Securities and Exchange Commission
FORM 10-QSB
Quarterly Report Under Section 13 of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 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 July 31, 1997
Shares of Common Stock Latest Practical Date
<PAGE>
Securities Exchange Commission
Form 10-QSB
Quarterly Report
For Quarter Ended June 30, 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
(Unaudited)
<CAPTION>
June 30 December 31
ASSETS 1997 1996
<S> <C> <C>
Current Assets
Cash and due from banks $ 2,432,420 $ 2,858,625
Federal funds sold 0 1,300,000
Interest-bearing accounts 3,865,616 0
Securities available for sale, at fair value 5,525,326 4,301,985
Securities held to maturity, at amortized cost 6,356,014 7,480,583
Loans 35,580,166 32,691,757
Less: allowance for loan losses (373,942) (365,231)
------------ ------------
Loans, net 35,206,224 32,326,526
Premises and equipment, net 2,907,269 2,909,751
Other assets 2,298,128 967,168
------------ ------------
TOTAL ASSETS $58,590,997 $52,144,638
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 9,753,642 $ 9,979,254
Interest-bearing demand 6,821,995 5,601,021
Savings 4,750,992 3,298,627
Time, $100,000 and over 8,802,418 12,042,080
Other time 17,566,716 14,614,342
----------- -----------
Total Deposits 47,695,763 45,535,324
Note Payable 200,000 400,000
Advances and Other Federal Funds Purchased 3,800,000 0
Other Liabilities 820,415 581,525
----------- -----------
Total Liabilities 52,516,178 46,516,849
Stockholders' Equity
Common stock, par value $5; 10,000,000 shares
authorized; 554,958 issued and 553,503 outstanding
in 1997 and 528,958 issued and 527,503 outstanding
in 1996, respectively 2,774,790 2,644,790
Surplus 2,777,268 2,647,268
Treasury Stocks, at cost (10,913) (10,913)
Retained Earnings 520,586 357,581
Net unrealized gains (losses) 13,088 (10,937)
----------- -----------
Total Stockholders' Equity 6,074,819 5,627,789
----------- -----------
TOTAL LIABILITIES AND EQUITY $58,590,997 $52,144,638
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST SOUTHERN BANCSHARES, INC.
Consolidated Income Statements
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
<S> <C> <C> <C> <C>
Interest Income
Interest & fees on loans $ 870,332 $ 743,597 $1,671,801 $1,422,548
Interest on investments 193,276 166,388 379,673 296,509
Interest on Federal funds 139 64,790 10,089 151,865
Interest Bearing Deposits 9,563 0 9,563 0
---------- --------- ---------- ----------
Total Interest Income 1,073,310 974,775 2,071,126 1,870,922
Interest on Deposit 458,522 422,850 912,828 814,803
Interest on Advances and Other Borrowings 45,602 1,686 64,908 3,650
---------- --------- ---------- ----------
504,124 424,536 977,736 818,453
Net Interest Income 569,186 550,239 1,093,390 1,052,469
Provision for loan losses 45,000 36,000 90,000 60,000
---------- -------- ---------- ----------
Net Interest Income After
Provision for Loan Losses 524,186 514,239 1,003,390 992,469
---------- -------- ---------- ----------
Other Income
Service charge on deposits 201,514 260,341 432,630 504,780
Other charges and fees 470,211 11,924 882,490 39,877
---------- -------- ---------- ----------
671,725 272,265 1,315,120 544,657
Other Expenses
Salaries & benefits 559,533 343,922 1,081,507 635,382
Net Occupancy and equipment expenses 159,979 137,169 322,583 274,449
Other operating expenses 309,925 227,504 653,758 468,702
---------- -------- ---------- ----------
1,029,437 708,595 2,057,848 1,378,533
Income Before Taxes 166,474 77,909 260,662 158,593
Income Tax Expense 46,240 25,289 71,281 36,489
---------- --------- ---------- ----------
Net Income $ 120,234 $ 52,620 $ 189,381 $ 122,104
========== ========= ========== ==========
Net Income Per Common and Common
Equivalent Share $ 0.22 $ 0.10 $ 0.34 $ 0.23
========== ========= ========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST SOUTHERN BANCSHARES, INC.
Consolidated Statements of Cash Flows
For the Six Months ended June 30, 1997 and June 30, 1996
(Unaudited)
<CAPTION>
June 30 June 30
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 189,381 $ 122,104
Depreciation 171,032 129,432
Provision for loan loss 90,000 60,000
Deferred Income taxes (5,872) 0
Other assets and accruals, net (1,089,662) 22,629
------------ -----------
(645,121) 334,165
Cash flow from investing activities:
Decrease in Fund Funds Sold 1,300,000 2,300,000
Increase Interest-bearing deposits (3,865,616) 0
Proceeds from sale of securities held to maturity 250,234 0
Proceeds from maturities of securities available for sale 27,057 1,216,328
Proceeds from maturities of securities held to maturity 877,364 1,128,339
Purchase of securities available for sale (1,229,400) (2,776,796)
Purchase of securities held for maturities 0 (3,005,527)
Net increase in loans (2,969,698) (5,063,590)
Purchase of premises and equipment (168,550) (465,896)
------------ ------------
(5,778,609) (6,667,142)
Cash flows from financing activities:
Net increase in deposits 2,160,439 5,749,278
Proceeds form line of credit 0 400,000
Increase in advances and other borrowings 3,800,000 0
Repayment of line of credit (200,000) (80,000)
Dividends paid (22,914) (16,908)
Proceeds from the sale of stock 260,000 26,360
---------- ------------
5,997,525 6,078,730
Net increase (decrease) in cash and due from banks (426,205) (254,247)
----------- ------------
Cash and Due from Banks, beginning of year 2,858,625 2,046,906
Cash and Due from Banks, end of quarter $ 2,432,420 $ 1,792,659
=========== ===========
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 June 30, 1997 and the related statements of income
and cash flows for the six 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, Inc. and
subsidiaries as of June 30, 1997 and December 31, 1996, and the
results of their operations for the six month periods ended June
30, 1997 and 1996, and their cash flows for the six month periods
ended June 30, 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.
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
June 30, 1997 and December 31, 1996 was $6,102,000 and
$7,161,000, 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 $189,381 for the six
month period ended June 30, 1997, as compared to $122,104 for the
same period in 1996. The Company earned net income after taxes
of $120,234 for the second quarter of 1997 compared to $52,620
for the second quarter of 1996. The Company experienced higher
levels of interest income and interest expense proportionate to
its increase in asset size. Net interest income before provision
for loan losses was $1,093,390 at June 30, 1997 as compared to
$1,052,469 for the same period in 1996. During 1997, the Company
increased its provision for loan losses by $30,000 or 50.00
percent to reflect the growth in the Company's loan portfolio.
Net loans increased $7,910,000 or 28.98 percent as of June 30,
1997 from $27,296,000 at June 30, 1996.
Also, contributing to the Company's earnings growth was an
increase in other income in the bank subsidiary. Other income
increased by $236,000 to $780,789 compared to $545,000 at June
30, 1996. For the six month period ending June 30, 1996 the
mortgage company was at a breakeven position.
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 $41,000 or
3.89 percent for the period ending June 30, 1997, as compared with
the same period in 1996. Strong growth in interest-earning
assets, primarily loans, accounted for the increase in net
interest income. For the twelve month period ended June 30, 1997
gross loans grew by 28.07 percent, while total interest bearing
deposits and other interest bearing liabilities grew by 22.14 percent.
STATEMENT OF CONDITION
Liquidity
The Bank typically manages its liquidity position through federal
funds sold. However, in 1997 the Bank became a member of the
Federal Home Loan Bank of Atlanta (the "FHLB") and now use
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
ended on June 30, 1997. The Bank also maintains its excess cash
balance at the FHLB. This account is interest-bearing and
generally pays a higher interest rate than federal funds sold. At
June 30, 1997, the Bank had $3,865,616 on deposit at the FHLB at
an average rate of 5.38 percent. Using the FHLB has improved the
Bank's ability to meet increasing loan demand and has assisted
management's efforts in lowering its cost of funds. 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 June 30,1997, the Bank's liquid assets (cash and due from
banks, investment securities, federal funds sold and interest-
bearing deposits) represented 31.03 percent of total assets
compared to 30.57 percent at December 31, 1996.
<PAGE>
Securities Exchange Commission
Form 10-QSB
Investment Securities
The Bank invests a portion of its assets in U.S. treasury bills
and notes, U.S. government sponsored agency securities, mortgage
backed bonds and recently, FHLB stock. At June 30, 1997 and
December 31, 1996, the Bank's investment securities portfolio
represented approximately 20.28 percent and 22.60 percent, of
total assets, respectively
At June 30, 1997, the Bank's securities portfolio was invested in
the following types of securities:
Available for Sale Held for Maturity
U.S. Treasuries - % 17%
U.S. Agencies 77 17
Mortgage Backed 5 22
Municipals - 44
FHLB Stock 18 -
----- ----
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 June 30, 1997, the allowance for loan losses represented 1.05
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 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 DeKalb Mall 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. The Company also utilizes a building in Decatur,
Georgia as its Operations Center.
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 June 30, 1997 was $2,907,269 compared
to $2,909,751 at December 31, 1996.
<PAGE>
Securities Exchange Commission
Form 10-QSB
Deposits
The Company held total deposits of $47,695,763 at June 30, 1997,
compared to $45,535,324 at December 31, 1996. This represents an
increase of 4.74 percent and is primarily attributed to several
marketing programs enacted by the Bank. For the six month period
interest-bearing deposits increased by $1,221,000 or 21.80
percent and savings increased by $1,452,000 or 44.03 percent.
Other time deposits increased by $2,952,000 or 20.20 percent
through June 30, 1997, while time deposits of over $100,000
decreased by $3,240,000. The Bank replaced several large time
deposits with advances from FHLB. The Bank is able to fund its
growing loan portfolio with advances. The FHLB provides funding
at rates lower then those demanded by jumbo certificates holders.
During the period, FHLB advances increased to $3,800,000 at an
average daily rate of 5.67 percent.
Stockholder's Equity
Stockholder's equity increased by 7.94 percent for the six month
period ended June 30, 1997. This increase is due to 26,000 shares
of authorized but unissued common stock sold during the first
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 gain on the investment portfolio was $13,088 at
June 30, 1997, compared to a net unrealized loss of $10,937 at
December 31, 1996. Total stockholders equity for June 30, 1997 was
$6,074,819 and $5,627,789 at December 31, 1996. The Company
maintained total retained earnings of $520,586 and paid a
cash dividend of $26,376 or .05 cent per share for shareholders of
record as of December 31, 1996.
Part II. Other Information
Item 1. Legal Proceedings
During the quarter ended June 30, 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 elected
directors Dr. William H. Cleveland, Robert L. Brown, Lynn
Pattillo and Thom Peters who 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
<PAGE>
Securities Exchange Commission
Form 10-QSB
Item 5. Other Information
First Southern Bancshares, Inc. and Citizens Trust Bancshares
Corp. signed a letter of intent to merge on July 29, 1997. This
merger is subjected to regulatory and shareholder approval.
Item 6. Exhibits and Reports on Form 10-QSB
A) Exhibits:
Exhibit 27 - Financial Data Schedule
B) Reports on Form 8-K :None
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: August 12, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,432,420
<INT-BEARING-DEPOSITS> 3,865,616
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,525,326
<INVESTMENTS-CARRYING> 6,356,014
<INVESTMENTS-MARKET> 6,381,707
<LOANS> 35,580,166
<ALLOWANCE> 373,942
<TOTAL-ASSETS> 58,590,997
<DEPOSITS> 47,695,763
<SHORT-TERM> 4,000,000
<LIABILITIES-OTHER> 820,415
<LONG-TERM> 0
0
0
<COMMON> 2,774,790
<OTHER-SE> 3,300,029
<TOTAL-LIABILITIES-AND-EQUITY> 58,590,997
<INTEREST-LOAN> 1,671,801
<INTEREST-INVEST> 399,325
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,071,126
<INTEREST-DEPOSIT> 912,828
<INTEREST-EXPENSE> 977,736
<INTEREST-INCOME-NET> 1,093,390
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,057,848
<INCOME-PRETAX> 260,662
<INCOME-PRE-EXTRAORDINARY> 189,381
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189,381
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
<YIELD-ACTUAL> 0
<LOANS-NON> 49,000
<LOANS-PAST> 89,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 365,231
<CHARGE-OFFS> 108,528
<RECOVERIES> 27,238
<ALLOWANCE-CLOSE> 373,942
<ALLOWANCE-DOMESTIC> 373,942
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
