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 September 30, 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 September 30, 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
Part II. Other Information . . . . . . . . . . . . . . . . . . . . 12
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEET
September 30, December 31,
1996 1995
ASSETS
Cash and due from banks $ 6,421,568 $ 3,989,564
Deposits in other banks -
interest bearing $ 1,986,000 $ 795,000
Investment securities
Available for sale $ 13,390,293 $ 8,146,274
Held to maturity $ 2,665,562 $ 3,305,576
Pineland 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 $ 3,026,000 $ 13,335,000
Loans $ 92,559,123 $ 61,717,437
Less: Unearned discount ( 94,375) ( 82,051)
Reserve for loan losses ( 1,754,419) ( 994,027)
$ 90,710,329 $ 60,641,359
Bank premises and equipment $ 4,014,123 $ 3,104,655
Other assets $ 4,426,963 $ 2,509,399
Total Assets $127,289,722 $ 97,174,748
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits: Demand - non-interest bearing $ 17,632,505 $ 14,145,230
Demand - interest bearing 19,171,463 17,098,343
Savings 7,874,981 6,403,438
Time 65,784,778 46,898,446
$110,463,727 $ 84,545,457
Borrowing 4,379,051 1,976,405
Accrued expenses and other liabilities 1,302,372 604,033
Total Liabilities $116,145,150 $ 87,125,895
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEET (con't)
September 30, December 31,
1996 1995
Stockholders' Equity
Common stock, $1 par value; shares
authorized - 1,000,000 shares
issued and outstanding September 30,
1996 and December 31, 1995,
403,496 and 405,283, respectively $ 403,496 $ 405,283
Surplus 3,116,581 3,136,238
Undivided profits 7,746,533 6,464,741
Unrealized gain (loss) on
securities ( 122,038) 42,591
Total Stockholders' Equity $ 11,144,572 $10,048,853
Total Liabilities and
Stockholders' Equity $127,289,722 $ 97,174,748
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENT OF INCOME
Three Three
Months Months Nine Months Nine Months
Ended Ended Ended Ended
September September September September
30, 1996 30, 1995 30, 1996 30, 1995
Interest Income:
Interest & fees
on loans $ 2,539,668 $ 1,833,121 $ 7,107,610 $ 5,278,457
Interest on federal
funds sold 53,007 121,322 390,803 299,317
Interest on deposits
with other banks 36,731 10,266 96,471 30,413
Interest on
investment
securities:
U.S. Treasury 46,282 21,237 140,046 63,152
U.S. Government
agencies 145,933 71,857 405,132 203,572
Mortgage backed
bonds 28,738 34,659 125,392 106,579
State & municipal
subdivisions 24,193 11,647 72,152 42,044
Other 1,832 - 25,772 9,655
Total Interest
Income $ 2,876,384 $ 2,104,109 $ 8,363,378 $ 6,033,189
Interest Expense:
Interest on
deposits $ 1,106,414 $ 861,074 $ 3,385,267 $ 2,272,789
Interest on other
borrowings 81,159 38,721 223,420 95,439
Total Interest
Expense $ 1,187,573 $ 899,795 $ 3,608,687 $ 2,368,228
Net Interest
Income $ 1,688,811 $ 1,204,314 $ 4,754,691 $ 3,664,961
Provision for loan
losses 36,000 11,800 84,000 45,400
Net interest income
after provision
for loan losses $ 1,652,811 $ 1,192,514 $ 4,670,691 $ 3,619,561
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENT OF INCOME (con't)
Three Three
Months Months Nine Months Nine Months
Ended Ended Ended Ended
September September September September
30, 1996 30, 1995 30, 1996 30, 1995
Other Operating Income:
Service charge on
deposit accounts $ 303,303 $ 231,613 $ 872,876 $ 704,727
Commission on
insurance 34,841 16,627 60,317 48,854
Other income 36,873 56,115 234,398 273,940
Gain (loss) on sale
of securities ( 2,463) - ( 23,775) -
Total Other
Operating Income $ 372,554 $ 304,355 $ 1,143,816 $ 1,027,521
Other Operating Expenses:
Salaries $ 545,893 $ 423,416 $ 1,661,828 $ 1,277,100
Profit sharing &
personnel expense 86,996 70,582 269,929 193,582
Occupancy expense 129,144 111,315 376,452 278,029
Furniture &
fixtures expense 78,449 119,783 356,992 312,772
Payroll taxes 40,819 26,244 122,101 78,176
Data processing 80,448 - 146,154 -
Other operating
Expenses 325,256 283,635 1,010,699 952,510
Total Other Operating
Expenses $ 1,287,005 $ 1,034,975 $ 3,944,155 $ 3,092,169
Income before
income taxes $ 738,360 $ 461,894 $ 1,870,352 $ 1,554,913
Applicable income
taxes 230,685 146,004 588,561 507,240
Net Income $ 507,675 $ 315,890 $ 1,281,791 $ 1,047,673
Per share data based
on weighted average
outstanding shares
Weighted average
outstanding
shares 403,496 405,283 404,010 405,283
Net Income $ 1.26 $ .78 $ 3.17 $ 2.58
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENT OF CASH FLOWS
Nine Months Nine Months
Ended Ended
September September
30, 1996 30, 1995
Cash Flows From Operating Activities:
Net income $ 1,281,791 $ 1,047,673
Add expenses not requiring cash:
Provision for depreciation and
amortization 411,536 266,744
Provision for loan losses 84,000 45,400
Bond portfolio gains (losses) ( 23,755) -
Gain on sale of other real estate owned - 14,004
Increase (decrease) in taxes
payable 99,218 ( 84,160)
Increase (decrease) in interest
payable 190,460 371,021
Increase (decrease) in other
liabilities 191,417 219,160
(Increase) decrease in interest
receivable ( 539,493) ( 344,777)
(Increase) decrease in prepaid
expenses 41,513 8,572
(Increase) decrease in other
assets ( 365,394) ( 159,409)
Recognition of unearned loan
income 11,927 ( 5,149)
Net Cash Used in Operating Activities $ 1,383,220 $ 1,379,079
Cash Flows From Investing Activities:
Proceeds from sale of investment
securities $ 3,000,922 $ 1,033,659
Proceeds from maturities of
investment securities 3,996,714 2,190,509
Purchase of investment securities ( 7,833,850) (4,328,427)
Net loans to customers (17,149,055) ( 5,855,251)
Purchase of premise and equipment ( 263,615) ( 245,825)
Proceeds from sale of premises and
equipment - -
Proceeds from other real estate owned - 339,594
Purchase stock - Pineland Bank ( 1,839,937) ( 905,640)
Cash received from acquired bank 8,773,744 -
Purchase of FHLB stock 1,700 -
Net Cash Used in Investing Activities $(11,313,377) $( 7,771,381)
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENT OF CASH FLOWS (Con't)
Nine Months Nine Months
Ended Ended
September September
30, 1996 30, 1995
Cash Flows From Financing Activities:
Net increase (decrease) in demand
deposits, NOW and money market $(2,296,466) $( 891,680)
Net increase (decrease) in savings
and time deposits 3,159,425 8,442,260
Net increase (decrease) in borrowings 2,402,646 691,667
Dividends paid - -
Redemptions of company stock ( 21,444) -
Net Cash Provided (Used) From
Financing Activities $ 3,244,161 $ 8,242,247
Net Increase (Decrease) in Cash
and Cash Equivalents $(6,685,996) $ 1,849,945
Cash and Cash Equivalents at
Beginning of Year 18,119,564 13,097,596
Cash and Cash Equivalents at
End of Period $11,433,568 $14,947,541
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 February 28, 1990, the merger of Georgia Peoples
Bankshares, Inc. into South Banking Company was completed. The
purchase method of accounting was used to record this transaction.
The activity of Georgia Peoples Bankshares, Inc. since February 28,
1990 has been consolidated in these statements.
On January 11, 1996, the acquisition of Pineland State Bank in
Metter, Georgia was completed. The purchase method of accounting
was used to record the transaction. All transactions since January
11, 1996 of Pineland State Bank have been consolidated in these
statements.
Effective January 1, 1993, the Company adopted FASB 109
regarding 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
year to date numbers with prior period. All of this discussion will
take into consideration the acquired assets and liabilities.
During the third quarter of 1996, total assets increased $2,877,168
which followed a second quarter decrease of $1,149,450. The banks have
been successful in maintaining core deposits and have not attempted to
attract higher yielding "hot" money. Loan demand increased by
$3,694,650 during this quarter and $17,149,055 for the year. 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. Part of the loan demand is seasonal; however,
the banks have been able to attract good quality nonseasonal loans.
Net income increased by $234,118 for the nine month period and
$191,785 for the three month period compared to 1995. Improvement in
the performance of Pineland State Bank continues with income of $90,038
for the quarter following a loss of $5,313 for the first six months.
With the exception of Pineland State Bank, which is improving, the banks
continue to maintain good interest margins. If the prime rate drops,
the banks could experience some decline in margins. Pineland State
Bank's interest margins should continue to improve as high yielding
certificates mature and are replaced with certificates closer to actual
market.
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.
Operating expenses continue to remain stable with little variation
from prior years. Management continues to closely monitor all
expenditures.
SOUTH BANKING COMPANY
ALMA, GEORGIA
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - No change.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits - None
(27) Financial Data Schedule
The registrant has not filed any reports on form 8-K
during the six month period ended September 30, 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: November 12, 1996 By: Paul Bennett
Paul Bennett
President
Date: November 12, 1996 By: Olivia Bennett
Olivia Bennett
Vice President
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<PERIOD-END> SEP-30-1996
<CASH> 6,421,568
<INT-BEARING-DEPOSITS> 1,986,000
<FED-FUNDS-SOLD> 3,026,000
<TRADING-ASSETS> 0
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<ALLOWANCE> 1,754,419
<TOTAL-ASSETS> 127,289,722
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<SHORT-TERM> 500,000
<LIABILITIES-OTHER> 802,372
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0
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<LOAN-LOSSES> 84,000
<SECURITIES-GAINS> ( 23,775)
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<INCOME-PRETAX> 1,870,352
<INCOME-PRE-EXTRAORDINARY> 1,281,791
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<CHARGE-OFFS> 146,942
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