits and Reports on Form 8-K
    
    
    13SIGNATURES
    
    
    14Ex-31.1 Section 302 CEO CertificationEx-31.2 Section 302 CFO CertificationEx-32.1 Section 906 CEO CertificationEx-32.2 Section 906 CFO Certification




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##### Table of Contents



PART I. FINANCIAL INFORMATION 
 Item 1. Financial Statements FIRST NATIONAL BANCSHARES, INC. 
  March 31
    
    
    December 312005
    
    
    2004(Unaudited)Assets (000s)Cash and due from banks
    
    $
    9,064
    
    
    $
    6,826Federal funds sold
    
    
    0
    
    
    
    0Cash and cash equivalents
    
    
    9,064
    
    
    
    6,826Interest-bearing deposits in banks
    
    
    6,323
    
    
    
    5,636Securities available for sale, net of mark-to-market
adjustments of $(889) and $32
    
    
    68,584
    
    
    
    57,763Federal Home Loan Bank stock, at cost
    
    
    1,434
    
    
    
    1,353Loans, net of allowance for loan losses of $2,400 and $2,396
    
    
    236,172
    
    
    
    233,395Foreclosed assets
    
    
    0
    
    
    
    0Premises and equipment, net
    
    
    7,407
    
    
    
    7,555Goodwill
    
    
    975
    
    
    
    975Intangible Assets
    
    
    241
    
    
    
    249Other assets
    
    
    4,421
    
    
    
    3,855TOTAL ASSETS
    
    $
    334,621
    
    
    $
    317,607




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March 31
    
    
    December 312005
    
    
    2004(unaudited)Liabilities and Stockholders
Equity (000s)Deposits:Non-interest bearing
    
    $
    44,884
    
    
    $
    31,934Interest-bearing
    
    
    242,362
    
    
    
    236,848Total deposits
    
    
    287,246
    
    
    
    268,782Repurchase agreements
    
    
    2,270
    
    
    
    3,343Long-term debt
    
    
    15,600
    
    
    
    17,250Accrued expenses and other liabilities
    
    
    2,042
    
    
    
    1,377TOTAL LIABILITIES
    
    
    307,158
    
    
    
    290,752Stockholders equity:Common stock, $.10 par value, 25,000,000
shares authorized; 3,306,757 shares issued
    
    
    331
    
    
    
    329Additional paid-in capital
    
    
    22,450
    
    
    
    22,239Retained earnings
    
    
    5,237
    
    
    
    4,267Accumulated other comprehensive income
    
    
    (555
    )
    
    
    20Total stockholders equity
    
    
    27,463
    
    
    
    26,855TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    334,621
    
    
    $
    317,607




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FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY 
 
 3 months endedMarch 31
    
    
    March 312005
    
    
    2004Interest and dividend income:Loans, including fees
    
    $
    3,958
    
    
    $
    3,186Debt securities:Taxable
    
    
    495
    
    
    
    392Tax-exempt
    
    
    106
    
    
    
    85Other
    
    
    72
    
    
    
    15Total interest and dividend income
    
    
    4,631
    
    
    
    3,678Interest expense:Deposits
    
    
    1,201
    
    
    
    845Federal funds purchased and securities sold under
agreements to repurchase
    
    
    18
    
    
    
    25Long-term debt
    
    
    137
    
    
    
    108Total interest expense
    
    
    1,356
    
    
    
    978Net interest income
    
    
    3,275
    
    
    
    2,700Provision for loan losses
    
    
    41
    
    
    
    130Net interest income, after provision for loan losses
    
    
    3,234
    
    
    
    2,570Non-interest income:Customer service fees
    
    
    78
    
    
    
    98Trust Services Fees
    
    
    357
    
    
    
    217Financial Product Sales Commissions and fees
    
    
    68
    
    
    
    128Net gain (loss) on available-for-sale securities
    
    
    0
    
    
    
    0Net gain (loss) on sale of assets
    
    
    2
    
    
    
    0Other
    
    
    106
    
    
    
    99Total non-interest income (charges)
    
    
    611
    
    
    
    542Non-interest expenses:Salaries and employee benefits
    
    
    1,437
    
    
    
    1,302Occupancy and equipment
    
    
    371
    
    
    
    329Legal, examination, and audit expenses
    
    
    93
    
    
    
    61Data processing
    
    
    36
    
    
    
    35Other
    
    
    402
    
    
    
    359Total non-interest expenses
    
    
    2,339
    
    
    
    2,086Income before income taxes
    
    
    1,506
    
    
    
    1,026Income tax expenses
    
    
    536
    
    
    
    361Net income
    
    $
    970
    
    
    $
    665Earnings per share:Basic
    
    $
    0.29
    
    
    $
    0.21Diluted
    
    $
    0.28
    
    
    $
    0.20




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FIRST NATIONAL BANCSHARES, INC Earnings per Share
For the Period January 1 through March 31 3 months
    
    
    3 months2005
    
    
    20041Profit After Tax
    
    $
    970,000
    
    
    $
    665,000Average Shares Outstanding1
    
    
    3,293,192
    
    
    
    3,162,237Earnings per Share  Basic
    
    $
    0.29
    
    
    $
    0.21Average Shares Outstanding Fully Diluted1
    
    
    3,496,727
    
    
    
    3,393,743Earnings per Share Fully Diluted
    
    $
    0.28
    
    
    $
    0.20
    FIRST NATIONAL BANCSHARES, INC COMPREHENSIVE INCOME For the Period January 1 through March 31 (000s) COMPREHENSIVE INCOME: Under FASB Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, the Company is required to report a measure of all changes in equity, not
only reflecting net income but certain other changes as well. At March 31, 2005 and 2004,
comprehensive income was as follows: ($000s)3 months
    
    
    3 months2005
    
    
    2004Profit After Tax
    
    $
    970
    
    
    $
    665Unrealized Securities Gains Net of Taxes
    
    $
    (575
    )
    
    $
    321Comprehensive Income
    
    $
    395
    
    
    $
    986




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FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY 
   3 months endedMarch 31
    
    
    March 312005
    
    
    2004Operating activitiesNet Income
    
    
    970
    
    
    
    665Adjustments to reconcile net income to cash provided by operating
activities:Allowance for loan losses (net of charge offs)
    
    
    38
    
    
    
    131Depreciation
    
    
    138
    
    
    
    125Increase (decrease) in interest payable
    
    
    188
    
    
    
    91Increase (decrease) in accrued expenses other liabilities
    
    
    477
    
    
    
    769Decrease (increase) in interest receivable
    
    
    (179
    )
    
    
    (76
    )Decrease (increase) in other assets
    
    
    (60
    )
    
    
    (225
    )Net cash provided by operating activities
    
    
    1,572
    
    
    
    1,480Investing activitiesNet change in interest bearing deposits in banks
    
    
    (687
    )
    
    
    (4,069
    )Proceeds from sale and maturity of securities net of purchases
    
    
    (11,792
    )
    
    
    (4,150
    )Loans originated, net of principal collections
    
    
    (2,820
    )
    
    
    (8,783
    )Cash received in merger with Trust Company of Florida
    
    
    0
    
    
    
    112Capital expenditures net of depreciation
    
    
    10
    
    
    
    (72
    )Proceeds from sale of other R. E. and assets owned
    
    
    0
    
    
    
    0Increase (decrease) in FHLB borrowings
    
    
    (1,650
    )
    
    
    4,900Decrease (increase) in federal funds sold
    
    
    0
    
    
    
    0Net cash provided (used) by investing activities
    
    
    (16,939
    )
    
    
    (12,062
    )Financing activitiesNet increase (decrease) in demand deposits
    
    
    9,464
    
    
    
    4,631Net increase (decrease) time deposits
    
    
    9,001
    
    
    
    15,144Increase (decrease) in securities sold under agreements to repurchase
    
    
    (1,073
    )
    
    
    (6,720
    )Dividends paid
    
    
    0
    
    
    
    0Proceeds from issuance of common stock
    
    
    213
    
    
    
    30Retirement of common stock
    
    
    0
    
    
    
    0Principal payments under capital lease obligation
    
    
    0
    
    
    
    0Net cash (used) provided by financing activities
    
    
    17,605
    
    
    
    13,085Net increase in cash and due from banks
    
    
    2,238
    
    
    
    2,503Cash and due from banks at beginning of year
    
    $
    6,826
    
    
    $
    6,876Cash and due from banks at end of quarter
    
    $
    9,064
    
    
    $
    9,379Schedule of non-cash investing activities
    
    
    0
    
    
    
    0




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(1) NOTES TO CONDENSED FINANCIAL STATEMENTS Note 1  Basis of Financial Reporting The accompanying unaudited condensed consolidated 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 U.S. 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, 2004. Results for the three month period ended March 31, 2005, may not necessarily be indicative of those
to be expected for the entire year. Note 2 Effective February 29, 2004 the Company merged with the Trust Company of Florida (Trust Company).
The accompanying financial statements include the operations of the Trust Company since that date.
The total purchase price was $2,453,000 including $1,426,000 in common stock. Total assets acquired
(net of $42,000 in liabilities) were $2,548,000. These assets included $1,238,000 in cash and cash
equivalents, $130,000 in equipment and other assets, $249,000 for customer relationships and
$975,000 for goodwill. Pro forma information includes the Trust Company information as if
the merger had been completed as of January 1, 2004 March 312004(in thousands)Net interest income
    
    
    2,700Total other operating income
    
    
    641Net Income
    
    $
    612Basic earnings per share
    
    $
    0.21Fully diluted earnings per share
    
    $
    0.20




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Note 3 The components of net periodic pension cost are as follows: Quarter Ended March 31,2005
    
    
    2004(in thousands)Service cost
    
    $
    92
    
    
    $
    90Interest cost
    
    
    55
    
    
    
    48Expected return on plan assets
    
    
    (63
    )
    
    
    (59
    )Amortization of prior service cost
    
    
    2
    
    
    
    1Recognized net actuarial loss
    
    
    27
    
    
    
    19$
    113
    
    
    $
    99
 For the quarter ended March 31, 2005 and 2004, the assumptions used to determine net periodic
pension cost are as follows: Quarter Ended March 31,2005
    
    
    2004Discount rate
    
    
    5.75
    %
    
    
    6.25
    %Expected long-term rate of return on plan assets
    
    
    8.00
    %
    
    
    8.00
    %Annual salary increase
    
    
    4.00
    %
    
    
    4.00
    %
 Note 4 Had compensation cost for the Corporations stock option plan been determined based on the fair
value at the grant dates for awards under the plan consistent with the method prescribed by SFAS
No. 123, the Corporations net income and earnings per share would have been adjusted to the pro
forma amounts indicated below: Quarter Ended March 31,2005
    
    
    2004(in thousands)Net income
    
    $
    970
    
    
    $
    665Additional expense had the Corporation adopted SFAS No.
123
    
    
    (29
    )
    
    
    (25
    )Pro forma net income
    
    $
    941
    
    
    $
    640Basic earnings per share  As reported
    
    
    .29
    
    
    
    .21- Pro forma
    
    
    .29
    
    
    
    .20Diluted earnings per share  As reported
    
    
    .28
    
    
    
    .20- Pro forma
    
    
    .27
    
    
    
    .19




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Managements Discussion and Analysis of Financial Condition and Results of Operations. Overview. 1st National Bank & Trust (formerly 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, the bank
opened its third branch on State Road 70 (8 miles southeast of the main office). The Bank opened
its latest Branch in Ellenton at the corner of US 301 and Old Tampa Road. 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. In March of 2004, the Bank merged with The Trust Company of Florida, a Florida chartered Trust
Bank. The operations of Trust Company for the month of March, 2004 are included in the operating
statement of the company. The operations for the first two months of the quarter, prior to the
merger, are noted but not included in the operating totals. The following discussion and analysis is based on the Holding Companys financial condition
and results of operations for the period from January 1, 2005 through March 31, 2005. 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 quarter of 2005 were up $305,000 or 46% compared to earnings in the same
period last year as direct result of net interest income increasing 26% after loan loss provision
while other operating income increased 13% and corresponding expenses grew 12%. The major
component of the increased overhead was salary expense due to increased headcount, increased cost
of benefits, and increased occupancy associated with the acquisition of the Trust Company of
Florida in March of last year. These were offset by the increased other operating income resulting
from that acquisition. The Banks contribution of $41,000 to loan loss reserve was $89,000 lower
than last year due to lower loan growth than in the first quarter of last year. 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,




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primarily deposits. The spread is considered positive when rate-sensitive assets exceed
rate-sensitive liabilities, and negative when rate-sensitive liabilities 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 March 31, 2005, the Banks loan portfolio had a high
ratio of repriceability within one year. Historically, low interest rates have accelerated the number of loans paying off to due to
refinancing. As a result, last year, the Bank had only budgeted growth in its loan portfolio
despite strong loan activity. However, as rates have bottomed out and recently begun to rise, the
refinancing activity has slowed. Net interest income for three months in 2005 was $3,234,000
compared to $2,570,000 in 2004. Interest Earning Assets. Real estate related loans at March 31, 2005, 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. This can result in periods when the banks net interest income is
either higher or lower than the norm. However, the bank receives wider margins on this type of
loan than on a truly floating loan. Management believes the improved margins more than offset the
temporary periods where moving rates can temporarily affect interest margins. The Banks investment portfolio is concentrated primarily in U.S. Government agencies and
corporations. The Banks Available-for-Sale portfolio has a market value of about $889,000 below
book value. Non-interest Earning Assets. Non-interest earning assets accounted for 6.3% of total
assets on March 31, 2005, and primarily consisted of cash and due from banks, branches and
equipment, accrued interest receivable and intangible assets resulting from the merger with The
Trust Company of Florida. Funding Sources. The primary source of funds for the Banks lending and investment
activities is deposits. At March 31, 2005 the Banks total deposits were $287.2 million plus $2.3
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 84% of its deposits in
interest bearing accounts. Since 2001, the bank has been successful in attracting more deposits
into NOW accounts and money market accounts and fewer into certificates of deposit. This
improvement in deposit mix was sustained into 2005. This was a significant part of the banks
improved net interest margin over the last several years. Non-interest Income. The Banks non-interest income for the three month period ended March
31, 2005 was $611,000 including $425,000 from its Trust and Financial Services area. Periodic
security transactions generate investment gains or losses and are primarily a result of tax
management considerations and liquidity requirements. The bank had no security gains in the first
quarter of 2005. The other significant items of non-interest income represented service charges on
deposit accounts and merchant credit card account income. Non-interest Expense. The Banks non-interest expense for the three month period ended
March 31, 2005 was $2,339,000 including $1,437,000 of salaries and employee benefits. The Banks
occupancy and equipment expenses for the period ended March 31, 2005 were $371,000. Non-interest
expense was up from $2,086,000 in




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2004. The increase in expense is primarily due to an increase in staff and occupancy associated
with the companys acquisition of The Trust Company of Florida. 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 $41,000 was charged to operating expenses for the three
month period ended March 31, 2005. The Bank had $8,000 in charge offs during this period and had
$5,000 in recoveries. The Bank has a total of $2,400,000 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 no loans on non-accrual at March 31, 2005. Where
appropriate, the Bank makes specific reserves for future losses on non-performing loans. The Bank
has no specific reserves established at March 31, 2005. The bank also had no other real estate owned (OREO) at March 31,2005. 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 Tier I capital ratio of capital-to-assets of 5% to be considered well capitalized. For
1st National Bank & Trust, Tier I Capital includes only the Banks stockholders equity.
At March 31, 2005, the Banks Tier I Capital leverage ratio was approximately 8.05%. 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 and 10% to be considered well capitalized. Currently the Bank has a total risk based
capital ratio in excess of 11.7 %. 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. Management
believes that the banks time deposits are concentrated in instruments that are primarily due to
customer relationships and not to higher-than-market rates




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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 function 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 $9,210,000 at March 31, 2005 representing 13% of the investment securities portfolio,
with an additional 17% in the second year. This is due to the Bank making an effort to shorten its
average bond maturity while rates are low. Shortening the maturity of the portfolio will have the
effect of not locking in investment rates while rates are low. The Bank moderates its liquidity needs by maintaining short term borrowing lines with several
regional banks. At March 31, the Bank had lines of credit established with other banking
institutions exceeding $100,000,000. 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 March 31, 2005, are summarized as follows: Time Deposits(thousands of dollars)3 months or less
    
    $
    9,461Over 3 through 12 months
    
    
    22,170Over 12 through 36 months
    
    
    3,541Over 36 months
    
    
    0Total
    
    $
    35,172
 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 passbook 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. The following table shows the interest sensitivity gaps for four different time intervals as
of March 31, 2005. For the first year, interest-sensitive assets exceed liabilities by $51,155,000.
Over the following two years, liabilities re-price faster than assets. 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.




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##### Table of Contents



As of March 31(thousands of dollars)0-90
    
    
    91-365
    
    
    1-3
    
    
    Over 3Days
    
    
    Days
    
    
    Years
    
    
    YearsInterest-sensitive assets
    
    $
    98,556
    
    
    $
    87,335
    
    
    $
    77,156
    
    
    $
    50,858Interest-sensitive
liabilities
    
    
    61,852
    
    
    
    72,884
    
    
    
    121,504
    
    
    
    3,993Interest sensitivity gap
    
    
    36,704
    
    
    
    14,451
    
    
    
    (44,348
    )
    
    
    46,865Cumulative gap
    
    $
    36,704
    
    
    $
    51,155
    
    
    $
    6,807
    
    
    $
    53,672
 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. Management has adopted a philosophy of balancing assets and liabilities over a
three-year period, which it has accomplished. Management feels that the rate rewards of being
balanced over a three-year period more than offset the risk of being modestly and temporarily
unbalanced over the short term.




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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. - Noneb)
    
    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 filed with the Securities and Exchange Commission
on July 31, 1998 (Registration No. 333-60283).2
    )
    
    A copy of the Bylaws of the Registrant is included in
the companys 10-k, as filed with the Securities and Exchange Commission
on March 22, 2004 (Registration No. 333-60283).c)
    
    Instruments defining the rights of securities holders, including
indentures. - Noned)
    
    Published report regarding matters submitted to vote of security
holders. - None31.1
    
    CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act
of 2002.32.1
    
    Certification pursuant to 18 U.S.C. section 1350, as enacted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification pursuant to 18 U.S.C. section 1350, as enacted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST NATIONAL BANCSHARES, INC.(Registrant)Date: May 10, 2005
    By          /s/ Glen W. FaussetPresident and Chief Financial Officer