Securities and Exchange Commission
FORM 10-QSB
Quarterly Report Under Section 13 of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1996
FIRST SOUTHERN BANCSHARES, INC.
(Exact name of bank as specified in its charter)
Lithonia, Georgia
(State or jurisdiction of incorporation)
58-2171291
(I.R.S. Employer Identification No.)
2727 Panola Road, Lithonia, Georgia
(Address of principal executive offices)
30058
(Zip Code)
(770) 987-3511
(Bank's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the bank (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 bank was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
X Yes No
Indicate the number of shares outstanding of each of the bank's
classes of common stock, as of the latest practicable date
524,208 As of September 30, 1996
Shares of Common Stock Latest Practical Date
<PAGE>
Securities Exchange Commission
Form 10-QSB
Quarterly Report
For Quarter Ended September 30, 1996
Table of Contents
Part I
1. Consolidated Financial Statements
2. Notes to the Consolidated Financial Statements
3. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II
Financial Information
1. Legal Proceedings
2. Change in Securities
3. Defaults Upon Senior Securities
4. Submission of Matters to a Vote of Security Holders
6. Exhibits and Reports on Form 10-QSB
Other Information
<PAGE>
FIRST SOUTHERN BANCSHARES, INC.
Consolidated Balance Sheets
(Unaudited)
September 30 December 31
ASSETS 1996 1995
Current Assets
Cash and due from banks $ 3,089,996 $ 2,046,906
Account Receivables 30,814 -
Federal funds sold 1,750,000 5,700,000
Securities available for sale, at fair value 5,206,857 3,887,888
Securities held to maturity, at amortized cost 7,748,331 5,644,389
Loans 30,666,078 22,778,100
Less: allowance for loan losses (384,113) (386,561)
Loans, net 30,281,965 22,391,539
Premises and equipment, net 2,909,303 2,055,975
Other assets 565,902 504,064
$51,583,168 $42,230,761
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 9,525,686 $ 6,758,903
Interest-bearing demand 4,621,763 3,975,759
Savings 4,208,555 3,037,360
Time, $100,000 and over 11,499,348 7,014,753
Other time 15,322,341 15,596,280
Total Deposits 45,177,693 36,383,055
Note Payable 400,000 80,000
Other Liabilities 640,472 462,919
Total Liabilities 46,218,165 36,925,974
Stockholders' Equity
Common stock, par value $ 5; 10,000,000
shares authorized; 528,958 issued; 524,208
and 521,562 shares outstanding in 1996 and
1995, respectively 2,644,790 2,631,560
Surplus 2,644,790 2,631,560
Treasury Stocks, at cost (45,648) (45,648)
Retained Earnings 242,594 81,818
Net unrealized gains (losses) (121,523) 5,497
Total Stockholders' Equity 5,365,003 5,304,787
TOTAL LIABILITIES AND EQUITY $51,583,168 $42,230,761
See notes to consolidated financial statements.
<PAGE>
<TABLE>
FIRST SOUTHERN BANCSHARES, INC.
Consolidated Income Statements
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Income
Interest & fees on loans $ 827,539 $672,345 $2,250,087 $1,915,048
Interest on investments 195,568 97,857 492,077 262,151
Interest on Federal funds 30,608 63,316 182,473 137,908
Total Interest Income 1,053,715 833,518 2,924,637 2,315,107
Interest on Deposit 460,017 365,025 1,274,820 896,149
Interest on Note Payable 9,200 1,650 12,850 1,650
469,217 366,675 1,287,670 897,799
Net Interest Income 584,497 466,843 1,636,966 1,417,308
Provision for loan losses 44,000 28,500 104,000 66,500
Net Interest Income After
Provision for Loan Losses 540,497 438,343 1,532,966 1,350,808
Other Income
Service charge on deposits 151,411 211,001 656,191 626,611
Other charges and fees 176,168 12,360 216,045 78,092
327,579 223,361 872,236 704,703
Other Expenses
Salaries & benefits 388,100 259,226 1,023,482 763,680
Net Occupancy and equipment expenses 152,748 (79,781) 427,197 141,410
Other operating expenses 232,689 338,845 701,391 798,228
773,538 518,290 2,152,071 1,703,318
Income Before Taxes 94,539 143,414 253,132 352,193
Income Tax Expense 29,787 54,600 66,276 102,600
Net Income $ 64,752 $ 88,814 $ 186,856 $ 249,593
Net Income Per Common and Common
Equivalent Share $ 0.12 $ 0.17 $ 0.36 $ 0.48
See notes to consolidated financial statements.
</TABLE>
<PAGE>
FIRST SOUTHERN BANCSHARES, INC.
Consolidated Statements of Cash Flows
Months ended September 30, 1996 and September 30, 1995
September 30 September 30
1996 1995
Cash flows from operating activities:
Net Income $ 186,856 $ 256,765
Depreciation 203,453 63,917
Provision for loan loss 104,000 66,500
Gain on sale of equipment (10,557) -
Deferred Income taxes 38,746 102,600
Other assets and accruals, net 88,063 94,792
610,560 584,574
Cash flow from investing activities:
Net (increase) decrease in Fund Funds 3,950,000 (2,400,000)
Proceeds from maturities of securities
available for sale 1,232,259 2,366,772
Proceeds from maturities of securities
held to maturity 1,753,905 -
Purchase of securities available for sale (2,997,623) (3,581,273)
Purchase of securities held for maturities (3,842,555) -
Net increase in loans (7,994,426) (3,983,835)
Proceeds from the sale of equipment 14,000 -
Purchase of premises and equipment (807,220) (228,854)
(8,691,660) (7,827,190)
Cash flows from financing activities:
Net increse in deposits 8,794,638 5,105,662
Proceeds from line of credit 400,000 75,000
Repayment of line of credit (80,000) -
Purchase of treasury stock - -
Dividends paid (16,908) -
Proceeds from the sale of stock 26,460 -
9,124,190 5,180,662
Net increase (decrease) in cash
and due from banks 1,043,090 (2,061,954)
Cash and Due from Banks, beginning of year 2,046,906 4,518,598
Cash and Due from Banks, end of quarter $3,089,996 $2,456,644
<PAGE>
Securities Exchange Commission
Form 10-QSB
First Southern Bancshares and Subsidiary
Notes To Consolidated Financial Statements
Basis of Presentation: The consolidated statements of financial
position as of September 30, 1996 and the related statements of
income and cash flows for the nine month period then ended are
unaudited. In the opinion of management, such consolidated
financial statements contain all adjustments necessary to present
fairly the financial position of First Southern Bancshares and
subsidiaries as of September 30, 1996 and December 31, 1995, and
the results of their operations for the nine month periods ended
September 30, 1996 and 1995, and their cash flows for the nine
month periods ended September 30, 1996 and 1995.
The financial statements and notes are presented as permitted by
Form 10-QSB, and do not contain certain information included in
the Company's annual financial statements and notes. A
comprehensive set of the Company's notes are set forth in
the Company's 1995 Annual Report to Shareholders on file with the
Securities and Exchange Commission.
Earnings Per Share: Net income per common and common equivalent
share was computed by dividing net income by the weight average
number of shares of common stock and common stock equivalents
outstanding during the year.
Commitments and Contingents: In the normal course of business
there are various commitments and contingent liabilities such as
commitments to extend credit, which are not reflected on the
financial statements. The unused portion of loan commitments at
September 30, 1996 and December 31, 1995 was $9,273,000 and $
10,201,000, respectively. Additionally, standby letters of
credit of approximately $30,000 was outstanding at December 31,
1995. There were no standby letters of credit for the quarter
ended September 30, 1996. Management does not anticipate any
significant losses to result from these transactions.
Acquisition: On September 6, 1996, FSB Mortgage Services, Inc.,
a subsidiary of the First Southern Bancshares, Inc. (the "Company"),
acquired the assets of American Financial Mortgage Corp. ("AFM"), a
mortgage broker company. As of the acquisition date, AFM had assets
of approximately $246,000. The purchase price of AFM was $225,000,
consisting of cash of $175,000 and 5,000 shares of the Company
common stock valued at $50,000. The transaction was accounted
for as a purchase resulting in the recording of total assets of
approximately $246,000.
Current Accounting Developments: In March 1995, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-lived Assets and for Assets to be Disposed
of," which was effective for the Company beginning January 1,
1996. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. The implementation of SFAS No. 121 did
not have a material impact on the Company's financial condition
or results of operations.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," which was effective
for the Company beginning January 1, 1996. SFAS No. 123 requires
expanded disclosures of stock-based compensation arrangements
with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity
instrument awarded. Companies are permitted, however, to
continue to apply APB Opinion No. 25, which recognizes
compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB No.
25 to its stock based compensation awards to employees and will
disclose the required pro forma effect on net income and earnings
per share.
Reclassifications: Certain amounts for 1995 have been
reclassified to conform to the current period presentation.
<PAGE>
Securities Exchange Commission
Form 10-QSB
Management Discussion and Analysis of Financial Condition and
Results of Operations
Changes In Financial Condition
Total assets increased $9,352,407 from December 31, 1995 to
September 30, 1996. The 22.2 percent growth in assets resulted
primarily from an increase in deposits of $8,794,638 or 24.2
percent. As a result, gross loans increased $7,887,978 or 34.6
percent. Cash and due from banks reflected an increase of
$1,043,090, and federal funds sold decrease by $3,950,000 or
69.3 percent. The decreases are the results of management
refocusing its liquidity position and its investment strategy to
improve earnings by investing these funds in higher yielding
assets. As a result, investment securities increased by
$3,422,911 or 37.3 percent, excluding unrealized gains (losses)
on available for sale securities of ($121,523) and $5,497, at
September 30, 1996 and December 31, 1995, respectively.
Total deposits grew at a rate of 24.2 percent or $8,794,638 for
the nine month period. Non-interest bearing deposits increased
$2,766,733 or 40.9 percent, while time deposit increased
$4,210,656 or 18.6 percent. This growth in time deposits
reflects interest sensitive customers shifting their funds from
lower interest-bearing accounts to higher yielding time deposits
as well as normal growth. The loan-to-deposits ratios were 67.0
percent and 62.61 percent on September 30, 1996 and December 31,
1995, respectively.
Common stock outstanding increased by 2,646 shares for the first
nine month due to new shareholders investing in the Company
and provided cash of $26,460. Retained earnings reflect a
declared cash dividends of $.05 and payable on 521,562 shares
outstanding to shareholders on record as of December 31, 1995.
Retained earnings also includes earnings of $186,856 for the
nine month period ending September 30, 1996. The Company's
liquid assets to total assets was 34.6 percent and 40.91 percent
for the periods ending September 30, 1996 and December 31, 1995,
respectively. These percentages reflect the Company's continued
strong liquidity position.
Results of Operations for the Nine Month Period Ended September 30, 1996
Net interest income represents the primary component of the
Company's earnings. It is the difference between interest and
fee income related to earning assets and interest expense
incurred to carry interest bearing liabilities. The Company's
net interest income is affected by changes in the volume,
interest rate and mix of earning assets and interest bearing
liabilities. Management, on an ongoing basis, analyze the
Company's interest rate gap, earnings sensitivity to rate
changes, and sources and use of funds to manage the impact of
these changes on net interest income. For the three month period
ending September 30, 1996 net interest income increased $117,654
or 25.2 percent to $584,497 from $466,843 in the third quarter of
1995. The quarterly net interest income margin also improved by
$540,497 from $992,469 in the second quarter for a total year-to-
date increase of $1,532,966. These improvements reflect a $8
million increase in earning assets as well as increase in the
yield on earning assets. The higher level of earning assets is
due to growth of the loan portfolio. Gross loans grew to
$30,666,078 or 27.7 percent as of September 30, 1996 from
$24,014,448 for the same period in 1995 at an average yield of
10.25 percent. The Company's investments portfolio, including
Fed Funds Sold, also grew at an impressive rate. Investments
increased $1.5 million to $14,705,188 from $13,223,566 in the
third quarter of 1995. Funding of this growth came primarily
from new deposits. Management believes this growth reflects both
its marketing efforts and the economic characteristics of the
Company's market area.
The allowance for possible loan losses is the charge to operating
earnings for anticipated losses and inherent risk in the
company's loan portfolio. The allowance is based on management's
assessment of the company's risk of possible loan defaults.
Management determines the adequacy of the allowance by
considering the dollar amount of loans outstanding,
individual evaluations of problem loans, current economic
conditions and prior experience.
At September 30,1996, the allowance for loan losses represented
1.25 percent of gross loans compared to 1.84 percent at
September 30, 1995. Management feels that the current level of
reserves are adequate to absorb possible losses on existing loans
that may be deemed uncollectable.
<PAGE>
Securities Exchange Commission
Form 10-QSB
Non-interest income includes all revenues which are not included
in interest and fee income relating to earning assets.
Non-interest income for the third quarter of September 30, 1996
increased $327,579 for a total year-to-date of $872,236. This is
an increase of $104,218 or 46.7 percent compared to the same
three month period in 1995. The increase reflects higher volumes
in service charges on deposit accounts and ATM surcharge fees.
Other expenses for the third quarter increased $255,284 or 49.3
percent compared to the same three month period in 1995. On a
year-to-date basis other expenses was $2,152,071 representing
an increase of $448,753 or 26.4 percent for the same nine month
period in 1995. Salaries and benefits, and occupancy expenses
increased $259,802 or 34.0 percent and $285,787 or 202.1 percent
when compared on a year-to-date basis, respectively. The
increase in salaries and benefits reflects general pay increases
and growth in the number of employees needed to staff a new
branch which opened July 1996. The increase in occupancy and
equipment is primarily attributable to an increase in operating
expenses resulting from the opening of an operations center in
June of 1995 and a new branch in July 1996.
Part II. Other Information
Item 1. Legal Proceedings
During the quarter ended September 30, 1996, the company did not
have any reportable legal proceedings.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of First Southern Bancshares,
Inc. was held on May 16, 1996. The stockholders
determined the directors Gregory T. Baranco, Bernard H. Bronner
and Nathaniel Bronner, Jr. Will serve additional three year
terms ending in May, 1999. Continuing directors are Dr. William
H. Cleveland, C. David Moody, Ben Gross, Robert C.
McMahan, Porter Sanford, III and James E. Young
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 10-QSB
A) Exhibits:
Exhibit 27 - Financial Data Schedule
B) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1996.
<PAGE>
Securities Exchange Commission
Form 10-QSB
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 hereunto duly authorized.
FIRST SOUTHERN BANCSHARES, INC.
DATE: November 14, 1996 James E. Young
President & CEO
Willard C. Lewis
Executive Vice President & COO
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,089,996
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,750,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,206,857
<INVESTMENTS-CARRYING> 7,748,331
<INVESTMENTS-MARKET> 7,687,368
<LOANS> 30,666,078
<ALLOWANCE> 384,113
<TOTAL-ASSETS> 51,583,168
<DEPOSITS> 45,177,693
<SHORT-TERM> 400,000
<LIABILITIES-OTHER> 640,472
<LONG-TERM> 0
0
0
<COMMON> 2,644,790
<OTHER-SE> 2,720,213
<TOTAL-LIABILITIES-AND-EQUITY> 51,583,168
<INTEREST-LOAN> 2,250,087
<INTEREST-INVEST> 492,077
<INTEREST-OTHER> 182,473
<INTEREST-TOTAL> 2,924,637
<INTEREST-DEPOSIT> 1,274,820
<INTEREST-EXPENSE> 12,850
<INTEREST-INCOME-NET> 1,636,966
<LOAN-LOSSES> 104,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,152,071
<INCOME-PRETAX> 253,132
<INCOME-PRE-EXTRAORDINARY> 253,132
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,856
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 0
<LOANS-NON> 240,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 30,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 386,561
<CHARGE-OFFS> 150,697
<RECOVERIES> 44,249
<ALLOWANCE-CLOSE> 384,113
<ALLOWANCE-DOMESTIC> 384,113
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
