Securities and Exchange Commission
FORM 10-QSB
Quarterly Report Under Section 13 of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1997
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
553,503 As of April 30, 1997
Shares of Common Stock Latest Practical Date
<PAGE>
Securities Exchange Commission
Form 10-QSB
Quarterly Report
For Quarter Ended March 31, 1997
Table of Contents
Part I Financial Information
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 Other Information
1. Legal Proceedings
2. Change in Securities
3. Defaults Upon Senior Securities
4. Submission of Matters to a Vote of Security Holders
5. Other Information
6. Exhibits and Reports on Form 10-QSB
<PAGE>
<TABLE>
FIRST SOUTHERN BANCSHARES, INC.
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
<CAPTION>
Consolidated
March 31, 1997 December 31, 1996
<S> <C> <C>
ASSETS
Current Assets
Cash and due from banks 3,061,870 2,858,625
Federal funds sold - 1,300,000
Securities available for sale, at fair value 5,158,596 4,301,985
Securities held to maturity, at amortized cost 7,201,022 7,480,583
Loans 34,131,079 32,691,757
Less: allowance for loan losses (373,800) (365,231)
__________ __________
Loans, net 33,757,279 32,326,526
Premises and equipment, net 2,870,919 2,909,751
Other Assets 3,317,252 967,168
__________ __________
TOTAL ASSETS 55,366,938 52,144,638
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand 9,162,606 9,979,254
Interest-bearing demand 5,183,097 5,601,021
Savings 4,373,277 3,298,627
Time, $100,000 and over 9,894,373 12,042,080
Other time 16,417,905 14,614,342
__________ __________
Total Deposits 45,031,258 45,535,324
Note Payable 300,000 400,000
Advances from FHLB 3,550,000 -
Other Liabilities 643,188 581,525
__________ __________
Total Liabilities 49,524,446 46,516,849
Stockholders' Equity
Common stock, par value $5; 10,000,000 shares
authorized: 554,958 issued; 554,958 and 528,958
shares outstanding in 1997 and 1996, respectively 2,774,790 2,644,790
Surplus 2,777,267 2,647,267
Treasury stock at cost, 1,455 shares (10,912) (10,912)
Retained earnings 400,352 357,581
Net unrealized gains (losses) (99,005) (10,937)
__________ __________
Total Stockholders' Equity 5,842,492 5,627,789
__________ __________
TOTAL LIABILITIES AND EQUITY 55,366,938 52,144,638
========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST SOUTHERN BANCSHARES, INC.
Consolidated Income Statements
For the years ended March 31, 1997 and 1996
<CAPTION>
Consolidated
March 31, 1997 March 31, 1996
<S> <C> <C>
Interest Income
Interest & fees on loans 801,469 678,951
Interest on investments 186,397 130,121
Interest on Federal funds 9,950 87,075
_________ _______
Total Interest Income 997,816 896,147
Interest on Deposit 454,306 391,953
Interest on FHLB advances and other borrowings 19,306 1,964
_________ _______
473,612 393,917
Net Interest Income 524,204 502,230
Provision for loan losses 45,000 24,000
Net Interest Income After
Provision for Loan Losses 479,204 478,230
Other Income
Service charge on deposits 231,116 244,439
Other charges, comm & fees 412,279 27,953
_________ _______
643,395 272,392
Other Expenses
Salaries & benefits 521,974 291,460
Net Occupancy and Equipment expenses 162,604 137,280
Other operating expenses 343,833 241,298
_________ _______
1,028,411 670,038
Income Before Taxes 94,188 80,584
Income Tax Expense 25,041 11,200
_________ _______
Net Income 69,147 69,384
========= =======
Per Common share Net Income 0.12 0.13
========= =======
Dividends Per Common share 0.05 0.05
========= =======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST SOUTHERN BANCSHARES, INC.
Consolidated Statements of Cash Flows
For the years ended March 31, 1997 and 1996
<CAPTION>
Consolidated
March 31, 1997 March 31, 1996
<S> <C> <C>
Cash flows from operating activities:
Net Income 69,147 69,384
Depreciation 72,686 64,056
Provision for loan loss 45,000 24,000
Deferred Income taxes (5,372) -
Other assets and accruals, net (2,295,504) (11,457)
___________ ___________
(2,114,043) 145,983
Cash flow from investing activities:
Net increase in Fund Funds 1,300,000 (500,000)
Proceeds from sale of securities held to maturity 250,234 -
Proceeds from maturities of securities available for sale 11,799 1,000,000
Proceeds from maturities of securities held to maturity 31,649 800,000
Purchase of securities available for sale (958,800) (2,198,500)
Purchase of securities held for maturities - (300,000)
Net increase in loans (1,475,753) (2,372,912)
Purchase of Premises and Equipment (44,684) (271,270)
___________ ___________
(885,555) (3,842,682)
Cash flows from financing activities:
Net increase in deposits (504,066) 3,513,235
Net increase in FHLB advances 3,550,000 -
Repayment on line of credit (100,000) -
Dividends paid (3,091) -
Proceeds from the sale of stock 260,000 8,130
__________ __________
3,202,843 3,521,365
Net increase in cash and due from banks 203,245 (175,334)
__________ ___________
Cash and Due from Banks, beginning of year 2,858,625 2,046,906
Cash and Due from Banks, end of year 3,061,870 1,871,572
========== ===========
See notes to consolidated financial statements.
</TABLE>
<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 March 31, 1997 and the related statements of
income and cash flows for the three 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 March 31, 1997 and December 31, 1996, and the
results of their operations for the three month periods ended
March 31, 1997 and 1996, and their cash flows for the three month
periods ended March 31, 1997 and 1996.
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 1996 Annual Report to Shareholders on file with the
Securities and Exchange Commission.
The accounting and reporting policies of the Company and its
subsidiary conform to generally accepted accounting principles
and with general practices within the banking industry. Assets
held by the Bank in a fiduciary or agency capacity are not assets
of the Bank and are not included in the financial statements.
Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and its wholly
owned subsidiaries First Southern Bank (the "Bank") and FSB
Mortgage Services ("FSB Mortgage"). All significant intercompany
transactions and balances have been eliminated in the
consolidation.
FSB Mortgage Services, Inc.: On May 22, 1996, FSB Mortgage
Services, Inc. was created as a wholly-owned subsidiary of First
Southern Bancshares, Inc. (the "Parent"). FSB Mortgage was
formed to provide mortgage related services to communities in and
around DeKalb County, as well as, the entire metropolitan
Atlanta, Georgia area.
On June 17, 1996, 30,000 shares of the Company's common stock
were issued at a price of $10 per share for a total of $300,000.
On May 23, 1996, FSB Mortgage entered into an asset purchase
agreement to purchase the assets of an existing business which
provides residential mortgage lending and mortgage brokerage
services. The purchase price for the purchased assets totaled
$225,000. The purchase price was paid as $175,000 in cash and
5,000 shares of the Parent's common stock valued at $50,000.
This agreement was consummated on September 6, 1996.
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
March 31, 1997 and December 31, 1996 was $4,869,000 and
$14,351,000, respectively. Management does not anticipate any
significant losses to result from these transactions.
Current Accounting Developments: The Financial Accounting
Standards Board has issued SFAS 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of
Liabilities", which becomes effective for years beginning after
December 31, 1996.
SFAS 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of
liabilities. The statement generally requires that servicing
assets and liabilities be subsequently measured by (a)
amortization in proportion to and over the period of estimated
servicing income or loss and (b) assessment for asset impairment
or increased obligation based on their fair values. The
implementation of SFAS No. 125 did not have a material impact on
the Company's financial condition or results of operations.
Reclassifications: Certain amounts for 1996 have been
reclassified to conform to the current period presentation.
<PAGE>
Securities Exchange Commission
Form 10-QSB
Management Discussion and Analysis
Results of Operations
The Company reported after tax earnings of $69,147 for the three
month period ended March 31, 1997, as compared to $69,384 for the
same period in 1996. While the 1997 results of operations
remained virtually unchanged when compared to 1996, the Company
experienced higher levels of interest income and interest expense
proportionate to its increase in asset size. Also, the Company
has incurred additional expenses converting the mortgage company
it purchased in to a mortgage bank operation. Net interest
income before provision for loan losses was $524,204 at March 31,
1997 as compared to $502,230 for the same period in 1996. During
1997, the Company increased its provision for loan losses by
$21,000 or 87.50 percent to reflect the growth in the Company's
loan portfolio. Net loans increased $8,993,000 or 36.31 percent
as of March 31, 1997 from $24,764,000 on March 31, 1996.
Net Interest Income
Net interest income, the primary source of the Company's
earnings, is the amount by which interest and fees generated by
earning assets (principally loans and investment securities)
exceeds the total interest costs of the funds (mainly deposits)
obtained to carry them. Net interest income rose by $21,974 or
4.38 percent for the period ending March 31, 1997 as compared
with the same period in 1996. Strong growth in interest-earnings
assets, primarily loans, accounted for the earnings gain. For
the twelve month period ended March 31, 1997 gross loans grew by
35.48 percent, while total interest bearing deposits and other
interest bearing liabilities grew by 22.28 percent.
STATEMENT OF CONDITION
Liquidity
The Bank primarily manages its liquidity position through federal
funds sold. During the first quarter of 1997 the Bank became a
member of the Federal Home Loan Bank of Atlanta (the "FHLB") and
now uses advances from the FHLB to manage its liquidity. As a
result, the Bank did not have any funds invested in federal fund
sold at the quarter ended on March 31, 1997. This is a
$1,300,000 decrease from December 31, 1996 levels and resulted
from increase loan demand and management efforts to improve the
interest yields the Company earns on its assets. Additional
sources of liquidity include cash and due from banks, federal
funds line from correspondent banks, maturing investment
securities and payments on commercial and installment loans.
At March 31, 1997, the Bank's liquid assets (cash and due from
banks, investment securities, and federal funds sold) represented
27.85 percent of total assets compared to 30.57 percent at
December 31, 1996.
Investment Securities
The Bank invests a portion of its assets in U.S. treasury bills
and notes, U.S. government sponsored agency securities, as well
as, mortgage backed bonds. At March 31, 1997 and December 31,
1996, the Bank's investment securities portfolio represented
approximately 22.32 percent and 22.60 percent, of total assets,
respectively. The investment portfolio, based on amortized cost,
increased by $577,000 or 4.9 percent during the first quarter.
At March 31, 1997, the Bank's securities portfolio was invested
in the following types of securities:
Available for Sale Held for Maturity
U.S. Treasuries - % 19 %
U.S. Agencies 80 24
Mortgage Backed 6 20
Municipals - 37
FHLB Stock 14 -
100 % 100 %
Provision for Losses on Loans
The provision for losses on loans is the charge to operating
earnings that management feels is necessary to maintain the
reserve for possible loan losses at an adequate level. 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, the underlying collateral value of
the loan and prior loan loss experience.
At March 31, 1997, the allowance for loan losses represented 1.10
percent of gross loans compared to 1.12 percent at December 31,
1996, Management believes that this level of reserve is adequate
to absorb possible loan losses on existing loans, including non-
accrual loans of $184,000 at March 31, 1997 and December 31,
1996, respectively, that may be uncollectible.
Premises and Equipment
First Southern operates three retail commercial banking
operations in DeKalb County, Georgia. The Company's main office
is located in Lithonia, Georgia, the South DaKalb Mail Branch is
located in Decatur and the Company's Rockbridge Branch is located
in Stone Mountain, Georgia. On July 19, 1996, the Company began
operating the Rockbridge Plaza Branch after an extensive study of
metropolitan Atlanta designed to determine the best location for
a new branch. After five months of operation, the branch
maintains over $2,500,000 in deposits and now rivals the main
office in new account openings. The Company also utilizes a
building in Decatur, Georgia as its Operations Center and to
house its mortgage company.
The Company maintains a wide area network ("WAN"). The Company's
WAN enables it to communicate to locations efficiently, as well
as process customer information. The Company believes leading
edge technology will further enhance the Company's ability to
remain competitive with major banks. The Company's investment in
premises and equipment at March 31, 1997 was $2,870,919 compared
to $2,909,751 at December 31, 1996.
Deposits
The Company held total deposits of $45,031,258 at March 31, 1997
compared to $45,535,324 at December 31, 1996. This represents a
decrease of 1.11 percent and is primarily attributed to several
jumbo certificates of deposits that were not renewed due to
interest rate factors. The Bank failed to renew $2,147,707 or
17.84 percent of time deposits over $100,000 due to rate factors.
The Bank is able to fund its growing loan portfolio with advances
from the FHLB, which provides funding at rates lower than those
demanded by jumbo certificates holders. During the period, FHLB
advances increased to $3,550,000 at an average daily rate of 5.53
percent.
Stockholder's Equity
Stockholder's equity increased by 3.82 percent for the quarter.
This increase is due to 26,000 shares of common stock sold during the
quarter which provided cash of $260,000. The unrealized gain or
loss from securities is the difference between the fair market
value and the book value of the Company's investment securities
portfolio that was held in the available for sale category. The
net unrealized loss on the investment portfolio was $99,005 at
March 31, 1997 compared to 10,937 for December 31, 1996. This
amount had a negligible effect on total equity and resulted from
the expected increase in the federal funds rate by the FOMC.
Total stockholders equity for March 31, 1997 was $5,842,492 and
$5,627,789 at December 31, 1996. The Company maintained total
retained earnings of $400,352 which includes a cash dividend of
$26,376 or .05 cent per share for shareholders of record as of
December 31, 1996.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
During the quarter ended March 31, 1997, 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 April 17, 1997. The stockholders determined the
directors Dr. William H. Cleveland, Robert L. Brown, Lynn
Pattillo and Thom Peters will serve three year terms ending in
May, 2000. Continuing directors are Gregory T. Baranco, Bernard
H. Bronner, Nathaniel Bronner, Jr., C. David Moody, 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: None
<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: May 14,1997
/s/ James E. Young
James E. Young
President & CEO
/s/ Willard C. Lewis
Willard C. Lewis
Executive Vice President & COO
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,061,870
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,158,596
<INVESTMENTS-CARRYING> 7,201,022
<INVESTMENTS-MARKET> 7,139,921
<LOANS> 34,131,079
<ALLOWANCE> 373,800
<TOTAL-ASSETS> 55,366,938
<DEPOSITS> 45,031,258
<SHORT-TERM> 3,850,000
<LIABILITIES-OTHER> 643,188
<LONG-TERM> 0
0
0
<COMMON> 2,774,790
<OTHER-SE> 3,067,702
<TOTAL-LIABILITIES-AND-EQUITY> 55,366,938
<INTEREST-LOAN> 801,469
<INTEREST-INVEST> 196,347
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 997,816
<INTEREST-DEPOSIT> 454,306
<INTEREST-EXPENSE> 473,612
<INTEREST-INCOME-NET> 524,204
<LOAN-LOSSES> 45,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,028,411
<INCOME-PRETAX> 94,188
<INCOME-PRE-EXTRAORDINARY> 69,147
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,147
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
<YIELD-ACTUAL> 0
<LOANS-NON> 184,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 30,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 410,231
<CHARGE-OFFS> 50,140
<RECOVERIES> 13,709
<ALLOWANCE-CLOSE> 373,800
<ALLOWANCE-DOMESTIC> 373,800
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
