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, 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
553,603 As of October 31, 1997
Shares of Common Stock Latest Practical Date
<PAGE>
Securities Exchange Commission
Form 10-QSB
Quarterly Report
For Quarter Ended September 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>
September 30 December 31
ASSETS 1997 1996
<S> <C> <C>
Current Assets
Cash and due from banks $ 1,697,221 $ 2,858,625
Federal funds sold 0 1,300,000
Interest-bearing accounts 504,505 0
Securities available for sale, at fair value 5,099,365 4,301,985
Securities held to maturity, at amortized cost
(fair value of $6,195,835 in 1997 and $7,456,739 in 1996) 6,130,048 7,480,583
Loans 36,680,692 32,691,757
Less: allowance for loan losses (388,834) (365,231)
------------ ------------
Loans, net 36,291,858 32,326,526
Premises and equipment, net 2,891,030 2,909,751
Other assets 2,424,052 967,168
------------ -------------
$ 55,038,079 $ 52,144,638
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 9,288,456 $ 9,979,254
Interest-bearing demand 7,100,862 5,601,021
Savings 4,336,617 3,298,627
Time, $100,000 and over 9,935,471 12,042,080
Other time 15,871,791 14,614,342
------------ -------------
Total Deposits 46,533,197 45,535,324
Note Payable 200,000 400,000
Advances from Federal Home Loan Bank 1,300,000 0
Other Liabilities 812,740 581,525
------------ -------------
Total Liabilities 48,845,937 46,516,849
Stockholders' Equity
Common stock, par value $5; 10,000,000 shares
authorized; 554,958 issued and 553,603 outstanding
in 1997 and 528,958 issued and 527,503 outstanding
in 1996, respectively 2,775,290 2,644,790
Surplus 2,777,768 2,647,268
Treasury Stocks, at cost (10,913) (10,913)
Retained Earnings 648,784 357,581
Net unrealized gains (losses) 1,213 (10,937)
------------- -------------
Total Stockholders' Equity 6,192,142 5,627,789
------------- -------------
TOTAL LIABILITIES AND EQUITY $ 55,038,079 $ 52,144,638
============= =============
See notes to consolidated financial statements.
</TABLE>
<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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest Income
Interest & fees on loans $ 989,358 $ 827,539 $ 2,794,407 $ 2,250,087
Interest on investments 183,593 195,566 563,266 492,077
Interest on Federal funds 0 30,608 10,089 182,473
Interest bearing deposits 12,882 0 22,445 0
----------- ------------ ----------- -----------
Total Interest Income 1,185,833 1,053,715 3,390,207 2,924,637
Interest on Deposit 491,686 460,017 1,404,514 1,274,820
Interest on Advances and Other Borrowings 44,505 9,200 109,413 12,850
----------- ------------ ----------- -----------
536,191 469,217 1,513,927 1,287,670
Net Interest Income 649,642 584,498 1,876,280 1,636,967
Provision for loan losses 45,000 44,000 135,000 104,000
----------- ------------ ----------- -----------
Net Interest Income After
Provision for Loan Losses 604,642 540,498 1,741,280 1,532,967
----------- ------------ ----------- -----------
Other Income
Service charge on deposits 273,578 151,411 706,208 656,191
Other charges and fees 420,745 176,168 1,169,987 216,045
----------- ------------ ----------- -----------
694,323 327,579 1,876,195 872,236
Other Expenses
Salaries & benefits 615,056 388,101 1,696,563 1,023,482
Net Occupancy and equipment expenses 184,223 152,748 506,806 427,197
Other operating expenses 324,340 232,689 978,098 701,392
----------- ------------ ----------- -----------
1,123,619 773,538 3,181,467 2,152,071
Income Before Taxes 175,346 94,539 436,008 253,132
Income Tax Expense 47,149 29,787 118,430 66,276
----------- ------------ ----------- -----------
Net Income $ 128,197 $ 64,752 $ 317,578 $ 186,856
=========== ============ =========== ===========
Net Income Per Common and Common
Equivalent Share $ 0.23 $ 0.12 $ 0.58 $ 0.36
=========== ============ =========== ===========
Common Equivalent Shares 547,883 523,005 547,883 523,085
=========== ============ =========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST SOUTHERN BANCSHARES, INC.
Consolidated Statements of Cash Flows
For the Nine Months ended September 30, 1997 and September 30, 1996
<CAPTION>
September 30 September 30
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 317,578 $ 186,856
Depreciation 266,551 203,453
Provision for loan loss 135,000 104,000
Gain on sale of equipment 0 (10,557)
Deferred Income taxes 4,023 38,746
Increase in accrued expenses and other liabilities 224,744 149,900
(Increase) other assets (1,456,884) (61,838)
------------ ------------
(508,988) 610,560
Cash flow from investing activities:
Decrease in Fund Funds Sold 1,300,000 3,950,000
Increase Interest-bearing deposits (504,505) 0
Proceeds from sale of securities held to maturity 0 0
Proceeds from maturities of securities available for sale 442,499 1,232,259
Proceeds from maturities of securities held to maturity 1,356,229 1,753,905
Purchase of securities available for sale (1,229,400) (2,997,623)
Purchase of securities held for maturities 0 (3,842,555)
Net increase in loans (4,100,332) (7,994,426)
Proceeds from the sale of equipment 0 14,000
Purchase of premises and equipment (247,831) (807,220)
------------ ------------
(2,983,340) (8,691,660)
Cash flows from financing activities:
Net increase in deposits 997,873 8,794,638
Proceeds from line of credit 0 400,000
Increase in advances and other borrowings 1,300,000 0
Repayment of line of credit (200,000) (80,000)
Dividends paid (27,949) (16,908)
Proceeds from the sale of stock 261,000 26,460
------------ ------------
2,330,924 9,124,190
Net increase (decrease) in cash and due from banks (1,161,404) 1,043,090
----------- ------------
Cash and Due from Banks, beginning of year 2,858,625 2,046,906
Cash and Due from Banks, end of quarter $ 1,697,221 $ 3,089,996
=========== ===========
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 September 30, 1997 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, Inc. and subsidiaries as of
September 30, 1997 and December 31, 1996, and the results of their
operations for the nine month periods ended September 30, 1997 and
1996, and their cash flows for the nine month periods ended September
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. The preparation
of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of net revenues and
expenses during the reporting period. Actual results could differ
from those estimates. 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 September 30, 1997 and
December 31, 1996 was $6,012,000 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.
Statement of Financial Accounting Standards (FASB) No. 128 "Earnings
Per Share" became effective for the Company for the year ended
December 31, 1997. This new standard specifies the computation,
presentation and disclosure requirements for earnings per share and is
designed to simplify previous earnings per share standards and to make
domestic and international practices more compatible. Earnings per
common share are based on the weighted average number of common shares
outstanding during the period while the effects of potential common
shares outstanding during the period are included in diluted earnings
per share. All earnings per common share amounts have been restated to
conform to the provisions of FASB No. 128.
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 $317,578 for the nine month
period ended September 30, 1997, as compared to $186,856 for the same
period in 1996. The Company earned net income after taxes of $128,197
for the third quarter of 1997 compared to $64,752 for the third
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
$1,876,280 at September 30, 1997 as compared to $1,636,967 for the
same period in 1996 representing a 14.62% increase. This increase is
attributed to the increase in loan volume at the Bank level. Net
loans increased $6,010,000 or 29.81 percent to $36,292,000 as of
September 30, 1997 from $30,282,000 at September 30, 1996. During
1997, the Company increased its provision for loan losses by $31,000
or 29.81 percent to reflect the growth in the Company's loan
portfolio.
Also, contributing to the Company's earnings growth was an increase in
other income at the bank subsidiary. Other income increased by
$111,000 to $943,000 compared to $832,000 at September 30, 1996. This
increase is primarily due to higher services charges on deposit
accounts. For the three month and nine month periods ending September
30, 1997 the mortgage subsidiary had net income of $36,000. At
September 30, 1996, the mortgage subsidiary has a net loss of $14,000.
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 $239,000 or 14.62 percent for the period
ending September 30, 1997, as compared with the same period in 1996.
Strong growth in loans accounted for the increase in net interest
income. For the twelve month period ended September 30, 1997 gross
loans grew by 19.61 percent while other interest-earning assets
decreased by 20.20 percent to fund part of this loan growth. The
results of replacing other earning assets with higher yielding loans
has improved the Bank's net interest margin. The Bank also used
advances from the Federal Home Loan Bank to fund its loan growth, that
resulted in additional interest expenses but at a lower rate then
interest paid on jumbo certificates. Total interest bearing deposits
and other interest bearing liabilities only grew by 5.39 percent for
the twelve month period.
STATEMENT OF CONDITION
Liquidity
In 1997, the Bank became a member of the Federal Home Loan Bank of
Atlanta (the "FHLB") and now use advances from the FHLB for liquidity
purposes. 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 September 30, 1997, the
Bank had $504,505 on deposit at the FHLB at an average rate of 5.45
percent. Using the FHLB has improved the Bank's ability to meet
increasing loan demand and has assisted management's efforts in lowing
its cost of funds. Additional sources of liquidity include cash and
due from banks, interest-bearing deposits, federal funds line from
correspondent banks, maturing investment securities and payments on
commercial and installment loans.
At September 30,1997, the Bank's liquid assets (cash and due form
banks, investment securities, federal funds sold and interest-bearing
deposits) represented 24.40 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 September 30, 1997 and December
31, 1996, the Bank's investment securities portfolio represented
approximately 20.40 percent and 22.60 percent, of total assets,
respectively
At September 30, 1997, the Bank's securities portfolio was invested in
the following types of securities:
Available for Sale Held for Maturity
U.S. Treasuries - % 15%
U.S. Agencies 76 18
Mortgage Backed 5 23
Municipals - 44
FHLB Stock 19 -
---- ----
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 September 30, 1997, the allowance for loan losses represented 1.06
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 net investment in premises and equipment
at September 30, 1997 was $2,891,000 compared to $2,910,000 at
December 31, 1996.
<PAGE>
Securities Exchange Commission
Form 10-QSB
Deposits
The Company held total deposits of $46,533,000 at September 30, 1997,
compared to $45,535,000 at December 31, 1996. This represents an
increase of 2.19 percent and is primarily attributed to several
marketing programs enacted by the Bank. For the nine month period
interest-bearing deposits increased by $1,500,000 or 26.78 percent and
savings increased by $1,038,000 or 31.47 percent. Other time deposits
increased by $1,257,000 or 8.60 percent through September 30, 1997,
while time deposits over $100,000 decreased by $2,107,000 or 17.49
percent. The Bank replaced several large time deposits with advances
from the FHLB. The Bank is able to fund it growing loan portfolio
with FHLB advances. The FHLB provides funding at rates lower then
those demanded by jumbo certificates holders. At September 30, 1997,
FHLB advances outstanding was $1,300,000 at an average daily rate of
5.70 percent. The Bank can borrow up to $7,500,000 from the FHLB.
Stockholder's Equity
Stockholder's equity increased by 7.94 percent for the nine month
period ended September 30, 1997. This increase is due to 26,100
shares of authorized but unissued common stock sold during the first
quarter which provided cash of $261,000. 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 $1,213 at September 30, 1997 compared
to a net unrealized loss of $10,937 at December 31, 1996. Total
stockholders equity for September 30, 1997, was $6,192,142 and
$5,627,789 at December 31, 1996. The Company maintained total
retained earnings of $648,784 and paid a cash dividend of $26,376 or
.05 cent per share to shareholders of record as of March 31, 1997.
Part II. Other Information
Item 1. Legal Proceedings
During the quarter ended September 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: November 13, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,697,221
<INT-BEARING-DEPOSITS> 504,505
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,099,365
<INVESTMENTS-CARRYING> 6,130,048
<INVESTMENTS-MARKET> 6,195,835
<LOANS> 36,680,692
<ALLOWANCE> 388,834
<TOTAL-ASSETS> 55,038,079
<DEPOSITS> 46,845,937
<SHORT-TERM> 1,500,000
<LIABILITIES-OTHER> 812,740
<LONG-TERM> 0
0
0
<COMMON> 2,775,290
<OTHER-SE> 3,416,852
<TOTAL-LIABILITIES-AND-EQUITY> 55,038,079
<INTEREST-LOAN> 2,794,407
<INTEREST-INVEST> 595,800
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,390,207
<INTEREST-DEPOSIT> 1,404,514
<INTEREST-EXPENSE> 1,513,927
<INTEREST-INCOME-NET> 1,876,280
<LOAN-LOSSES> 135,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,181,467
<INCOME-PRETAX> 436,008
<INCOME-PRE-EXTRAORDINARY> 317,578
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 317,578
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
<YIELD-ACTUAL> 0
<LOANS-NON> 6,000
<LOANS-PAST> 417,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 365,231
<CHARGE-OFFS> 142,604
<RECOVERIES> 31,207
<ALLOWANCE-CLOSE> 388,834
<ALLOWANCE-DOMESTIC> 388,834
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
