UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1996
Commission File Number: 333-12373
Southern Community Bancshares, Inc.
Exact name of registrant as specified in its
charter
Delaware 63-1176408
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization
325 2nd Street, S.E.
Cullman, Alabama 35055
Address of principal executive Zip Code
offices
Registrant's telephone number, including area code: (205)734-4863
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ___X___ No_______
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at December 31, 1996
Common Stock, $.01 par value 1,137,350 shares
SOUTHERN COMMUNITY BANCSHARES, INC.
PART I. FINANCIAL INFORMATION
Page
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL 2
CONDITION AS OF DECEMBER 31, 1996 AND
SEPTEMBER 30, 1996
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR 3
THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 4
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FURNISHED HAVE NOT BEEN AUDITED BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS, BUT REFLECT, IN THE
OPINION OF MANAGEMENT, ALL ADJUSTMENTS NECESSARY FOR
A FAIR PRESENTATION OF FINANCIAL CONDITION AND THE
RESULTS OF OPERATIONS FOR THE PERIOD PRESENTED.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 7
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
OTHER INFORMATION 8
SIGNATURES 9
SOUTHERN COMMUNITY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
ASSETS
December 31, September 30,
1996 1996
CASH AND CASH EQUIVALENTS $14,397 $3,868
SECURITIES AVAILABLE FOR SALE,at fair value 11,707 11,628
SECURITIES HELD TO MATURITY, fair value of
$5,304 and $6,687, respectively 5,775 6,767
LOANS RECEIVABLE, net 38,902 39,601
PREMISES AND EQUIPMENT 590 603
OTHER ASSETS 780 964
Total Assets $72,151 $63,431
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $56,017 $57,138
OTHER LIABILITIES 161 608
Total Liabilities 56,178 57,746
STOCKHOLDERS' EQUITY:
Preferred stock, par $.01, no shares
issued, 100,000 authorized 0 0
Common stock, par $.01 per share,
1,137,350 issued and outstanding,
3,000,000 authorized 11 0
Additional paid-in capital 10,922 0
Retained earnings 6,032 5,872
Unrealized loss on securities (82) (187)
Unearned ESOP compensation (910) O
Total Stockholders' equity 15,973 5,685
Total liabilities and stockholders'
equity $72,151 $63,431
The accompanying notes are an integral part of this balance sheet.
SOUTHERN COMMUNITY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
THREE MONTHS
ENDED
DECEMBER 31,
1996 1995
INTEREST INCOME:
Interest and fees on loans $864 $831
Interest and dividends on securities 266 247
Other interest income 74 70
Total interest income 1,204 1,148
INTEREST EXPENSE:
Interest on deposits 643 644
Total interest expense 643 644
Net interest income 561 504
PROVISION FOR LOAN LOSSES 0 0
Net interest income after provision
for loan losses 561 504
NONINTEREST INCOME:
Customer service fees 65 78
Total noninterest income 65 78
NONINTEREST EXPENSE:
Compensation and benefits 191 177
Occupancy and equipment 41 40
Deposit insurance expense 30 32
Other operating expense 120 109
Total noninterest expense 382 358
Income before income taxes 244 224
PROVISION FOR INCOME TAXES 84 60
NET INCOME $160 $164
EARNINGS PER SHARE $0.15 N/A
SHARES OUTSTANDING 1,137,350 N/A
The accompanying notes are an integral part of these statements.
SOUTHERN COMMUNITY BANCSHARES, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(IN THOUSANDS)
1996 1995
CASH FLOWS FORM OPERATING ACTIVITIES:
Net Income $160 $164
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 20 21
Amortization and accretion on
securities (11) (36)
Amortization of net deferred loan
origination fees (10) (9)
Change in assets and liabilities:
Income taxes receivable/payable (33) 34
Accrued interest receivable (3) (27)
Other assets 165 62
Accrued interest payable (26) (19)
Other liabilities (421) (94)
Total adjustments (321) (68)
Net cash provided by(used in)
operating activities (159) 96
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities/calls of
securities available-for-sale 454 137
Proceeds from maturities/calls of
securities held-to-maturity 1,004 1,173
Purchase of securities available-for-sale (374) (1,337)
Net loan repayments (originations) 709 864
Capital expenditures (7) (15)
Net cash provided by investing
activities 1,786 822
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase(decrease) in deposits (1,121) 928
Net proceeds from issuance of common stock 10,023 0
Net cash provided by financing
activities 8,902 928
NET INCREASE IN CASH AND CASH EQUIVALENTS 10,529 1,846
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,868 6,108
CASH AND CASH EQUIVALENTS AT END OF YEAR $14,397 $7,954
The accompanying notes are an integral part of these statements.
SOUTHERN COMMUNITY BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Southern Community Bancshares, Inc.(the "Company") was
incorporated in the State of Delaware at the direction of
management of First Federal Savings and Loan Association
of Cullman (the "Association") for the purpose of serving
as a savings institution holding company of the
Association upon the acquisition of all of the capital
stock issued by the Association upon the conversion from
a federally chartered mutual savings association form of
organization to a federally chartered stock savings
association (the "Conversion").
The accompanying unaudited condensed consolidated
financial statements as of December 31, 1996, and for the
three month period then ended, include the accounts of the
Company and the Association. All significant
intercompany transactions and accounts have been
eliminated in consolidation.
The condensed consolidated financial statements were
prepared by the Company without an audit, but in the
opinion of management, reflect all adjustments necessary
for the fair presentation of financial position and
results of operations for the three month periods ended
December 31, 1996 and 1995. Results of operations for
the current interim period are not necessarily indicative
of results expected for the fiscal year ended September
30, 1997. While certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange
Commission, management believes that the disclosures
herein are adequate to make the information presented
not misleading. These condensed consolidated financial
statements should be read in conjunction with the
financial statements and notes thereto for the year ended
September 30, 1996. The accounting policies followed by
the Association are set forth in the summary of
significant accounting policies in the Association's
September 30, 1996 financial statements.
2. STOCK CONVERSION
On December 23, 1996, the Conversion to a federally
chartered stock savings association through amendment of its
charter, and issuance of common stock to the Company was completed.
Related thereto, the Company sold 1,137,350 shares of common
stock, par value $.01 per share, at an initial price of $10 per
share in subscription and community offerings. Costs associated
with the Conversion were approximately $590,000, including
underwriting fees. These conversion costs were deducted from the
gross proceeds of the sale of the common stock.
In connection with the Conversion, the Company has established
an employee stock ownership plan (the "ESOP"). The ESOP
purchased approximately 8%, or 90,988 shares, of the total
shares of common stock sold. The Company lent $909,880
to the ESOP for the purchase of the shares of common stock.
Unearned compensation for the ESOP was charged to stockholders'
equity and is reduced ratably in connection with principal
payments under the terms of the Plan.
Within one year following the Conversion, and subject to
shareholder approval, the Company is expected to implement the
Management Recognition Plan, under which employees could be
awarded an aggregate amount of shares of common stock equal
to 4% of the shares issued in the Conversion(45,494 shares of
common stock) and the Stock Option Plan, under which employees
and directors could be granted options to purchase an aggregate
amount of shares of common stock equal to 10% of the shares
issued in the Conversion at exercise prices equal to the market
price of the common stock on the date of grant.
3. EARNINGS PER SHARE
Earnings per share for the period from December 23, 1996, the
date of Conversion, to December 31, 1996, has been computed
based on the earnings during that period and on the weighted
average number of shares of common stock and common stock
equivalents outstanding during that period. Common stock
outstanding is comprised of issued shares less unallocated
Employee Stock Ownership Plan ("ESOP") shares. The weighted
average number of shares used for the period from December 23,
1996 through December 31, 1996, was 1,046,362.
Item 2. Management's Discussion and Analysis or Plan of
Operations
On December 23, 1996, the Company completed the sale of
1,137,350 shares of its common stock in an initial public offering
at a price of $10.00 per share and simultaneously acquired the shares
of common stock of the Association in connection with the mutual to
stock conversion. Costs associated with the offering were approximately
$590,000. Prior to December 23, 1996, the Company had not issued any
stock, had no assets or liabilities and had not engaged in any business
activities other than of an organizational nature. Accordingly, the
financial data for periods prior to the Conversion included herein
reflect the operations of the Association only.
Comparison of Financial Condition at December 31,
1996 and September 30, 1996. Total assets increased by $8.7 million
or 13.7%, from $63.4 million at September 30, 1996 to $72.2 million
at December 31, 1996. The increase in total assets was primarily
attributable to a $10.5 million increase in cash which was partially
offset by a $992,000 decrease in securities held to maturity and a
$699,000 decrease in loans. This asset growth was funded by the net
proceeds received by the Company from its initial public offering.
Total deposits decreased by $1.1 million from $57.1 million
at September 30, 1996 to $56.0 million at December 31, 1996. The
decrease was primarily attributable to deposits being used by
customers to purchase stock in the Company's initial public offering.
Comparison of Results of Operations for the Three Months Ended
December 31, 1996 and 1995. The Company reported net income for the
three months ended December 31, 1996 of $160,000 as compared to
$164,000 for the three months ended December 31, 1995.
Net Interest Income. Net interest income for the three months
ended December 31, 1996 amounted to $561,000 as compared to $504,000
for the three months ended December 31, 1995. Total interest income
increased slightly during the quarter ended December 31, 1996 as
compared to the prior year. This increase resulted primarily from
increased interest and fees. Total interest expense remained
relatively the same as compared to 1995.
Provision for Loan Losses. No provision for loan losses was
made during the first quarter of 1996 or 1995. The allowance for
loan losses reflects management's estimates which took into account
historical experience, the amount of non-performing assets and
general economic conditions.
Provision for Income Taxes. Income tax expense for the three
months ended December 31, 1996 remained fairly stable increasing
by $24,000 to $84,000 for the three months ended December 31, 1996
as compared to income tax expense of $60,000 for the three months
months ended December 31, 1995.
Capital Resources. The Association's primary sources of funds
are customer deposits, repayments of loan principal, and interest
from loans and investments. While scheduled principal repayments
on loans and mortgage-backed securities are a relatively predictable
source of funds, deposit flows, and loan prepayments are greatly
influenced by general interest rates, economic conditions, and
competition. The Association manages the pricing of its deposits
to maintain a desired deposit balance. In addition, the Association
invests in short-term interest-earning assets which provide liquidity
to meet lending requirements.
The Association is required to maintain certain levels of
regulatory capital. At December 31, 1996, The Association was
in compliance with all regulatory capital requirements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company and subsidiary may be a party to
various legal proceedings incident to its or their business.
At December 31, 1996, there were no legal proceedings to which
the Company or subsidiary was a party, or to which any of their
property was subject, which were expected by management to
result in a material loss.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
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 thereunto duly
authorized.
SOUTHERN COMMUNITY BANCSHARES, INC.
Date: February 13, 1997 William R. Faulk
________________________________________
William R. Faulk
President and Chief Executive Officer
Date: February 13, 1997 Beth Knight
________________________________________
Beth Knight
Secretary and Treasurer
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