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, 1997 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, 1997.
Common stock, $1.00 par value - 400,000 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 SHEETS
March 31, December 31,
1997 1996
ASSETS
Cash and due from banks $ 5,484,929 $ 6,863,559
Deposits in other banks -
interest bearing $ 1,489,000 $ 1,886,000
Investment securities
Available for sale $ 15,331,975 $ 13,449,288
Held to maturity $ 1,863,052 $ 2,363,744
Georgia Bankers stock $ 547,283 $ 547,283
Federal Home Loan Bank stock $ 263,000 $ 247,600
Federal funds sold $ 7,934,000 $ 11,983,000
Loans $ 94,722,388 $ 89,046,526
Less: Unearned discount ( 144,707) ( 150,457)
Reserve for loan losses ( 1,773,338) ( 1,781,013)
$ 92,804,343 $ 87,115,056
Bank premises and equipment $ 4,050,389 $ 3,995,385
Goodwill $ 351,948 $ 364,983
Other assets $ 3,376,708 $ 3,474,685
Total Assets $133,496,627 $132,290,583
The accompanying notes are an integral part of these financial statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEETS (con't)
March 31, December 31
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits: Demand - non-interest
bearing $ 17,914,755 $ 21,451,527
Demand - interest bearing 22,881,862 20,440,276
Savings 8,391,232 7,917,814
Time 67,689,718 66,883,966
$116,877,567 $116,693,583
Borrowing 3,529,779 3,507,279
Accrued expenses and other
liabilities 1,361,342 905,472
Federal funds purchased 180,000 -
Total Liabilities $121,948,688 $121,106,334
Stockholder's Equity
Common stock $1 par value; shares
authorized - 1,000,000, shares
issued and outstanding -
March 31, 1997 and December 31, 1996
- 400,000 and 403,500, respectively $ 400,000 $ 403,500
Surplus 3,076,331 3,116,581
Undivided profits 8,183,948 7,675,216
Unrealized gain (loss) on
securities ( 112,340) ( 11,048)
Total Stockholders' Equity $ 11,547,939 $ 11,184,249
Total Liabilities and
Stockholders' Equity $133,496,627 $132,290,583
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,
1997 1996
Interest Income
Interest and fees on loans $ 2,547,193 $ 2,172,645
Interest on federal funds sold 105,755 207,840
Interest on deposits with other
banks 29,776 29,641
Interest on investment securities:
U. S. Treasury 46,598 45,404
U. S. government agencies 148,670 142,753
Mortgage backed securities 24,727 31,761
State and political subdivisions 23,198 23,398
Dividends 26,610 22,135
Total Interest Income $ 2,952,527 $ 2,675,577
Interest Expense
Interest on deposits $ 1,166,615 $ 1,141,892
Interest on other borrowings 70,147 68,973
Total Interest Expense $ 1,236,762 $ 1,210,865
Net Interest Income $ 1,715,765 $ 1,464,712
Provision for loan losses 16,500 24,000
Net interest income after provisions
for loan losses $ 1,699,265 $ 1,440,712
Other Operating Income
Service charge on deposit accounts $ 280,057 $ 268,476
Commission on insurance 27,026 16,380
Other income 74,957 97,223
Gain (loss) sale of securities 4 ( 20,432)
Computer income 34,653 -
Total Other Operating Income $ 416,697 $ 361,647
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,
1997 1996
Other Operating Expenses
Salaries $ 577,692 $ 529,821
Profit sharing and other personnel
expense 107,091 87,592
Occupancy expense 117,958 110,269
Furniture and fixtures expense 104,618 120,004
Payroll taxes 39,916 35,663
Data processing 62,892 48,713
Other operating expenses 362,658 317,825
Total Other Operating Expenses $ 1,372,825 $ 1,249,887
Income before income taxes $ 743,137 $ 552,472
Applicable income taxes 234,405 177,548
Net income $ 508,732 $ 374,924
Per share data on weighted average
outstanding shares
Weighted average outstanding shares 402,838 405,047
Net income per share $ 1.263 $ .9256
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,
1997 1996
Cash Flows From Operating Activities:
Net income $ 508,732 $ 374,924
Add expenses not requiring cash:
Provision for depreciation and
amortization 138,708 156,377
Provision for loan losses 16,500 24,000
Bond portfolio losses (gains) ( 4) 20,432
Gain on sale of other real estate
owned - -
Increase (decrease) in taxes
payable 196,900 177,548
Increase (decrease) in interest
payable 49,686 38,940
Increase (decrease) in other
liabilities 209,284 174,073
(Increase) decrease in interest
receivable 111,531 ( 67,099)
(Increase) decrease in prepaid
expenses ( 36,425) ( 15,071)
(Increase) decrease in other assets 17,810 ( 275,502)
Recognition of unearned loan income ( 5,750) ( 7,158)
Net Cash Provided (Used) in Operating
Activities $ 1,206,972 $ 601,464
Cash Flows From Investing Activities:
Proceeds from sale of investment
securities - available for sale $ - $ 2,406,844
Proceeds from maturities of investment
securities - available for sale 126,665 1,846,927
Proceeds from maturities of investment
security - held to maturity 500,223 -
Purchase of investment securities - AFS ( 2,097,070) ( 5,313,102)
Net loans to customers ( 5,700,037) ( 3,861,592)
Purchase of premise and equipment ( 188,717) ( 81,316)
Proceeds from sale of equipment - -
Proceeds from other real estate owned - -
Purchase of stock - Pineland Bank - ( 1,839,937)
Purchase of FHLB stock ( 15,400) ( 1,700)
Cash received from acquired bank - 8,773,744
Net Cash Provided (Used) in Investing
Activities $( 7,374,336) $ 1,929,868
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,
1997 1996
Cash Flows From Financing Activities:
Net increase (decrease) in demand
deposits, NOW and money market $( 1,095,186) $( 1,893,171)
Net increase (decrease) in savings
and time deposit 1,279,170 2,856,961
Net increase (decrease) in short-term
borrowings 22,500 1,567,646
Dividends paid - -
Redemptions of company stock ( 43,750) ( 21,444)
Federal funds purchased 180,000 -
Net Cash Provided (Used) From
Financing Activities $ 342,734 $ 2,509,992
Net Increase (Decrease) in Cash
and Cash Equivalents $( 5,824,630) $ 5,041,324
Cash and Cash Equivalents at
Beginning of Year 20,732,559 18,119,564
Cash and Cash Equivalents at
End of Period $ 14,907,929 $ 23,160,888
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.
During the first quarter of 1997, total assets increased $1,206,044
compared to an increase of $369,047. This increase represents a .91%
from January 1, 1997. The banks historically have not increased in
assets during the first quarter compared to the remaining parts of the
year. The last twelve months have increased at a 6.31% rate. This
growth is slightly less than comparable banks in the area, as South
Banking Company has not been aggressive in the time deposit market.
Most growth in the area has been as a result of rates paid and has
tended to move to the highest bidder South has been aggressive in
maintaining its core deposit to counter any deposit runoff without
detriment to its interest margins. Loan demand has grown very rapidly
compared to asset growth and has been funded internally through
liquidation of federal funds sold and other assets as the banks have
attempted to maximize higher yielding assets.
This policy has put a strain on the liquidity of the bank.
Historically, liquidity of the bank has been provided from financing
activities such as deposit growth. While the bank has refrained from
active pursuit of high paying deposits, it is believed that if the banks
loan demand continues to grow the opportunity to raise the funds from
deposits to provide adequate interest margins exist. In addition, the
banks have sufficient lines to purchase federal funds in the event of a
short term need. Operational profits remain high and add additional
cash flow for liquidity purposes.
Net income increased by $133,808 for the first quarter, 1997
compared to a decrease of $37,489 for the fist quarter, 1996. The first
quarter of 1996 was the initial quarter of Pineland State Bank.
Pineland State Bank suffered a loss during 1996; however, through the
efforts of management and employees many changes were made and Pineland
State Bank is profitable currently. While the increase has been
significant, additional increases are anticipated when all the changes
become fully implemented. The major change has been in the improvement
of the net interest margins. South continues to have excellant margins
as compared to its peer group. This is partly as a result of the policy
not to aggressively pursue high paying "hot" deposits. South remains
aware of its interest rate sensitivity as the Federal Reserve raises its
interest rate and this has a ripple effect down to the bank. The bank
is working to maintain its interest rate gap at a point that the
volatility of the current interest rate market will not materially
affect its margins.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (con't)
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 have increased slightly during this period
compared to 1996. Expenses for Pineland State Bank in 1996 did not
include the first eleven days which would account for a major portion of
this increase. The increase remains relatively small with increase
scattered through out all areas. This increase is in keeping with
inflationary trends in the area.
Net income has risen to $1.263 per share compared to .9256 for
1996. This continues a trend that has existed for the last few years.
The banks continue to monitor the economy and its operation to insure
proper actions are taken to counter any changes that might occur.
State-wide branching has been approved; however, South has not been
affected at this time. Currently one location has a branch under
construction by a competitor from an adjoining county. This will cause
some market shake up. Management does not expect significant change in
its current deposit base.
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, 1997.
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 9, 1997 By:
Paul Bennett
President
Date: May 9, 1997 By:
Olivia Bennett
Vice President
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<PERIOD-END> MAR-31-1997
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<FED-FUNDS-SOLD> 7,934,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,331,975
<INVESTMENTS-CARRYING> 1,863,052
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<ALLOWANCE> 1,773,338
<TOTAL-ASSETS> 133,496,627
<DEPOSITS> 116,877,567
<SHORT-TERM> 180,000
<LIABILITIES-OTHER> 1,361,342
<LONG-TERM> 3,529,779
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<LOANS-NON> 566,235
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