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 June 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 June 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 -13
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1996 1995
ASSETS
Cash and due from banks $ 5,238,350 $ 3,989,564
Deposits in other banks -
interest bearing $ 2,286,000 $ 795,000
Investment securities
Available for sale $ 10,350,797 $ 8,146,274
Held to maturity $ 6,253,126 $ 3,305,576
Pineland State Bank stock - at cost $ - $ 975,141
Georgia Bankers stock $ 547,283 $ 272,880
Federal Home Loan Bank stock $ 101,600 $ 99,900
Federal funds sold $ 4,280,000 $ 13,335,000
Loans $ 88,672,530 $ 61,717,437
Less: Unearned discount ( 71,910) ( 82,051)
Reserve for loan losses ( 1,584,941) ( 994,027))))
$ 87,015,679 $ 60,641,359
Bank premises and equipment $ 4,027,286 $ 3,104,655
Other assets $ 4,312,493 $ 2,509,399
Total Assets $124,412,614 $ 97,174,748
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits: Demand - non-interest bearing $ 16,621,510 $ 14,145,230
Demand - interest bearing 20,552,668 17,098,343
Savings 8,048,404 6,403,438
Time 64,042,805 46,898,446
$109,265,387 $ 84,545,457
Borrowing 3,511,551 1,976,405
Accrued expenses and other liabilities 1,128,367 604,033
Total Liabilities $113,905,305 $ 87,125,895
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEET (con't)
June 30, December 31,
1996 1995
Stockholder's Equity
Common stock $1 par value; shares
authorized - 1,000,000, shares
issued and outstanding -
1996 and 1995 - 403,496
and 405,283, respectively $ 403,496 $ 405,283
Surplus 3,116,581 3,136,238
Undivided profits 7,238,857 6,464,741
Unrealized gain (loss) on securities ( 251,625) 42,591
Total Stockholders' Equity $ 10,507,309 $ 10,048,853
Total Liabilities and Stockholders' Equity $124,412,614 $ 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 Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
Interest Income:
Interest & fees
on loans $ 2,395,297 $ 1,792,977 $ 4,567,942 $ 3,445,336
Interest on federal
funds sold 129,956 86,586 337,796 177,995
Interest on deposits
with other banks 30,099 12,324 59,740 20,147
Interest on
investment
securities:
U.S. Treasury 48,360 20,333 93,764 41,915
Mortgage backed
securities 64,893 35,795 96,654 71,920
U.S. Government
agencies 116,446 68,397 259,199 131,715
State & municipal
subdivisions 24,561 16,938 47,959 30,397
Other 1,805 9,655 23,940 9,655
Total Interest
Income $ 2,811,417 $ 2,043,005 $ 5,486,994 $ 3,929,080
Interest Expense:
Interest on
deposits $ 1,136,961 $ 776,988 $ 2,278,853 $ 1,411,715
Interest on other
borrowings 73,288 23,824 142,261 56,718
Total Interest
Expense $ 1,210,249 $ 800,812 $ 2,421,114 $ 1,468,433
Net Interest
Income $ 1,601,168 $ 1,242,193 $ 3,065,880 $ 2,460,647
Provision for loan
losses 24,000 16,800 48,000 33,600
Net interest income
after provision
for loan losses $ 1,577,168 $ 1,225,393 $ 3,017,880 $ 2,427,047
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 Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
Other Operating Income:
Service charge on
deposit accounts $ 301,097 $ 239,870 $ 569,573 $ 473,114
Commission on
insurance 9,096 17,744 25,476 32,227
Other income 100,302 41,819 197,525 217,825
Gain (loss) on sale
of securities ( 880) - ( 21,312) -
Total Other
Operating Income $ 409,615 $ 299,433 $ 771,262 $ 723,166
Other Operating Expenses:
Salaries $ 586,114 $ 456,837 $ 1,115,935 $ 853,684
Profit sharing &
personnel expense 95,341 65,491 182,933 123,000
Occupancy expense 137,039 75,843 247,308 166,714
Furniture &
fixtures expense 158,539 88,568 278,543 192,989
Payroll taxes 45,619 22,824 81,282 51,932
Data processing 16,993 - 65,706 -
Other operating
Expenses 367,618 335,801 685,443 668,875
Total Other Operating
Expenses $ 1,407,263 $ 1,045,364 $ 2,657,150 $ 2,057,194
Income before
income taxes $ 579,520 $ 479,462 $ 1,131,992 $ 1,093,019
Applicable income
taxes 180,328 160,092 357,876 361,236
Net Income $ 399,192 $ 319,370 $ 774,116 $ 731,783
Per share data based
on weighted average
outstanding shares
Weighted average
outstanding
shares 403,496 405,283 404,271 405,283
Net Income $ .99 $ .79 $ 1.91 $ 1.81
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENT OF CASH FLOWS
Six Months Six Months
Ended Ended
June 30, June 30,
1996 1995
Cash Flows From Operating Activities:
Net income $ 774,116 $ 731,783
Add expenses not requiring cash:
Provision for depreciation and
amortization 297,798 219,375
Provision for loan losses 48,000 33,600
Bond portfolio losses - -
Gain on sale of other real estate
owned - 14,004
Increase (decrease) in taxes
payable 111,371 ( 92,664)
Increase (decrease) in interest
payable 76,738 195,988
Increase (decrease) in other
liabilities 118,981 181,008
(Increase) decrease in interest
receivable ( 412,625) ( 251,498)
(Increase) decrease in prepaid
expenses ( 2,689) ( 24,561)
(Increase) decrease in other
assets 159,466 ( 206,788)
Recognition of unearned loan
income ( 10,538) 181)
Net Cash Used in Operating Activities $ 1,160,618 $ 800,428
Cash Flows From Investing Activities:
Proceeds from sale of investment
securities $ 3,000,922 $ -
Proceeds from maturities of
investment securities 2,590,397 1,855,353
Purchase of investment securities ( 7,661,262) ( 1,871,776)
Net loans to customers (13,337,858) ( 7,842,294)
Purchase of premise and equipment ( 178,460) ( 133,254)
Proceeds from sale of premises
and equipment - -
Proceeds from other real estate owned - 339,594
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENT OF CASH FLOWS (Con't)
Six Months Six Months
Ended Ended
June 30, June 30,
1996 1995
Cash Flows From Investing Activities (con't):
Purchase stock - Pineland Bank ( 1,839,937) ( 130,463)
Options to purchase Pineland Bank stock - ( 9,530)
Cash received from acquired bank 8,773,744 -
Purchase of FHLB stock ( 1,700) -
Net Cash Used in Investing Activities $( 8,654,154) $( 7,792,370)
Cash Flows From Financing Activities:
Net increase (decrease) in demand
deposits, NOW and money market $( 3,357,669) $( 2,933,178)
Net increase (decrease) in savings
and time deposit 3,022,289 6,356,972
Net increase (decrease) in borrowings 1,535,146 ( 65,000)
Dividends paid - -
Redemptions of company stock ( 21,444) -
Net Cash Provided (Used) From
Financing Activities $ 1,178,322 $ 3,358,794
Net Increase (Decrease) in Cash
and Cash Equivalents $( 6,315,214) $( 3,633,148))
Cash and Cash Equivalents at
Beginning of Year 18,119,564 13,097,596
Cash and Cash Equivalents at
End of Period $ 11,804,350 $ 9,464,448
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.
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 second quarter of 1996, total assets decreased
$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 $9,563,481 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. Part of the loan demand is seasonal; however,
the banks have been able to attract good quality nonseasonal loans also.
Net income increased by $79,822 for the nine month period in 1996
and $42,333 for the six month period compared to 1995. The increase is
after an income by Pineland State Bank of $8,271 for the quarter and
loss of $(5,313) for the six months and additional interest expense
associated with the purchase of Pineland stock. Improvement in the
performance of Pineland State Bank has been initiated and should
continue in the foreseeable future. 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.
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 June 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: August 12, 1996 By: Paul T. Bennett
Paul T. Bennett
President
Date: August 12, 1996 By: Olivia Bennett
Olivia Bennett
Vice President
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<CASH> 5,238,350
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