April 04, 2009

First National Bancshares, the holding company for Spartanburg-based First National Bank of the South, could go out of business if it is unable to raise capital this year, a banking industry expert said Friday.The bank expects to report a loss of $37.3 million for 2008 - although $28.7 million is a non-cash accounting charge - but it has delayed filing its year-end financial reports because it is negotiating with Nexity Bank of Birmingham, Ala., to avoid defaulting on a loan it used to purchase Carolina National of Columbia in February of last year.

First National is in violation of three loan covenants and is awaiting approval of an extension of a waiver of defaults on the credit line to carry it through the end of 2009."It's a very difficult situation, but it's certainly not unique. We have sick banks all over the Carolinas," said Tony Plath, associate professor of finance for the Belk College of Business at the University of North Carolina Charlotte. "We're going to have to see how (First National) does, but they need capital to survive."