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, 1999 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
incorporation or organization) Number)
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, 1999.
Common stock, $1.00 par value - 399,500 shares outstanding
SOUTH BANKING COMPANY
SOUTH BANKING COMPANY
ALMA, GEORGIA
Part I. Financial Information
Consolidated Financial Statements . . . . . . . . . . . 4 -
10
Notes to Consolidated Financial Statements . . . . . . .
11
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . .12 -
19
Part II. Other Information . . . . . . . . . . . . . . . . . . .
20
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
ASSETS
Cash and due from banks $ 9,054,171 $ 6,122,085
Deposits in other banks -
interest bearing $ 1,364,000 $ 1,539,000
Investment securities:
Available for sale $ 18,237,748 $ 16,993,917
Held to maturity $ 747,435 $ 747,716
Georgia Bankers stock $ 547,283 $ 547,283
Federal Home Loan Bank stock $ 426,100 $ 396,200
Federal Funds Sold $ 4,467,000 $ 17,648,000
Loans $126,658,017 $114,959,844
Less: Unearned discount ( 154,545)
( 154,545 )
Reserve for loan losses ( 1,952,706) ( 1,970,620
)
$124,550,766 $112,834,679
Bank premises and equipment $ 3,942,268 $ 4,020,735
Goodwill $ 223,031 $ 262,137
Other assets $ 4,084,929 $ 3,778,990
Total Assets $167,644,731 $164,890,742
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEETS (con't)
September 30, December 31,
1999 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits: Demand - noninterest
bearing $ 19,350,276 $ 23,299,454
Demand - interest bearing 24,596,754 24,613,084
Savings 11,589,952 9,057,678
Time 91,628,838 89,019,729
$147,165,820 $145,989,945
Borrowing 3,030,475 3,156,096
Accrued expenses and other
liabilities 1,686,912 1,391,347
Federal funds purchased - -
Note payable - FHLB 106,666 146,667
Total Liabilities $151,989,873 $150,684,055
Stockholders' Equity
Common stock $1 par value; shares
authorized - 1,000,000, shares issued
and outstanding - September 30, 1999
and December 31, 1998, 399,500
and 399,500, respectively $ 399,500 $ 399,500
Surplus 3,070,831 3,070,831
Undivided profits 12,424,569 10,651,788
Accumulated other comprehensive
income ( 240,042) 84,568
Total Stockholders' Equity $ 15,654,858 $ 14,206,687
Total Liabilities and
Stockholders' Equity $167,644,731 $164,890,742
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME
Three Three
Months Months Nine Months Nine Months
Ended Ended Ended Ended
September September September September
30, 1999 30, 1998 30, 1999 30, 1998
Interest Income:
Interest & fees
on loans $ 3,353,084 $ 3,218,249 $ 9,510,983 $ 9,178,841
Interest on federal
funds sold 97,544 143,669 383,674 423,354
Interest on deposits
with other banks 19,570 24,596 59,403 55,951
Interest on
investment
securities:
U.S. Treasury 35,725 54,630 118,110 160,327
U.S. Government
agencies 198,693 161,934 540,063 495,642
Mortgage backed
bonds 8,926 14,009 29,609 46,217
State & municipal
subdivisions 20,853 22,877 65,925 68,822
Other 18,593 7,974 77,436 49,356
Total Interest
Income $ 3,752,988 $ 3,647,938 $10,785,203 $10,478,510
Interest Expense:
Interest on
deposits $ 1,498,150 $ 1,588,301 $ 4,428,683 $ 4,547,478
Interest on other
borrowings 61,838 69,391 180,719 202,505
Total Interest
Expense $ 1,559,988 $ 1,657,692 $ 4,609,402 $ 4,749,983
Net interest income$ 2,193,000 $ 1,990,246 $ 6,175,801 $ 5,728,527
Provision for loan
losses 84,000 54,000 234,000 182,000
Net interest income
after provision
for loan losses $ 2,109,000 $ 1,936,246 $ 5,941,801 $ 5,546,527
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (con't)
Three Three
Months Months Nine Months Nine Months
Ended Ended Ended Ended
September September September September
30, 1999 30, 1998 30, 1999 30, 1998
Other Operating Income:
Service charge on
deposit accounts $ 401,246 $ 280,038 $ 1,072,165 $ 841,970
Commission on
insurance 16,127 17,813 45,207 67,710
Other income 84,534 124,358 289,959 295,348
Computer processing
fees 98,712 32,006 286,161 114,537
Gain (loss) on sale
of securities 80 115 130 138
Total Other
Operating Income $ 600,699 $ 454,330 $ 1,693,622 $ 1,319,703
Other Operating
Expenses:
Salaries $ 745,096 $ 672,802 $ 2,215,183 $ 1,898,127
Profit sharing &
personnel expense 147,002 122,513 417,309 345,470
Occupancy expense 95,924 94,662 304,519 333,379
Furniture &
fixtures expense 194,484 233,622 548,686 539,159
Payroll taxes 46,601 14,165 146,226 123,851
Data processing 45,471 52,930 162,562 96,322
Other operating
Expenses 434,642 402,975 1,271,602 1,244,344
Total Other
Operating Expenses $ 1,709,220 $ 1,593,669 $ 5,066,087 $ 4,580,652
Income before income
taxes $ 1,000,479 $ 796,907 $ 2,569,336 $ 2,285,578
Applicable income
taxes 320,885 255,356 796,555 700,250
Net Income $ 679,594 $ 541,551 $ 1,772,781 $ 1,585,328
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (con't)
Three Three
Months Months Nine Months Nine Months
Ended Ended Ended Ended
September September September September
30, 1999 30, 1998 30, 1999 30, 1998
Other comprehensive
income, net of tax:
Unrealized gains
(losses) on
Securities $( 66,591 ) $ 71,516 $( 324,610)
$ 115,813
Other Comprehensive
Income (Loss) $( 66,591 ) $ 71,516 $( 324,610)
$ 115,813
Comprehensive
Income $ 613,003 $ 613,067 $
1,448,171 $ 1,701,141
Per share data based
on weighted average
outstanding shares
Weighted average
outstanding
shares 399,500 399,500 399,500 399,500
Net Income $ 1.70 $ 1.36 $ 4.44 $ 3.97
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENTS OF CASH FLOWS
Nine Months Nine Months
Ended Ended
September September
30, 1999 30, 1998
Cash Flows from Operating Activities:
Net income $ 1,772,781 $ 1,585,328
Add expenses not requiring cash:
Provision for depreciation and
amortization 397,554 493,804
Provision for loan losses 234,000 182,000
Bond portfolio gains (losses) 130 138
Gain on sale of other real estate owned - -
Increase (decrease) in taxes payable 226,989 12,930
Increase (decrease) in interest
payable ( 92,852 )
145,274
Increase (decrease) in other liabilities 161,428 105,793
(Increase) decrease in interest
receivable ( 403,764 )(
392,333 )
(Increase) decrease in prepaid expenses 28,068 59,044
(Increase) decrease in other assets 103,178 (
378,597
Recognition of unearned loan income - (
18,363 )
Net Cash Used in Operating Activities $ 2,427,512 $ 1,795,018
Cash Flows from Investing Activities:
Proceeds from sale of investment
securities - available for sale $ - $ -
Proceeds from maturities of
investment securities - available
for sale 5,338,681 4,919,373
Purchase of investment securities -
available for sale ( 6,600,000 )(
5,501,423 )
Net loans to customers (11,950,087 )(
11,632,770 ) Purchase of premise and equipment ( 370,373)
( 415,156 )
Proceeds from sale of premises and
equipment - -
Proceeds from maturity of investment
securities - held to maturity -
1,060,098
Purchase of investment securities -
held to maturity - (
502,137 )
Purchase of equity securities ( 250,000) -
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENTS OF CASH FLOWS (con't)
Nine Months Nine Months
Ended Ended
September September
30, 1999 30, 1998
Cash Flows from Investing Activities: (con't)
Purchase of CB Financial Corp stock $ - $(
300,000 )
Purchase of FHLB stock ( 29,900 )
( 51,000 )
Net Cash Used in Investing Activities $(13,861,679 )$
(12,423,015 )
Cash Flows from Financing Activities:
Net increase (decrease) in demand
deposits, NOW and money market $( 3,965,508 )$(
2,805,312 )
Net increase (decrease) in savings
and time deposits 5,141,383 9,168,052
Net increase (decrease) in borrowings ( 125,621 )
202,500
Dividends paid - -
Redemptions of company stock - -
Increase (decrease) in federal
funds sold - (
150,000 )
Increase note payable - FHLB ( 40,001 )
160,000
Net Cash Provided (Used) From
Financing Activities $ 1,010,253 $ 6,575,240
Net Increase (Decrease) in Cash
and Cash Equivalents $(10,423,914 )$(
4,052,757 )
Cash and Cash Equivalents at
Beginning of Period 25,309,085 19,448,444
Cash and Cash Equivalents at
End of Period $ 14,885,171 $ 15,395,687
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 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.
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
Liquidity and Capital Resources
Liquidity management involves the matching of the cash flow
requirements of customers, who may be either depositors desiring to
withdraw funds or borrowers needing assurance that sufficient funds will
be available to meet their credit needs and the ability of South Banking
Company and its subsidiaries (the "Company") to meet those needs. The
Company strives to maintain an adequate liquidity position by managing
the balances and maturities of interest-earning assets and interest-
bearing liabilities so that the balance it has in short-term investments
(Federal funds sold) at any given time will adequately cover any
reasonably anticipated immediate need for funds. Additionally, the
subsidiary banks (the "Banks") maintain relationships with correspondent
banks, which could provide funds to them on short notice, if needed.
The liquidity and capital resources of the Company are monitored on
a periodic basis by state and Federal regulatory authorities. As
determined under guidelines established by these regulatory authorities,
the Banks' liquidity ratios at September 30, 1999 were considered
satisfactory but on the lower level. At that date, the Banks' Federal
funds sold were adequate to cover any reasonably anticipated immediate
need for funds. The Company is aware of no events or trends likely to
result in a material change in liquidity. At September 30, 1999, the
Company's and the Banks' capital asset ratios were considered well
capitalized based on guidelines established by regulatory authorities.
During the three months ended September 30, 1999, total capital
increased $613,003 to $15,654,858. This increase in capital resulted
from net earnings of $679,594 and an increase of $66,591 in unrealized
losses on securities available for sale, net of taxes.
At September 30, 1999, South Banking Company had no binding
commitments for capital expenditures. No additional mergers or
acquisitions requiring cash are being negotiated at present.
Results of Operations
The following discussion and analysis presents the significant
changes in financial condition and the results of operations of South
Banking Company and Subsidiaries for the periods indicated. This
discussion and analysis should be read in conjunction with the Company's
1998 Annual Report to Shareholders and Form 10-K.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - (con't)
Since the primary business activities of South Banking Company are
conducted through its Banks, this discussion focuses primarily on the
financial condition and operations of the Banks. Included in this
discussion are forward looking statements based on management's current
expectations, actual results, however, may differ. Amounts and
percentages used in this discussion have been rounded.
Earnings Summary
Net income for the third quarter of 1999 was $679,594, up $138,043
from $541,551 in the third quarter of 1998. On a per share basis,
earnings registered a similar increase from 1.36 to 1.70. These levels
of income represent annualized returns on average assets of 1.63% and
1.40%. respectively. Return on average equity also increased from
16.23% to 18.21%. Details concerning the Company's results of
operations are discussed in the following sections of this report.
Net interest income for the third quarter of 1999 totaled
$2,193,000 up $202,754 from $1,990,246 in the third quarter of 1998.
Interest income is being impacted by the mix of assets, the level
of earning assets, and the interest rate environment. Average earning
assets for the quarter of $151.3 million are $5.7 million in excess of
the third quarter 1998 average. These funds are primarily being
invested in the loan portfolio. The lower rate environment, however,
has caused loan income to increase only $105,050 from $3,647,938 in the
third quarter of 1998 to $3,752,988 in the third quarter of 1999. This
increase reflects the downward repricing of the Bank's substantial
portfolio of one-year adjustable rate loans; however, the recent
increase in the prime rate has begun to positively impact interest
income.
Interest expense, the other component of net interest income,
decreased $97,704 when compared to the third quarter of last year
despite the fact that the average balance of interest bearing
liabilities was up $10 million. This is the result of lower interest
rates. The overall cost of interest bearing liabilities for the quarter
of 5.07% is 44 basis points lower than in the third quarter of 1999,
reflecting several rate reductions implemented in late 1998 and early
1999.
This combination of higher average balances and lower rates
produced a net interest margin of 4.83% for the quarter, up from 4.51%
in the third quarter of last year.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Earnings Summary (con't)
The provision for loan losses is a charge to earnings in the
current period to replenish the allowance for loan losses and maintain
it at the level management determines is adequate. The provision for
loan losses charged to earnings amounted to $84,000 and $54,000 during
the three months ended September 30, 1999 and 1998, respectively.
Noninterest Income
Following is a comparison of noninterest income for the three
months ended September 30, 1999 and 1998.
Three Months Three Months
Ended Ended
September 30, September 30,
1999 1998
Service charges on deposits $ 401,246 $ 280,038
Other service charges, commissions
& fees 16,127 17,813
Other income 183,246 156,364
Total Noninterest Income $ 600,619 $ 454,215
Total noninterest income for the three months ended September 30,
1999 was $146,404 higher than during the same period in 1998. The
primary increase is related to additional computer processing income
from nonaffiliated banks and brokerage services.
During the third quarter of 1998, the Bank began offering brokerage
services, including stocks, bonds, mutual funds, and annuities, to its
customers. The effect on the deposit base has been limited as less than
one quarter of the total sales have come from Bank deposits. In the
long-term, management believes this service will actually increase
deposits.
Noninterest Expense
Noninterest expense includes all items of expense other than
interest expense, the provision for loan losses, and income taxes.
Total noninterest expense for the third quarter of 1999 of $1,709,220
was $115,551 or 7.25% greater than during the third quarter of 1998.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Noninterest Expense (con't)
The majority of this increase was due to higher salary, payroll
taxes, and benefit costs, up $129,219 to $938,699. Salaries have
increased as a result of the retention of a full-time broker and a new
branch location, in addition to regular compensation adjustments.
Increases were also experienced in group insurance and pension expense.
Other non-personnel expense had little change from prior year.
Management expects this trend to remain constant during the remainder of
the year.
Income Taxes
The Company's provision for income taxes, which totaled $320,885 in
the third quarter of 1999 and $255,356 in the third quarter of 1998
includes both federal and state income taxes. The effective tax rates
during the two periods were 32.0% in 1999 and 32.0% in 1998.
Financial Condition
Average total assets during the third quarter of 1999 were
$165,449,764, up from $157,288,048 from the third quarter of 1998. A
detailed discussion of the Bank's financial condition and its various
balance sheet components follows:
Loan Portfolio
The loan portfolio, which represents South's largest asset, has
increased during the third quarter by $3,631,631 to $126,658,017.
Competitive pressures from auto manufacturers and a variety of mortgage
providers continue to make loan growth at acceptable yields and risk
levels difficult for those types of loans. Management also believes
that with the recent decline in the local farming economy, there exists
little opportunity to expand and develop the agricultural loan
portfolio. In the year since September 30, 1998, the loan portfolio has
increased substantially. Commercial and real estate lending remains the
largest part of the portfolio.
The Bank is also a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments to
extend credit and letters of credit. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
Loan Portfolio (con't)
the amount recognized in the consolidated balance sheets. At September
30, 1999, commitments to extend credit, including unused lines of
credit, totaled $20,820,000 while letters of credit totaled $596,000.
Company policy requires those loans which are past due 90 days or
more be placed on nonaccrual status unless they are both well secured
and in the process of collection. The following table provides a
summary of past due loans and nonperforming assets.
Summary of Past Due Loans and Nonperforming Assets
(in thousands)
------September 30,------
1999 1998
(Unaudited)
Loans past due 90 or more days
still accruing interest $ 277 $ 157
Nonperforming assets:
Nonaccruing loans $ 790 $ 846
Other real estate owned 180 679
$ 970 $ 1,525
Management makes this determination by its analysis of overall
loan quality, changes in the mix and size of the loan portfolio,
previous loss experience, general economic conditions, information about
specific borrowers, and other factors. At September 30, 1999, the
allowance for loan losses was $1,952,706 or 1.54% of gross loans. Given
the inherent risk contained in the portfolio, including the nonaccrual
loan described above as well as commitments to extend credit, this level
is considered adequate. Management is not aware of any trends,
uncertainties, or other information relating to the loan portfolio,
which it expects will materially impact future operating results,
liquidity, or capital resources.
The provision for loan losses is a charge to earnings, which is
made to maintain the allowance for loan losses at a significant level.
The provision totaled $84,000 during the third quarter of 1999 and
$54,000 during the third quarter of 1998.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Securities Portfolio and Federal Funds Sold
The Bank's securities portfolio consists of available for sale and
held to maturity securities while no securities are maintained in a
trading account. At September 30, 1999, the held to maturity portfolio
totaled $747,283.
Management attempts to emphasize the available for sale portfolio
due to the flexibility it allows in managing the balance sheet structure
and addressing asset/liability issues. At September 30, 1999, this
portfolio had an estimated fair value of $18,237,748, $240,042 less than
the amortized cost. Such deficit represents an unrealized loss.
This portfolio, which represents 91.3% of the total securities
portfolio, is invested primarily in U. S. Treasury and agency
obligations and tax exempt municipals. The treasury and agency portion
of the portfolio, including agency backed mortgage securities, total
$16,114,433 at quarter end or 88.4% of the available for sale portfolio.
Tax exempt municipals totaling $1,573,315 comprised 8.6%. The remainder
of the portfolio, which totals $550,000, consists of bank holding
company stock and Georgia Bankers Stock.
The Bank has typically favored investments with maturities of five
years or less which have known cash flow patterns. Such instruments
typically provide greater safety, less market value fluctuation, and
more simplified asset/liability issues. However, some callable
securities and mortgage backed securities may be purchased from time to
time for their increased yield.
The Bank generally tries to minimize its involvement in the
overnight federal funds sold market, instead, relying on the continually
maturing securities portfolio to provide the liquidity needed to fund
loans or meet deposit withdraw demands. Nonetheless, at any given time,
the execution of specific investing or funding strategies or normal
fluctuations in deposit and loan balances may require the bank to sell
or buy funds on an overnight basis. In addition, any daily excess funds
are maintained in Federal Funds until demands on accounts are
determined.
Deposits and Other Funding Sources
Total deposits at September 30, 1999 of $147,165,820 were up from
their second quarter total of $143,484,922. The third quarter has
traditionally been a good growth period. Third quarter deposits have
increased $3,680,898.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONNS
Deposits and Other Funding Sources (con't)
Noninterest bearing deposits decreased $697,760 to $19,350,276
during the quarter. In contrast to this, interest bearing deposits
increased $4,378,658, or 3.5%, to $127,815,544 during the quarter.
Increases were experienced in all types of interest bearing deposits.
In addition to deposits, the Bank may generate funding by the use
of borrowing.
Year 2000 Compliance
Historically, certain computerized systems have had two digits
rather than four digits to define the applicable year, which could
result in recognizing a date using 00 as the year 1900 rather than the
year 2000. This could result in failures or miscalculations and is
generally referred to as the Year 2000 issue.
Because the Bank, as well as some of its suppliers, customers, and
service providers, is heavily dependent on computers to conduct its
business operations, it recognizes and seeks to responsibly address the
Year 2000 issue. Failure to address Year 2000 issues could result in
business disruption that could materially affect the Company's
operations, liquidity, or capital resources. A Year 2000 Task Team has
been assembled to study, test, and remedy Year 2000 issues. This team
includes members of senior management and reports regularly to the Board
of Directors. The team has inventoried all computer related or
dependent hardware and software, identified those which are critical,
and assessed the Year 2000 compliance of each component. Testing of
critical items, which involve a third party software vendor, are being
jointly conducted with that processor. During 1998 and 1999, such tests
of the processors' major functions were successful. Backup systems for
noncritical functions have also been identified and are also subject to
testing. The Bank also has contingency plans, which will be implemented
in the event of a Year 2000 failure. In addition, the Bank has
contacted those customers and vendors, who, if unable to cope with the
Year 2000 issue, may negatively impact the Bank, to attempt to determine
their degree of readiness.
Through September 30, 1999, the Bank expenditures have been
nonmaterial in preparation for the Year 2000. It is not expected that
additional capital expenditures of a significant amount will be needed.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND AANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year 2000 Compliance
While the Bank believes the tests and procedures in place should
minimize the Year 2000 risks and enable it to meet the needs of its
customers in the Year 2000, the Bank cannot quantify the potential
impact of any unforeseen Year 2000 failures that might occur either
internally or from external third parties.
Impact of Inflation
The consolidated financial statements and related data included in
this report were prepared in accordance with generally accepted
accounting principles, which require the Company's financial position
and results of operations to be measured in terms of historical dollars,
except for the available for sale securities portfolio. Consequently,
the relative value of money generally is not considered. Nearly all of
the Company's assets and liabilities are monetary in nature and, as a
result, interest rates and competition in the market area tend to have a
more significant impact on the Company's performance than the effect of
inflation.
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 nine-month period ended September 30, 1999.
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: By:
Paul T. Bennett
President
Date: By:
Olivia Bennett
Vice President
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 9,054,171
<INT-BEARING-DEPOSITS> 1,364,000
<FED-FUNDS-SOLD> 4,467,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,237,748
<INVESTMENTS-CARRYING> 747,435
<INVESTMENTS-MARKET> 750,000
<LOANS> 126,658,017
<ALLOWANCE> 1,952,706
<TOTAL-ASSETS> 167,644,731
<DEPOSITS> 147,165,820
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,686,912
<LONG-TERM> 3,137,141
0
0
<COMMON> 399,500
<OTHER-SE> 15,255,358
<TOTAL-LIABILITIES-AND-EQUITY> 167,644,731
<INTEREST-LOAN> 9,510,983
<INTEREST-INVEST> 1,274,220
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 10,785,203
<INTEREST-DEPOSIT> 4,428,683
<INTEREST-EXPENSE> 4,609,402
<INTEREST-INCOME-NET> 6,175,801
<LOAN-LOSSES> 234,000
<SECURITIES-GAINS> 130
<EXPENSE-OTHER> 5,016,087
<INCOME-PRETAX> 2,569,336
<INCOME-PRE-EXTRAORDINARY> 2,569,336
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,772,781
<EPS-BASIC> 4.44
<EPS-DILUTED> 4.44
<YIELD-ACTUAL> 0
<LOANS-NON> 790,000
<LOANS-PAST> 277,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,970,620
<CHARGE-OFFS> 368,933
<RECOVERIES> 117,019
<ALLOWANCE-CLOSE> 1,952,706
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,952,706
</TABLE>
