SECURITY AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1996 Commission file number 2-71249
SOUTH BANKING COMPANY
(Exact name of registrant as specified in its charter)
Georgia 58-1418696
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
104 North Dixon Street, Alma, Georgia 31510
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (912) 632-8631
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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 report(s), and (2)
has been subject to such filing requirement for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of March 31, 1996.
Common stock, $1.00 par value - 403,496 shares outstanding
SOUTH BANKING COMPANY
SOUTH BANKING COMPANY
ALMA, GEORGIA
Part I. Financial Information
Consolidated Financial Statements . . . . . . . . . . . 4 - 9
Notes to Consolidated Financial Statements . . . . . . . . 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 11 - 12
Part II. Other Information . . . . . . . . . . . . . . . . . . . . 13
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1996 1995
ASSETS
Cash and due from banks $ 4,910,888 $ 3,989,564
Deposits in other banks - interest bearing $ 2,285,000 $ 795,000
Investment securities:
Available for sale $ 12,889,686 $ 8,146,274
Held to maturity $ 3,267,716 $ 3,305,576
Pineland State Bank stock - at cost $ - $ 975,141
Georgia Bankers stock $ 547,284 $ 272,880
Federal Home Loan Bank stock $ 101,600 $ 99,900
Federal funds sold $ 15,965,000 $ 13,335,000
Loans $ 79,109,049 $ 61,717,437
Less: Unearned discount ( 75,290) ( 82,051)
Reserve for loan losses ( 1,531,808) ( 994,027)
$ 77,501,951 $ 60,641,359
Bank premises and equipment $ 4,079,088 $ 3,104,655
Other assets $ 4,013,851 $ 2,509,399
Total Assets $125,562,064 $ 97,174,748
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits: Demand - non-interest bearing $ 16,707,037 $ 14,145,230
Demand - interest bearing 21,931,639 17,098,343
Savings 7,975,054 6,403,438
Time 63,950,827 46,898,446
$110,564,557 $ 84,545,457
Borrowing 3,544,051 1,976,405
Accrued expenses and other liabilities 1,211,838 604,033
Total Liabilities $115,320,446 $ 87,125,895
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEET (con't)
March 31, December 31,
1996 1995
Stockholder's Equity
Common stock $1 par value; shares
authorized - 1,000,000, shares
issued and outstanding -
March 31, 1996 and December 31, 1995
403,496 and 405,283, respectively $ 403,496 $ 405,283
Surplus 3,116,581 3,136,238
Undivided profits 6,839,665 6,464,741
Unrealized gain (loss) on securities ( 118,124) 42,591
Total Stockholders' Equity $ 10,241,618 $ 10,048,853
Total Liabilities and
Stockholders' Equity $125,562,064 $ 97,174,748
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENT OF INCOME
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
Interest Income
Interest and fees on loans $ 2,172,645 $ 1,652,359
Interest on federal funds sold 207,840 91,409
Interest on deposits with other
banks 29,641 7,823
Interest on investment securities:
U. S. Treasury 45,404 21,582
U. S. government agencies 142,753 63,318
Mortgage backed securities 31,761 36,125
State and political subdivisions 23,398 13,459
Other - -
Dividends 22,135 -
Total Interest Income $ 2,675,577 $ 1,886,075
Interest Expense
Interest on deposits $ 1,141,892 $ 634,727
Interest on other borrowings 68,973 32,894
Total Interest Expense $ 1,210,865 $ 667,621
Net Interest Income $ 1,464,712 $ 1,218,454
Provision for loan losses 24,000 16,800
Net interest income after provisions
for loan losses $ 1,440,712 $ 1,201,654
Other Operating Income
Service charge on deposit accounts $ 268,476 $ 233,244
Commission on insurance 16,380 14,483
Other income 97,223 176,006
Gain (loss) sale of securities ( 20,432) -
Total Other Operating Income $ 361,647 $ 423,733
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENT OF INCOME (Con't)
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
Other Operating Expenses
Salaries $ 529,821 $ 396,847
Profit sharing and other personnel
expense 87,592 57,509
Occupancy expense 110,269 90,871
Furniture and fixtures expense 120,004 104,421
Payroll taxes 35,663 29,108
Data processing 48,713 -
Other operating expenses 317,825 333,074
Total Other Operating Expenses $ 1,249,887 $ 1,011,830
Income before income taxes $ 552,472 $ 613,557
Applicable income taxes 177,548 201,144
Net income $ 374,924 $ 412,413
Per share data on weighted average
outstanding shares
Weighted average outstanding shares 405,047 405,283
Net income per share $ .9256 $ 1.0176
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENT OF CASH FLOWS
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
Cash Flows From Operating Activities:
Net income $ 374,924 $ 412,413
Add expenses not requiring cash:
Provision for depreciation and
amortization 156,377 96,783
Provision for loan losses 24,000 16,800
Bond portfolio losses 20,432 -
Gain on sale of other real estate
owned - ( 17,332)
Increase (decrease) in taxes
payable 177,548 50,245
Increase (decrease) in interest
payable 38,940 100,870
Increase (decrease) in other
liabilities 174,073 120,568
(Increase) decrease in interest
receivable ( 67,099) ( 39,482)
(Increase) decrease in prepaid
expenses ( 15,071) ( 77,489)
(Increase) decrease in other assets ( 275,502) ( 147,824)
Recognition of unearned loan income ( 7,158) ( 1,143)
Net Cash Used in Operating Activities $ 601,464 $ 514,409
Cash Flows From Investing Activities:
Proceeds from sale of investment
securities $ 2,406,844 $ -
Proceeds from maturities of investment
securities 1,846,927 970,192
Purchase of investment securities ( 5,313,102) ( 935,027)
Net loans to customers ( 3,861,592) ( 1,906,115)
Purchase of premise and equipment ( 81,316) ( 86,096)
Proceeds from sale of equipment - -
Proceeds from other real estate owned - 339,594
Purchase of stock - Pineland Bank ( 1,839,937) ( 130,463)
Options to purchase Pineland Bank stock - 3,390
Purchase of FHLB stock ( 1,700) -
Cash received from acquired bank 8,773,744 -
Net Cash Used in Investing Activities $ 1,929,868 $( 1,744,525)
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENT OF CASH FLOWS (Con't)
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
Cash Flows From Financing Activities:
Net increase (decrease) in demand
deposits, NOW and money market $( 1,893,171) $( 2,308,030)
Net increase (decrease) in savings
and time deposit 2,856,961 3,156,026
Net increase (decrease) in short-term
borrowings 1,567,646 ( 32,500)
Dividends paid - -
Redemptions of company stock ( 21,444) -
Net Cash Provided (Used) From
Financing Activities $ 2,509,992 $ 815,496
Net Increase (Decrease) in Cash
and Cash Equivalents $ 5,041,324 $( 414,620)
Cash and Cash Equivalents at
Beginning of Year 18,119,564 13,097,596
Cash and Cash Equivalents at
End of Period $ 23,160,888 $ 12,682,976
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying consolidated financial statements in this report
have not been audited. The statements have been prepared in accordance
with generally accepted accounting principles and general practice
within the banking industry.
On January 11, 1996, the merger of Pineland State Bank into South
Banking Company was completed. The purchase method of accounting was
used to record this transaction. The activity of Pineland State Bank
since January 11, 1996 has been consolidated in these statements.
Effective January 1, 1993, the company adopted FASB 109 regarding
the recording of deferred income taxes. Prior year statements have been
restated to reflect an adjustment required of $58,508 reduction in
deferred taxes and an increase in equity.
In the opinion of management, all adjustments for the fair
presentation of the financial position and results of operations for the
interim periods have been made.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
During the first quarter of 1996, Pineland State Bank of Metter,
Georgia was acquired by South Banking Company. Effective January 11,
1996, the accounts of Pineland State Bank have been consolidated with
South Banking Company. This consolidation increased all asset and
liability accounts substantially. Pineland State Bank had approximately
$28,018,269 in total assets on the date of acquisition comprised of
$13,015,841 in net loans, $4,183,068 in securities, $6,334,000 in
federal funds, $2,439,744 in cash and $2,045,616 in fixed and other
assets. Pineland State Bank's liabilities consisted of $25,055,311 in
deposits and $21,724,385 in other liabilities. All assets and
liabilities have been recorded using the purchase method of accounting.
This acquisition must be taken into consideration when comparing current
quarter numbers with prior period. All of this discussion will take
into consideration the acquired assets and liabilities.
During the first quarter of 1996, total assets increased $369,047.
Pineland State Bank decreased $637,808 as some higher yield deposits
were not maintained. The other bank had an increase of $1,006,855 or
1.04%. The banks have been successful in maintaining core deposits and
have not attempted to attract higher yielding "hot" money. Loan demand
increased by $3,844,750 during this quarter. The banks continue to
attempt to place more good quality higher yielding loans on the books.
The loan continues to perform well and has not impacted the reserve for
loan losses. Pineland State Bank's loan to deposit ratio remains low
and management is attempting to address this situation.
Net income decreased by $37,489 for the period in 1996 compared to
1995. The decrease is attributable to a loss by Pineland State Bank of
$23,584 and additional interest expense associated with the purchase of
Pineland stock. This should be a short-term situation as efforts to
improve the performance of Pineland State Bank have been initiated.
With the exception of Pineland State Bank, the banks continue to
maintain good interest margins, although some tightening has occurred.
As the prime rate drops, the banks could experience some decline in
margins. Pineland State Bank's interest margins should improve as high
yielding certificates mature and are replaced with certificates closer
to actual market. Other income decreased considerably primarily due to
1995 has substantial gains on sale of SBA loans.
Provision for loan losses are maintained at levels that are
adequate based on management's evaluation of the loan portfolio.
Pineland State Bank has a substantial reserve to handle any problems
that might arise. Pineland's reserve has been increased substantially
in prior years due to loan problems. Most of the problems have been
worked out and reserve remains more than adequate.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (con't)
Operating expense have decreased from prior periods due to
improvements in the data processing center, regulatory costs and other
general cost cutting. Pineland State Bank will convert to the data
processing center in the second quarter and additional savings should
occur.
The bank continues to monitor the economy and operations to insure
proper actions are taken as the economy and banking climate continue to
change. Statewide branch banking has been approved and management will
monitor all changes in the marketplace.
SOUTH BANKING COMPANY
ALMA, GEORGIA
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
(27) Financial Data Schedule
The registrant has not filed any reports on Form 8-K
during the three month period ended March 31, 1996.
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.
SOUTH BANKING COMPANY
(Registrant)
Date: May 12, 1996 By:
Paul Bennett
President
Date: May 12, 1996 By:
Olivia Bennett
Vice President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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