##### 



EXHIBIT 99
 FIRST NATIONAL BANCSHARES, INC.
 CONSOLIDATED FINANCIAL STATEMENTS
 (INCLUDING WHOLLY OWNED SUBSIDIARY
 1ST NATIONAL BANK & TRUST)




---



##### 



FIRST NATIONAL BANCSHARES, INC.
 CONSOLIDATED FINANCIAL STATEMENTS
 TABLE OF CONTENTS
 PAGEINDEPENDENT AUDITORS REPORT
    
    
    1CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS
    
    
    2CONSOLIDATED STATEMENTS OF INCOME
    
    
    3CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
    
    
    4CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    
    5NOTES TO FINANCIAL STATEMENTS
    
    
    6-26




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##### 



INDEPENDENT AUDITORS REPORT
 
    /s/ CHRISTOPHER, SMITH, LEONARD,BRISTOW & STANELL, P.A.
 
 1




---



##### 



FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
  December 31,2004
    
    
    2003(in thousands)AssetsCash and due from banks
    
    $
    6,826
    
    
    $
    6,876Federal funds sold
    
    
    0
    
    
    
    0Cash and cash equivalents
    
    
    6,826
    
    
    
    6,876Interest bearing deposits in banks
    
    
    5,636
    
    
    
    8,412Securities available for sale
    
    
    57,795
    
    
    
    46,172Federal Home Loan Bank stock, at cost
    
    
    1,353
    
    
    
    652Loans, net of allowance for loan losses of $2,362and $2,067
    
    
    233,395
    
    
    
    204,314Foreclosed assets
    
    
    0
    
    
    
    0Premises and equipment, net
    
    
    7,555
    
    
    
    7,737Goodwill
    
    
    975
    
    
    
    0Intangible Assets
    
    
    249
    
    
    
    0Other assets
    
    
    3,823
    
    
    
    3,069TOTAL ASSETS
    
    $
    317,607
    
    
    $
    277,232Liabilities and Stockholders EquityDeposits:Non interest bearing
    
    $
    31,934
    
    
    $
    32,991Interest bearing
    
    
    236,848
    
    
    
    200,336Total deposits
    
    
    268,782
    
    
    
    233,327Repurchase agreements
    
    
    3,343
    
    
    
    11,301Long term debt
    
    
    17,250
    
    
    
    9,500Accrued expenses and other liabilities
    
    
    1,377
    
    
    
    1,089TOTAL LIABILITIES
    
    
    290,752
    
    
    
    255,217Stockholders equity:Common stock, $.10 par value, 25,000,000 shares authorized; 3,286,271 shares issued
    
    
    329
    
    
    
    199Additional paid in capital
    
    
    22,239
    
    
    
    16,209Retained earnings
    
    
    4,267
    
    
    
    5,454Accumulated other comprehensive income
    
    
    20
    
    
    
    153Total stockholders equity
    
    
    26,855
    
    
    
    22,015TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    317,607
    
    
    $
    277,232
  2




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##### 



FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
  Years Ended December 31,2004
    
    
    2003
    
    
    2002(in thousands, except per share data)Interest and dividend income:Loans, including fees
    
    $
    13,785
    
    
    $
    10,933
    
    
    $
    10,987Debt securities:Taxable
    
    
    1,494
    
    
    
    1,168
    
    
    
    1,495Tax-exempt
    
    
    341
    
    
    
    377
    
    
    
    387Other
    
    
    140
    
    
    
    139
    
    
    
    157Total interest and dividend income
    
    
    15,760
    
    
    
    12,617
    
    
    
    13,026Interest expense:Deposits
    
    
    3,714
    
    
    
    2,760
    
    
    
    3,233Federal funds purchased and securities sold under
agreements to repurchase
    
    
    87
    
    
    
    158
    
    
    
    252Long-term debt
    
    
    504
    
    
    
    226
    
    
    
    311Total interest expense
    
    
    4,305
    
    
    
    3,144
    
    
    
    3,796Net interest income
    
    
    11,455
    
    
    
    9,473
    
    
    
    9,230Provision for loan losses
    
    
    314
    
    
    
    448
    
    
    
    321Net interest income, after provision for loan losses
    
    
    11,141
    
    
    
    9,025
    
    
    
    8,909Non-interest income:Customer service fees
    
    
    372
    
    
    
    456
    
    
    
    502Trust Services Fees
    
    
    1,259
    
    
    
    621
    
    
    
    556Financial Product Sales Commissions and fees
    
    
    336
    
    
    
    252
    
    
    
    213Net gain (loss) on available-for-sale securities
    
    
    (0
    )
    
    
    87
    
    
    
    0Net gain (loss) on sale of assets
    
    
    (10
    )
    
    
    (1
    )
    
    
    (2
    )Other
    
    
    358
    
    
    
    452
    
    
    
    376Total non-interest income (charges)
    
    
    2,315
    
    
    
    1,867
    
    
    
    1,645Non-interest expenses:Salaries and employee benefits
    
    
    5,173
    
    
    
    4,686
    
    
    
    3,964Occupancy and equipment
    
    
    1,389
    
    
    
    1,233
    
    
    
    1,176Legal, examination, and audit expenses
    
    
    272
    
    
    
    267
    
    
    
    210Data processing
    
    
    142
    
    
    
    123
    
    
    
    129Other
    
    
    1,535
    
    
    
    1,312
    
    
    
    1,193Total non-interest expenses
    
    
    8,511
    
    
    
    7,621
    
    
    
    6,672Income before income taxes
    
    
    4,945
    
    
    
    3,271
    
    
    
    3,882Income tax expenses
    
    
    1,764
    
    
    
    1,120
    
    
    
    1,348Net income
    
    $
    3,181
    
    
    $
    2,151
    
    
    $
    2,534Earnings per share:Basic
    
    $
    .98
    
    
    $
    .69
    
    
    $
    .83Diluted
    
    $
    .92
    
    
    $
    .64
    
    
    $
    .77
  3




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##### 



FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
  AccumulatedShares of
    
    
    
    
    
    Additional
    
    
    
    
    
    OtherCommon
    
    
    
    
    
    Paid-in
    
    Retained
    
    ComprehensiveStock
    
    Common Stock
    
    Capital
    
    Earnings
    
    Income (Loss)
    
    Total(in thousands, except share data)Balance at December 31, 2001
    
    
    1,748,779
    
    
    $
    175
    
    
    $
    12,219
    
    
    $
    4,388
    
    
    $
    266
    
    
    $
    17,048Comprehensive income:Net income
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    2,534
    
    
    
    0
    
    
    
    2,534Change in net unrealized gain (loss) on
securities available for sale, net of tax
effect
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    335
    
    
    
    335Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,8695% Stock Dividend (Fractional Shares Paid in Cash)
    
    
    87,336
    
    
    
    9
    
    
    
    1,586
    
    
    
    (1,600
    )
    
    
    0
    
    
    
    (5
    )Exercise of Stock Options
    
    
    10,606
    
    
    
    1
    
    
    
    83
    
    
    
    0
    
    
    
    0
    
    
    
    84Balance at December 31, 2002
    
    
    1,846,721
    
    
    $
    185
    
    
    $
    13,888
    
    
    $
    5,322
    
    
    $
    601
    
    
    $
    19,996Comprehensive income:Net income
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    2,151
    
    
    
    0
    
    
    
    2,151Change in net unrealized gain (loss) on
securities available for sale, net of tax
effect
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (448
    )
    
    
    (448
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,7035% Stock Dividend (Fractional Shares Paid in Cash)
    
    
    94,554
    
    
    
    9
    
    
    
    2,005
    
    
    
    (2,019
    )
    
    
    0
    
    
    
    (5
    )Exercise of Stock Options
    
    
    53,465
    
    
    
    5
    
    
    
    316
    
    
    
    0
    
    
    
    0
    
    
    
    321Balance at December 31, 2003
    
    
    1,994,740
    
    
    $
    199
    
    
    $
    16,209
    
    
    $
    5,454
    
    
    $
    153
    
    
    $
    22,015Comprehensive income:Net income
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    3,181
    
    
    
    0
    
    
    
    3,181Change in net unrealized gain (loss) on
securities available for sale, net of tax
effect
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (133
    )
    
    
    (133
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,048Acquisition of Trust Company of Florida and
Merger into 1st National Bank & Trust
(Subsidiary)
    
    
    66,960
    
    
    
    7
    
    
    
    1,419
    
    
    
    0
    
    
    
    0
    
    
    
    1,42650% Stock Split (Fractional Shares Paid in Cash)
    
    
    1,038,555
    
    
    
    104
    
    
    
    0
    
    
    
    (108
    )
    
    
    0
    
    
    
    (4
    )5% Stock Dividend (Fractional Shares Paid in Cash)
    
    
    155,988
    
    
    
    16
    
    
    
    4,235
    
    
    
    (4,260
    )
    
    
    0
    
    
    
    (9
    )Exercise of Stock Options
    
    
    30,028
    
    
    
    3
    
    
    
    376
    
    
    
    0
    
    
    
    0
    
    
    
    379Balance at December 31, 2004
    
    
    3,286,271
    
    
    $
    329
    
    
    $
    22,239
    
    
    $
    4,267
    
    
    $
    20
    
    
    $
    26,855
  4




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##### 



FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
  Years Ended December 31,2004
    
    
    2003
    
    
    2002(in thousands)Cash flows from operating activities:Net income
    
    $
    3,181
    
    
    $
    2,151
    
    
    $
    2,534Adjustments to reconcile net income to net cash provided (used)
by operating activities:Provision for loan losses
    
    
    291
    
    
    
    347
    
    
    
    154Provision for foreclosed asset losses
    
    
    0
    
    
    
    0
    
    
    
    0Net amortization of securities
    
    
    354
    
    
    
    368
    
    
    
    171Amortization of deferred loan (fees)
    
    
    62
    
    
    
    126
    
    
    
    144Depreciation
    
    
    543
    
    
    
    524
    
    
    
    547Realized loss (gain) on sales of available-for- sale securities, net
    
    
    (0
    )
    
    
    (87
    )
    
    
    (0
    )Realized loss (gain) on sales of fixed assets
    
    
    9
    
    
    
    1
    
    
    
    (2
    )Deferred income tax benefit
    
    
    (202
    )
    
    
    (38
    )
    
    
    123Net change in:Other assets and liabilities, net
    
    
    (870
    )
    
    
    (304
    )
    
    
    353Net cash provided (used) by operating activities
    
    
    3,368
    
    
    
    3,088
    
    
    
    4,024Cash flows from investing activities:Net change in interest-bearing deposits in banks
    
    
    2,776
    
    
    
    (2,958
    )
    
    
    7,419Activity in available-for-sale securities:Sales
    
    
    0
    
    
    
    5,842
    
    
    
    1,260Maturities, prepayments and calls
    
    
    6,742
    
    
    
    18,917
    
    
    
    7,344Purchases
    
    
    (18,932
    )
    
    
    (31,209
    )
    
    
    (12,155
    )Loan originations and principal collections, net
    
    
    (29,436
    )
    
    
    (48,213
    )
    
    
    (12,585
    )Cash received in merger of Trust Company of Florida
    
    
    112
    
    
    
    0
    
    
    
    0Recoveries on loans charged off in prior years
    
    
    4
    
    
    
    16
    
    
    
    14Proceeds from sales of foreclosed assets
    
    
    0
    
    
    
    0
    
    
    
    593Proceeds from sales of fixed assets
    
    
    0
    
    
    
    0
    
    
    
    12Additions to premises and equipment
    
    
    (297
    )
    
    
    (223
    )
    
    
    (3,112
    )Net cash provided (used) by investing activities
    
    
    (39,031
    )
    
    
    (57,828
    )
    
    
    (11,210
    )Cash flows from financing activities:Net increase in deposits
    
    
    35,455
    
    
    
    52,815
    
    
    
    4,663Net change in federal funds purchased and securities sold under agreements
to repurchase
    
    
    (7,958
    )
    
    
    (4,510
    )
    
    
    2,846Principal payments under capital lease
    
    
    0
    
    
    
    0
    
    
    
    (1
    )Proceeds from issuance of long-term debt net of principal payments
    
    
    7,750
    
    
    
    5,000
    
    
    
    (500
    )Proceeds from issuance of stock under stock option plan
    
    
    379
    
    
    
    321
    
    
    
    84Cash dividends paid on common stock
    
    
    (13
    )
    
    
    (5
    )
    
    
    (5
    )Net cash provided by financing activities
    
    
    35,613
    
    
    
    53,621
    
    
    
    7,087Net change in cash and cash equivalents
    
    
    (50
    )
    
    
    (1,119
    )
    
    
    (99
    )Cash and cash equivalents at beginning of year
    
    
    6,876
    
    
    
    7,995
    
    
    
    8,094Cash and cash equivalents at end of year
    
    $
    6,826
    
    
    $
    6,876
    
    
    $
    7,995Supplementary cash flow information:Interest paid on deposits and borrowed funds
    
    $
    4,212
    
    
    $
    3,215
    
    
    $
    3,941Income taxes paid
    
    
    1,803
    
    
    
    1,044
    
    
    
    1,371
  5




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##### 



FIRST
NATIONAL BANCSHARES, INC. AND SUBSIDIARY
 Notes To Consolidated Financial Statements
 NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
  Nature of Operations
  Use of Estimates
  Significant Group Concentrations of Credit Risk
  Cash and Cash Equivalents
  Interest-bearing Deposits in Banks
  Trading Activities
  Securities
   Loans
  6




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##### 



Allowance for Loan Losses
      Servicing
  Off-Balance Sheet Credit Related Financial Instruments
  7




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##### 



Derivative Financial Instruments and Change in Accounting Principle
  Interest Rate Swap Agreement.
  Foreclosed Assets
  Premises and Equipment
  Goodwill and Intangible Assets
   Year ended December 31 (000s)2004
    
    2003
    
    2002Net Income
    
    $
    3,128
    
    
    $
    1,943
    
    
    $
    2,286Earnings per ShareBasic
    
    $
    .96
    
    
    $
    .62
    
    
    $
    .75Diluted
    
    $
    .90
    
    
    $
    .57
    
    
    $
    .69
 Transfers of Financial Assets
  Income Taxes
  Reclassifications
  Retirement Plan
  Stock Compensation Plans
  8




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##### 



Years Ended December 31,2004
    
    2003
    
    2002(in thousands)Net income
    
    $
    3,181
    
    
    $
    2,151
    
    
    $
    2,534Additional expense had the Corporation
adopted SFAS No. 123
    
    
    (101
    )
    
    
    (144
    )
    
    
    (107
    )Pro forma net income
    
    $
    3,080
    
    
    $
    2,007
    
    
    $
    2,427Basic
earnings per share  As reported
    
    
    .98
    
    
    
    .69
    
    
    
    .83 Pro forma
    
    
    .95
    
    
    
    .64
    
    
    
    .80Diluted
earnings per share  As reported
    
    
    .92
    
    
    
    .64
    
    
    
    .77 Pro forma
    
    
    .89
    
    
    
    .60
    
    
    
    .74
  Earnings Per Common Share
  Years Ended December 31,2004
    
    2003
    
    2002(in thousands)Net income
    
    $
    3,181
    
    
    $
    2,151
    
    
    $
    2,534Average number of common shares outstanding
    
    
    3,254
    
    
    
    3,132
    
    
    
    3,043Effect of dilutive options
    
    
    208
    
    
    
    209
    
    
    
    249Average number of common shares
outstanding used to calculate diluted
earnings per common share
    
    
    3,462
    
    
    
    3,341
    
    
    
    3,292
 Comprehensive Income
   Years Ended December 31,2004
    
    2003
    
    2002(in thousands)Unrealized holding gains on available-for-sale securities
    
    $
    (213
    )
    
    $
    (718
    )
    
    $
    537Tax effect
    
    
    80
    
    
    
    270
    
    
    
    (202
    )Net-of-tax amount
    
    $
    (133
    )
    
    $
    (448
    )
    
    $
    335
 9




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##### 



December 31,2004
    
    2003(in thousands)Net unrealized gain (loss) on securities available for sale
    
    $
    32
    
    
    $
    245Tax effect
    
    
    (12
    )
    
    
    (92
    )Net-of-tax amount
    
    
    20
    
    
    
    153Accumulated other comprehensive income (loss)
    
    $
    20
    
    
    $
    153
 Recent accounting pronouncements
    NOTE 2RESTRICTIONS ON CASH AND AMOUNTS DUE FROM BANKS
  NOTE 3SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
  10




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##### 



NOTE 4SECURITIES
  December 31, 2004Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    Value(in thousands)Securities Available-for-SaleDebt securities:U.S. Government and federal agency
    
    $
    9,491
    
    
    $
    57
    
    
    ($
    65
    )
    
    $
    9,483State and Political Subdivisions
    
    
    10,292
    
    
    
    316
    
    
    
    (31
    )
    
    
    10,577Mortgage-backed
    
    
    37,980
    
    
    
    69
    
    
    
    (314
    )
    
    
    37,735Total debt securities available for sale
    
    
    57,763
    
    
    
    442
    
    
    
    (410
    )
    
    
    57,795
 December 31, 2003Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    Value(in thousands)Securities Available-for-SaleDebt securities:U.S. Government and federal agency
    
    $
    6,000
    
    
    $
    100
    
    
    $
    (77
    )
    
    $
    6,023State and Political Subdivisions
    
    
    8,568
    
    
    
    451
    
    
    
    (14
    )
    
    
    9,005Mortgage-backed
    
    
    31,360
    
    
    
    165
    
    
    
    (381
    )
    
    
    31,144Total
    
    
    45,928
    
    
    
    716
    
    
    
    (472
    )
    
    
    46,172
   Available for SaleAmortized
    
    FairCost
    
    Value(in thousands)Within 1 year
    
    $
    4,160
    
    
    $
    4,213Over 1 year through 5 years
    
    
    11,725
    
    
    
    11,846After 5 years through 10 years
    
    
    3,898
    
    
    
    4,001Over 10 years
    
    
    0
    
    
    
    019,783
    
    
    
    20,060Mortgage-backed securities
    
    
    37,980
    
    
    
    37,735$
    57,763
    
    
    $
    57,795
  11




---



##### 



Less Than Twelve Months
    
    Over Twelve MonthsGross
    
    
    
    
    
    GrossUnrealized
    
    Fair
    
    Unrealized
    
    FairLosses
    
    Value
    
    Losses
    
    Value(in thousands)Securities Available for SaleDebt Securities:U.S. Government and Federal Agencies
    
    
    65
    
    
    
    2,932
    
    
    
    0
    
    
    
    0Mortgage-backed
    
    
    199
    
    
    
    18,287
    
    
    
    115
    
    
    
    7,684State and Political Subdivisions
    
    
    29
    
    
    
    2,383
    
    
    
    2
    
    
    
    251Total debt securities
    
    $
    293
    
    
    $
    23,602
    
    
    $
    117
    
    
    $
    7,935
   NOTE 5LOANS
  December 31,2004
    
    2003(in thousands)Mortgage loans on real estate:Residential 1-4 family
    
    $
    65,219
    
    
    $
    70,371Commercial
    
    
    134,645
    
    
    
    107,838Construction
    
    
    10,709
    
    
    
    10,200Second mortgages
    
    
    3,941
    
    
    
    1,479Equity lines of credit
    
    
    5,081
    
    
    
    3,933Total mortgage loans on real estate
    
    
    219,595
    
    
    
    193,821Commercial loans
    
    
    13,933
    
    
    
    9,864Consumer installment loans:Personal
    
    
    2,436
    
    
    
    2,863Credit cards
    
    
    216
    
    
    
    194Total consumer installment loans
    
    
    2,652
    
    
    
    3,057Total loans
    
    
    236,180
    
    
    
    206,742Less: Allowance for loan losses
    
    
    (2,362
    )
    
    
    (2,067
    )Net deferred loan fees
    
    
    (423
    )
    
    
    (361
    )Loans, net
    
    $
    233,395
    
    
    $
    204,314
 12




---



##### 



Years Ended December 31,2004
    
    2003
    
    2002(in thousands)Balance at beginning of year
    
    $
    2,067
    
    
    $
    1,704
    
    
    $
    1,551Provision for loan losses
    
    
    314
    
    
    
    448
    
    
    
    321Loans charged-off
    
    
    (23
    )
    
    
    (101
    )
    
    
    (182
    )Recoveries of loans previously charged-off
    
    
    4
    
    
    
    16
    
    
    
    14Balance at end of year
    
    $
    2,362
    
    
    $
    2,067
    
    
    $
    1,704
  NOTE 6PREMISES AND EQUIPMENT
  December 31,2004
    
    2003(in thousands)Premises:Land
    
    $
    2,623
    
    
    $
    2,623Buildings & Improvements
    
    
    4,930
    
    
    
    4,926Equipment
    
    
    3,291
    
    
    
    3,26510,844
    
    
    
    10,814Accumulated depreciation
    
    
    (3,289
    )
    
    
    (3,077
    )$
    7,555
    
    
    $
    7,737
   2005
    
    $
    2272006
    
    
    1902007
    
    
    1852008
    
    
    762008
    
    
    76Thereafter
    
    
    102$
    856
  13




---



##### 



NOTE 7DEPOSITS
   2005
    
    $
    81,5442006
    
    
    18,4312007
    
    
    1,7842008
    
    
    5372009
    
    
    353Thereafter
    
    
    0Total
    
    $
    102,649
  NOTE 8SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
  NOTE 9LONG-TERM DEBT
    December 31,Fixed Rate2004
    
    2003(in thousands)Due in 2004
    
    
    
    
    
    $
    2,200Due in 2005
    
    
    4,300
    
    
    
    2,200Due in 2006
    
    
    4,300
    
    
    
    2,200Due in 2007
    
    
    3,800
    
    
    
    1,700Due in 2008
    
    
    3,300
    
    
    
    1,200Due in 2009
    
    
    1,550
    
    
    
    0Thereafter
    
    
    0
    
    
    
    0Total long-term debt
    
    $
    17,250
    
    
    $
    9,500
 14




---



##### 



NOTE 10INCOME TAXES
  Years Ended December 312004
    
    2003
    
    2002(in thousands)Current tax provision:Federal
    
    $
    1,635
    
    
    $
    970
    
    
    $
    1,029State
    
    
    298
    
    
    
    187
    
    
    
    1961,933
    
    
    
    1,157
    
    
    
    1,225Deferred tax benefit:Federal
    
    
    (143
    )
    
    
    (31
    )
    
    
    105State
    
    
    (26
    )
    
    
    (6
    )
    
    
    18(169
    )
    
    
    (37
    )
    
    
    123$
    1,764
    
    
    $
    1,120
    
    
    $
    1,348
  Years Ended December 312004
    
    2003
    
    2002Statutory federal tax rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %Increase (decrease) resulting from:State taxes, net of federal tax
benefit
    
    
    3.6
    
    
    
    3.6
    
    
    
    3.6TEFRA deduction
    
    
    (2.2
    )
    
    
    (4.1
    )
    
    
    (3.5
    )Other, net
    
    
    .3
    
    
    
    .7
    
    
    
    .6Effective tax rate
    
    
    35.7
    %
    
    
    34.2
    %
    
    
    34.7
    %
  December 31,2004
    
    2003(in thousands)Deferred tax assets:Deferred loan fees
    
    
    159
    
    
    
    136Deferred Compensation
    
    
    77
    
    
    
    0Allowance for loan losses
    
    
    827
    
    
    
    716Total Deferred Tax Assets
    
    $
    1,063
    
    
    $
    852Deferred tax liabilities:Net unrealized gain on securities available-for-sale
    
    
    13
    
    
    
    92Employee pension plan
    
    
    505
    
    
    
    510Deferred gain on land sale
    
    
    124
    
    
    
    124Depreciation
    
    
    64
    
    
    
    50Other
    
    
    2
    
    
    
    2Total Deferred Tax Liabilities
    
    $
    708
    
    
    $
    778Net Deferred Tax Asset
    
    $
    355
    
    
    $
    74
 15




---



##### 



NOTE 11OFF-BALANCE SHEET ACTIVITIES
 Credit-Related Financial Instruments.
  Contract Amount2004
    
    2003(in thousands)Commitments to grant loans
    
    $
    23,831
    
    
    $
    23,466Unfunded commitments under lines of credit
    
    
    12,516
    
    
    
    11,120Standby letters of credit
    
    
    1,690
    
    
    
    1,895
    NOTE 12  ON-BALANCE SHEET DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 Derivative Financial Instruments
  Risk Management Policies  Hedging Instruments
  Interest Rate Risk Management  Cash Flow Hedging Instruments
  16




---



##### 



Interest Rate Risk Management  Fair Value Hedging Instrument
  Interest Rate Risk Management  Derivative Instruments Not Designated As Hedging Instruments
  NOTE 13LEGAL CONTINGENCIES
  17




---



##### 



NOTE 14MINIMUM REGULATORY CAPITAL REQUIREMENTS
    Minimum To Be WellCapitalized UnderMinimum Capital
    
    Prompt CorrectiveActual
    
    Requirement
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(dollars in thousands)December 31, 2004:Total Capital to Risk Weighted Assets:Consolidated
    
    $
    27,972
    
    
    
    11.7
    %
    
    $
    19,116
    
    
    
    8.0
    %
    
    $
    N/A
    
    
    
    N/A1st National Bank & Trust
    
    
    27,835
    
    
    
    11.7
    
    
    
    19,112
    
    
    
    8.0
    
    
    
    23,890
    
    
    
    10.0Tier 1 Capital to Risk Weighted Assets:Consolidated
    
    
    25,610
    
    
    
    10.7
    
    
    
    9,558
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/A1st National Bank & Trust
    
    
    25,473
    
    
    
    10.7
    
    
    
    9,556
    
    
    
    4.0
    
    
    
    14,334
    
    
    
    6.0Tier 1 Capital to Average Assets:Consolidated
    
    
    25,610
    
    
    
    8.2
    
    
    
    12,520
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/A1st National Bank & Trust
    
    
    25,473
    
    
    
    8.1
    
    
    
    12,515
    
    
    
    4.0
    
    
    
    15,643
    
    
    
    5.0December 31, 2003:Total Capital to Risk Weighted Assets:Consolidated
    
    
    23,929
    
    
    
    11.7
    
    
    
    16,367
    
    
    
    8.0
    
    
    
    N/A
    
    
    
    N/A1st National Bank & Trust
    
    
    23,548
    
    
    
    11.5
    
    
    
    16,362
    
    
    
    8.0
    
    
    
    20,453
    
    
    
    10.0Tier 1 Capital to Risk Weighted Assets:Consolidated
    
    
    21,862
    
    
    
    10.7
    
    
    
    8,184
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/A1st National Bank & Trust
    
    
    21,481
    
    
    
    10.5
    
    
    
    8,181
    
    
    
    4.0
    
    
    
    12,272
    
    
    
    6.0Tier 1 Capital to Average Assets:Consolidated
    
    
    21,862
    
    
    
    8.4
    
    
    
    10,373
    
    
    
    4.0
    
    
    
    N/A
    
    
    
    N/A1st National Bank & Trust
    
    $
    21,481
    
    
    
    8.3
    %
    
    $
    10,358
    
    
    
    4.0
    %
    
    $
    12,948
    
    
    
    5.0
 18




---



##### 



NOTE 15EMPLOYEE BENEFIT PLANS
 Pension Plan
  Years Ended December 31,2004
    
    2003
    
    2002(in thousands)Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    2,871
    
    
    $
    2,131
    
    
    $
    1,475Service cost
    
    
    358
    
    
    
    261
    
    
    
    218Interest cost
    
    
    191
    
    
    
    168
    
    
    
    131Actuarial loss
    
    
    134
    
    
    
    356
    
    
    
    310Benefits paid
    
    
    (3
    )
    
    
    (45
    )
    
    
    (3
    )Benefit obligation at end of year
    
    
    3,551
    
    
    
    2,871
    
    
    
    2,131Change in plan assets:Fair value of plan assets at beginning of year
    
    
    2,614
    
    
    
    2,129
    
    
    
    1,372Actual return on plan assets
    
    
    362
    
    
    
    (227
    )
    
    

    9Employer contribution
    
    
    379
    
    
    
    757
    
    
    
    751Benefits paid
    
    
    (3
    )
    
    
    (45
    )
    
    
    (2
    )Fair value of plan assets at end of year
    
    
    3,352
    
    
    
    2,614
    
    
    
    2,130Funded status
    
    
    (199
    )
    
    
    (257
    )
    
    
    (1
    )Unrecognized net actuarial loss
    
    
    1,519
    
    
    
    1,587
    
    
    
    928Unrecognized prior service cost
    
    
    21
    
    
    
    26
    
    
    
    28Prepaid pension cost recognized
    
    $
    1,341
    
    
    $
    1,356
    
    
    $
    955Accumulated benefit obligation
    
    $
    2,663
    
    
    $
    2,004
    
    
    $
    1,583
  December 31,2004
    
    2003Discount rate
    
    
    5.75
    %
    
    
    6.25
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    4.00
    %
 19




---



##### 



Years Ended December 31,2004
    
    2003
    
    2002(in thousands)Service cost
    
    $
    358
    
    
    $
    262
    
    
    $
    218Interest cost
    
    
    191
    
    
    
    168
    
    
    
    131Expected return on plan assets
    
    
    (234
    )
    
    
    (168
    )
    
    
    (130
    )Amortization of prior service cost
    
    
    4
    
    
    
    2
    
    
    
    2Recognized net actuarial loss
    
    
    75
    
    
    
    92
    
    
    
    43$
    394
    
    
    $
    356
    
    
    $
    264
  Years Ended December 31,2004
    
    2003
    
    2002Discount rate
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.75
    %Expected long-term rate of return on plan assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    8.00
    %Annual salary increase
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    4.00
    %
   Years Ended December 31,Asset Category
    
    2004
    
    2003Equity securities
    
    
    53
    %
    
    
    53
    %Fixed Income
    
    
    47
    %
    
    
    39
    %Other
    
    
    0
    %
    
    
    7
    %Cash
    
    
    0
    %
    
    
    1
    %Total
    
    
    100
    %
    
    
    100
    %
    Asset Category
    
    Target RangeCash
    
    0% to 10%Equities
    
    40% to 60%Fixed Income
    
    40% to 60%
 20




---



##### 



2005
    
    $
    10,6802006
    
    
    44,6612007
    
    
    48,4512008
    
    
    58,7632009
    
    
    101,205Years 2010-2014
    
    
    1,188,987
 401(k) Plan
  NOTE 16STOCK COMPENSATION PLANS
   2004
    
    2003
    
    2002Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected life
    
    6.0 years
    
    5.9 years
    
    6.0 yearsExpected volatility
    
    
    16.2
    %
    
    
    11.3
    %
    
    
    11.3
    %Risk-free interest rate
    
    
    3.93
    %
    
    
    2.88
    %
    
    
    3.85
    %
  2004
    
    2003
    
    2002Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning of year
    
    
    144
    
    
    $
    15.42
    
    
    
    164
    
    
    $
    10.49
    
    
    
    144
    
    
    $
    11.01Granted
    
    
    27
    
    
    
    25.05
    
    
    
    27
    
    
    
    22.21
    
    
    
    33
    
    
    
    17.73Stock Splits
    
    
    65
    
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    0Stock Dividends
    
    
    10
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    8Exercised
    
    
    (30
    )
    
    
    12.62
    
    
    
    (56
    )
    
    
    5.77
    
    
    
    (11
    )
    
    
    8.23Forfeited
    
    
    (11
    )
    
    
    15.88
    
    
    
    (0
    )
    
    
    
    
    
    
    (10
    )
    
    
    13.14Outstanding at end of year
    
    
    205
    
    
    $
    11.48
    
    
    
    144
    
    
    $
    15.42
    
    
    
    164
    
    
    $
    11.87Options exercisable at year-end
    
    
    175
    
    
    $
    9.62
    
    
    
    116
    
    
    $
    13.98
    
    
    
    130
    
    
    $
    10.49Weighted-average fair value of
options granted during the year
    
    
    
    
    
    $
    9.68
    
    
    
    
    
    
    $
    4.49
    
    
    
    
    
    
    $
    4.34
 21




---



##### 



Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageContractual
    
    Exercise
    
    Number
    
    ExerciseRange of Exercise Prices
    
    Number Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Price$8.10  $13.90
    
    
    167
    
    
    5.8 years
    
    $
    9.40
    
    
    
    167
    
    
    $
    9.40$14.01  $18.20
    
    
    17
    
    
    7.5 years
    
    
    14.94
    
    
    
    8
    
    
    
    14.13$20.57  $26.04
    
    
    21
    
    
    9.6 years
    
    
    24.96
    
    
    
    0Outstanding at end of year
    
    
    205
    
    
    6.3 years
    
    $
    11.48
    
    
    
    175
    
    
    $
    9.62
 NOTE 17RELATED PARTY TRANSACTIONS
   NOTE 18RESTRICTIONS ON DIVIDENDS, LOANS AND ADVANCES
    NOTE 19FAIR VALUE OF FINANCIAL INSTRUMENTS
   Cash and cash equivalents
  Interest bearing deposits in banks
  22




---



##### 



Securities
  Loans receivable
  Deposit liabilities
  Short-term borrowings
  Long-term borrowings
  Accrued interest
   December 31,2004
    
    2003Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair Value(in thousands)Financial assets:Cash and cash equivalents
    
    $
    6,826
    
    
    $
    6,826
    
    
    $
    6,876
    
    
    $
    6,876Interest-bearing deposits in banks
    
    
    5,636
    
    
    
    5,636
    
    
    
    8,412
    
    
    
    8,412Securities available-for-sale
    
    
    57,795
    
    
    
    57,795
    
    
    
    46,172
    
    
    
    46,172Federal Home Loan Bank stock
    
    
    1,353
    
    
    
    1,353
    
    
    
    652
    
    
    
    652Loans, net
    
    
    233,395
    
    
    
    233,847
    
    
    
    204,314
    
    
    
    207,062Accrued interest receivable
    
    
    1,109
    
    
    
    1,109
    
    
    
    986
    
    
    
    986Financial liabilities:Deposits
    
    
    268,782
    
    
    
    268,582
    
    
    
    233,327
    
    
    
    232,400Federal funds purchased and repurchase agreements
    
    
    3,343
    
    
    
    3,343
    
    
    
    11,301
    
    
    
    11,301Long-term debt
    
    
    17,250
    
    
    
    17,250
    
    
    
    9,500
    
    
    
    9,500Accrued interest payable
    
    
    745
    
    
    
    745
    
    
    
    652
    
    
    
    652Off-balance sheet credit related
financial instruments:Commitments to extend credit
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    36
 23




---



##### 



NOTE 20CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY
  December 31,2004
    
    2003(in thousands)Balance SheetsAssetsCash and due from banks
    
    $
    89
    
    
    $
    320Investment in common stock of 1st National Bank &
    
    
    26,718
    
    
    
    21,634Trust
Other assets
    
    
    48
    
    
    
    61Total assets
    
    $
    26,855
    
    
    $
    22,015Liabilities and Stockholders EquityTotal liabilities
    
    
    0
    
    
    
    0Stockholders equity
    
    
    26,855
    
    
    
    22,015Total liabilities and stockholders equity
    
    $
    26,855
    
    
    $
    22,015
 Years Ended December 31,2004
    
    2003
    
    2002(in thousands)Statements of IncomeTotal income
    
    
    0
    
    
    
    0
    
    
    
    0Operating expenses
    
    
    61
    
    
    
    70
    
    
    
    33Income before income taxes and equity in undistributed
net income of 1st National Bank & Trust
    
    
    (61
    )
    
    
    (70
    )
    
    
    (33
    )Applicable income tax provision (benefit)
    
    
    (23
    )
    
    
    (26
    )
    
    
    0(38
    )
    
    
    (44
    )
    
    
    (33
    )Equity in undistributed net income (loss) of 1st
National Bank & Trust
    
    
    3,219
    
    
    
    2,195
    
    
    
    2,567Net income
    
    $
    3,181
    
    
    $
    2,151
    
    
    $
    2,534
 24




---



##### 



2004
    
    2003
    
    2002Statements of Cash FlowsCash flows from operating activities:Net income
    
    $
    3,181
    
    
    $
    2,151
    
    
    $
    2,534Adjustments to reconcile net income to net cash provided by
operating activities:Equity in undistributed net loss (income) of 1st National Bank &
Trust
    
    
    (3,219
    )
    
    
    (2,195
    )
    
    
    (2,567
    )Decrease (increase) in other assets
    
    
    13
    
    
    
    (61
    )
    
    
    0Net cash provided by operating activities
    
    
    (25
    )
    
    
    (105
    )
    
    
    (33
    )Cash
flows from investing activities:Capital Investment in 1st National Bank & Trust
    
    
    (572
    )
    
    
    0
    
    
    
    0Net cash used for investing activities
    
    
    (572
    )
    
    
    0
    
    
    
    0Cash
flows from financing activities:Proceeds from issuance of treasury stock under stock option plan
    
    
    379
    
    
    
    321
    
    
    
    85Cash dividends paid on common stock
    
    
    (13
    )
    
    
    (5
    )
    
    
    (5
    )Net cash used for financing activities
    
    
    366
    
    
    
    316
    
    
    
    80Net increase (decrease) in cash and cash equivalents
    
    
    (231
    )
    
    
    211
    
    
    
    47Cash and cash equivalents at beginning of year
    
    
    320
    
    
    
    109
    
    
    
    62Cash and cash equivalents at end of year
    
    $
    89
    
    
    $
    320
    
    
    $
    109
 NOTE 21SEGMENT REPORTING
  
 25




---



##### 



FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
 NOTE 25QUARTERLY DATA (UNAUDITED)
 Years Ended December 31,2004
    
    2003Fourth
    
    Third
    
    Second
    
    First
    
    Fourth
    
    Third
    
    Second
    
    FirstQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter(in thousands, except per share data)Interest and dividend income
    
    $
    4,281
    
    
    $
    4,050
    
    
    $
    3,751
    
    
    $
    3,678
    
    
    $
    3,354
    
    
    $
    3,058
    
    
    $
    3,102
    
    
    $
    3,102Interest expense
    
    
    (1,235
    )
    
    
    (1,074
    )
    
    
    (1,018
    )
    
    
    (978
    )
    
    
    ( 855
    )
    
    
    (731
    )
    
    
    (768
    )
    
    
    (790
    )Provision for loan losses
    
    
    (12
    )
    
    
    (102
    )
    
    
    (70
    )
    
    
    (130
    )
    
    
    (275
    )
    
    
    (108
    )
    
    
    (18
    )
    
    
    (46
    )Net interest income, after
provision for loan losses
    
    
    3,034
    
    
    
    2,874
    
    
    
    2,663
    
    
    
    2,570
    
    
    
    2,224
    
    
    
    2,219
    
    
    
    2,316
    
    
    
    2,266Non-interest income (charges)
    
    
    593
    
    
    
    583
    
    
    
    598
    
    
    
    542
    
    
    
    411
    
    
    
    445
    
    
    
    510
    
    
    
    501Non-interest expenses
    
    
    (2,089
    )
    
    
    (2,152
    )
    
    
    (2,185
    )
    
    
    (2,086
    )
    
    
    (1,989
    )
    
    
    (1,905
    )
    
    
    (1,920
    )
    
    
    (1,807
    )Income before income taxes
    
    
    1,538
    
    
    
    1,305
    
    
    
    1,076
    
    
    
    1,026
    
    
    
    646
    
    
    
    759
    
    
    
    906
    
    
    
    960Provision for income taxes
    
    
    (553
    )
    
    
    (467
    )
    
    
    (383
    )
    
    
    (361
    )
    
    
    (217
    )
    
    
    (258
    )
    
    
    (308
    )
    
    
    (337
    )Net income
    
    $
    985
    
    
    $
    838
    
    
    $
    693
    
    
    $
    665
    
    
    $
    429
    
    
    $
    501
    
    
    $
    598
    
    
    $
    623Earnings per common share:Basic
    
    $
    0.30
    
    
    $
    0.26
    
    
    $
    0.21
    
    
    $
    0.20
    
    
    $
    0.14
    
    
    $
    0.16
    
    
    $
    0.19
    
    
    $
    0.20Diluted
    
    $
    0.28
    
    
    $
    0.24
    
    
    $
    0.20
    
    
    $
    0.19
    
    
    $
    0.13
    
    
    $
    0.15
    
    
    $
    0.18
    
    
    $
    0.18
 26