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, 2000 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 June 30, 2000.
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 -
12
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 13 -
19
Part II. Other Information . . . . . . . . . . . . . . . . . . 20 -
21
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
2000 1999
ASSETS
Cash and due from banks $ 5,007,260 $ 11,695,998
Deposits in other banks -
interest bearing $ 824,000 $ 869,000
Investment securities:
Available for sale $ 18,548,521 $ 18,306,239
Held to maturity $ 347,275 $ 747,339
Georgia Bankers stock $ 547,283 $ 547,283
Federal Home Loan Bank stock $ 426,100 $ 426,100
Federal funds sold $ 11,526,000 $ 3,180,000
Loans $145,037,356 $132,282,615
Less: Unearned discount ( 225,397) ( 216,397)
Reserve for loan losses ( 2,341,661) ( 2,168,877)
$142,470,298 $129,897,341
Bank premises and equipment $ 4,773,595 $ 4,097,405
Goodwill $ 182,492 $ 208,562
Other assets $ 4,981,697 $ 3,832,154
Total Assets $189,634,521 $173,807,421
The accompanying notes are an integral part of these financial
statements.
4
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEETS (con't)
(UNAUDITED)
June 30, December 31,
2000 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits: Demand - non-interest
bearing $ 24,343,320 $ 21,462,802
Demand - interest bearing 23,205,286 23,089,387
Savings 10,533,014 10,520,013
Time 108,205,463 97,727,773
$166,287,083 $152,799,975
Borrowing 3,256,798 2,669,743
Accrued expenses and other
liabilities 1,786,721 1,294,354
Federal funds purchased - 1,140,000
Note payable - Federal Home Loan Bank 1,066,667 93,333
Total Liabilities $172,397,269 $157,997,405
Stockholders' Equity
Common stock $1 par value; shares
authorized - 1,000,000, shares
issued and outstanding - June 30,
2000 and 1999 - 399,500
and 399,500, respectively $ 399,500 $ 399,500
Surplus 3,070,831 3,070,831
Undivided profits 14,022,541 12,520,614
Accumulated other comprehensive
income ( 255,620) ( 180,929)
Total Stockholders' Equity $ 17,237,252 $ 15,810,016
Total Liabilities and
Stockholders' Equity $189,634,521 $173,807,421
The accompanying notes are an integral part of these financial
statements.
5
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME
(UNAUDITED)
Three Three
Months Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
Interest Income:
Interest & fees
on loans $ 3,897,235 $ 3,106,089 $ 7,666,025 $ 6,157,899
Interest on federal
funds sold 137,279 130,984 244,316 286,130
Interest on deposits
with other banks 14,410 22,625 25,143 39,833
Interest on invest-
ment securities:
U.S. Treasury 25,742 40,376 50,114 82,385
Mortgage backed
securities 8,530 9,882 16,879 20,683
U.S. Government
agencies 217,863 172,032 435,231 341,370
State & municipal
subdivisions 20,852 22,195 41,704 45,072
Other 16,005 9,016 37,012 58,843
Total Interest
Income $ 4,337,916 $ 3,513,199 $ 8,516,424 $ 7,032,215
Interest Expense:
Interest on
deposits $ 1,843,246 $ 1,455,295 $ 3,544,503 $ 2,930,533
Interest on other
borrowings 68,264 61,189 128,098 118,881
Total Interest
Expense $ 1,911,510 $ 1,516,484 $ 3,672,601 $ 3,049,414
Net Interest
Income $ 2,426,406 $ 1,996,715 $ 4,843,823 $ 3,982,801
Provision for loan
losses 109,500 75,000 197,000 150,000
Net interest income
Net interest income
after provision
for loan losses $ 2,316,906 $ 1,921,715 $ 4,646,823 $ 3,832,801
The accompanying notes are an integral part of these financial
statements.
6
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME (con't)
(UNAUDITED)
Three Three
Months Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
Other Operating Income:
Service charge on
deposit accounts $ 362,003 $ 334,803 $ 716,226 $ 670,919
Commission on
insurance 18,028 13,805 46,167 29,080
Other income 218,845 93,308 397,959 205,425
Gain (loss) on sale
of securities 4 45 4 50
Computer income 109,212 100,864 221,557 187,449
Total Other
Operating Income $ 708,092 $ 542,825 $ 1,381,913 $ 1,092,923
Other Operating Expenses:
Salaries $ 914,542 $ 727,662 $ 1,709,955 $ 1,470,087
Profit sharing &
personnel expense 140,686 137,221 299,774 270,307
Occupancy expense 122,636 111,244 220,768 208,595
Furniture &
fixtures expense 216,878 175,940 398,432 354,202
Payroll taxes 50,366 48,417 101,311 99,625
Data processing 44,184 33,941 88,730 117,091
Other operating
expenses 472,603 457,324 939,567 836,960
Total Other Operating
Expenses $ 1,961,895 $ 1,691,749 $ 3,758,537 $ 3,356,867
Income before
income taxes $ 1,063,103 $ 772,791 $ 2,270,199 $ 1,568,857
Applicable income
taxes 365,063 236,883 768,272 475,670
Net Income $ 698,040 $ 535,908 $ 1,501,927 $ 1,093,187
The accompanying notes are an integral part of these financial
statements.
7
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME (Con't)
(UNAUDITED)
Three Three
Months Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30, 2000
1999 2000 1999
Other Comprehensive
Income, Net of Tax:
Unrealized gains
(losses) on
securities $ 37,734 $( 194,305) $( 74,691) $( 258,019)
Other Comprehensive
Income (Loss) $ 37,734 $( 194,305) $( 74,691) $( 258,019)
Comprehensive
Income $ 735,774 $ 341,603 $ 1,427,236 $ 835,168
Per share data based
on weighted average
outstanding shares
Weighted average
outstanding
shares 399,500 399,500 399,500 399,500
Net Income $ 1.75 $ 1.34 $ 3.76 $
2.74
The accompanying notes are an integral part of these financial
statements.
8
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
Cash Flows From Operating Activities:
Net income $ 1,501,927 $ 1,093,187
Add expenses not requiring cash:
Provision for depreciation and
amortization 340,692 267,688
Provision for loan losses 197,000 150,000
Bond portfolio losses (gains) 4 50
Gain on sale of other real estate
owned - -
Increase (decrease) in taxes payable 49,861 179,670
Increase (decrease) in interest
payable 169,286 (
80,809 )
Increase (decrease) in other
liabilities 273,220 (
46,404 )
(Increase) decrease in interest
receivable ( 448,287 )(
138,957 )
(Increase) decrease in prepaid
expenses ( 44,292 )3
5,942
(Increase) decrease in other assets ( 614,762 )(
23,378 )
Recognition of unearned loan income 9,000 -
Net Cash Used in Operating Activities $ 1,433,649 $ 1,436,989
Cash Flows From Investing Activities:
Proceeds from sale of investment
securities - available for sale $ - $ -
Proceeds from maturities of
investment securities - available
for sale 31,385 4,925,051
Purchase of investment securities -
available for sale ( 397,414 )(
5,550,000 )
Net loans to customers (12,778,957 )(
8,203,951 )
Purchase of premise and equipment ( 983,898 )(
327,346 )
Proceeds from sale of premises
and equipment - -
Proceeds from other real estate owned - -
Proceeds from maturities of investment
securities held to maturity 400,000 -
Purchase of equity securities - (
250,000 )
The accompanying notes are an integral part of these financial
statements.
9
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENT OF CASH FLOWS (Con't)
(UNAUDITED)
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
Cash Flows From Investing Activities (con't):
Purchase of investment securities
held to maturity $ - $ -
Purchase of FHLB stock - (
29,900 )
Net Cash Used in Investing Activities $(13,728,884 )$(
9,436,146 )
Cash Flows From Financing Activities:
Federal funds purchased repaid $ - $ -
Net increase (decrease) in demand
deposits, NOW and money market 2,996,417 (
6,059,648 )
Net increase (decrease) in savings
and time deposit 10,490,691 3,554,624
Net increase (decrease) in
borrowings 587,055 8,120
Net increase (decrease) - FHLB loan 973,334 ( 26,667)
Redemptions of company stock - -
Increase (decrease) in federal
funds purchased ( 1,140,000 )
-
Net Cash Provided (Used) From
Financing Activities $ 13,907,497 $(
2,523,571 )
Net Increase (Decrease) in Cash
and Cash Equivalents $ 1,612,262 $
(10,522,728 )
Cash and Cash Equivalents at
Beginning of Year 15,744,998 25,309,085
Cash and Cash Equivalents at
End of Period $ 17,357,260 $ 14,786,357
The accompanying notes are an integral part of these financial
statements.
10
SOUTH BANKING COMPANY
ALMA, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accounting and financial reporting policies of South
Banking Company and its subsidiaries conform to generally
accepted accounting principles and to general practice within the
banking industry. The consolidated statements include the
accounts of South Banking Company and its wholly owned
subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation. The
accompanying interim financial statements are unaudited. In
management's opinion, the consolidated financial statements
reflect a fair presentation of the consolidated financial
position of South Banking Company and subsidiaries, and the
results of its operations and its cash flows for the interim
periods presented, in conformity with generally accepted
accounting principles. These interim financial statements should
be read in conjunction with the audited financial statements and
footnote disclosures in the Bank's 10K for the fiscal year ended
December 31, 1999.
Basic earnings per share have been computed by dividing net
income (the numerator) by the weighted average number of common
shares (the denominator) for the period.
In June 1997, the FASB issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS
No. 131 requires that public companies report certain information
about operating segments in complete sets of financial statements
of the company and in condensed financial statements of interim
periods issued to shareholders. It also requires that public
companies report certain information about their products and
services, the geographic areas in which they operate, and their
major customers. SFAS No. 131 applies to fiscal years beginning
after December 15, 1997. South Banking Company is a four bank
holding company operating primarily in Southeast Georgia. The
primary purpose of the company is the delivery of financial
services within its market. Each of the company's entities are
part of the same reporting segment, whose operating results are
regularly reviewed by management. Therefore, consolidated
financial statements, as presented, fairly reflect the operating
results of the financial services segment of our business.
In June 1997, FASB issued SFAS No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 established
standards for reporting and display of comprehensive income and
its components in the financial statements. SFAS 130 applies to
fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods has been provided for
comparative purposes.
11
SOUTH BANKING COMPANY
ALMA, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), which
establishes accounting and reporting standards for derivative
instruments and for hedging activities. The statement requires that
all derivatives be recognized as either assets or liabilities in the
statement of financial position and be measured at fair value. SFAS
133 is effective for fiscal quarters of all fiscal years beginning
after June 15, 1999; earlier application is permitted. The company
does not hold or issue derivative instruments as defined by SFAS 133;
and accordingly, it is the opinion of management that there will be no
future impact from this recent accounting standard.
12
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 is 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 June 30, 2000 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 June 30, 2000, 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 June 30, 2000,
total capital increased $ 735,774 to $ 17,237,252. This increase in
capital resulted from net earnings of $ 698,040 and a decrease of
$ 37,734 in unrealized gains on securities available for sale, net of
taxes.
At June 30, 2000, South Banking Company had one binding
commitment for capital expenditures. South Banking Company's
subsidiary, Pineland State Bank, had entered into an agreement to
acquire three bank branches within its market area. South Banking
will contribute an additional $2,700,000 in capital to Pineland State
Bank to facilitate the acquisition. South Banking Company has arranged
long-term financing for the additional investment.
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 1999 Annual Report to Shareholders and Form 10-K.
13
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 second quarter of 2000 was $698,040, up
$162,132 from $535,900 in the second quarter of 1999. On a per share
basis, earnings registered a similar increase from $1.34 to $1.75.
These levels of income represent annualized returns on average assets
of 1.53% and 1.30%, respectively. Return on average equity also
decreased from 14.65% to 16.90%. Details concerning the Company's
results of operations are discussed in the following sections of this
report.
Net interest income for the second quarter of 2000 totaled
$2,426,406, up $429,691 from $1,996,715 in the second quarter of 1999.
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 $164.3 million are $14.6 million in excess
of the second quarter 1999 average. These funds are primarily being
invested in the loan portfolio. The rate environment and loan volume,
has caused loan income to increase $791,146 from $3,106,089 in the
second quarter of 1999 to $3,897,235 in the second quarter of 2000.
This increase reflects the volatile 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,
increased $395,026 when compared to the second quarter of last year
including the fact that the average balance of interest bearing
liabilities was up $13.5 million. This is the result of higher
interest rates. The overall cost of interest bearing liabilities for
the quarter of 5.26% is 53 basis points higher than in the second
quarter of 1999, reflecting several rate increases implemented in late
1999 and early 2000.
14
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Earnings Summary (Con't)
This combination of higher average balances and higher rates
produced a net interest margin of 5.30% for the quarter, up from 4.63%
in the second quarter of last year.
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 $109,500 and $75,000
during the three months ended June 30, 2000 and 1999, respectively.
Noninterest Income
Following is a comparison of noninterest income for the three
months ended June 30, 2000 and 1999.
Three Months Three Months
Ended Ended
June 30, June 30,
2000 1999
Service charges on deposits $ 362,003 $ 334,803
Other service charges, commissions
& fees 18,028 13,805
Other income 328,061 194,217
Total Noninterest Income $ 708,092 $ 542,825
Total noninterest income for the three months ended June 30, 2000
was $165,267 higher than during the same period in 1999. 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.
15
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 second quarter of 2000 of $2,184,843
was $270,146 or 16.00%, greater than during the second quarter of
1999.
The majority of this increase was due to higher salary and
benefit costs, up $186,880 to $914,542. 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 increases were experienced in equipment costs and data
processing, while other noninterest expense increased by $15,279 to
$472,603 for the quarter. Management expects this trend to remain
constant during the remainder of the year.
Income Taxes
The Company's provision for income taxes, which totaled $365,063
in the second quarter of 2000 and $236,883 in the second quarter of
1999, includes both federal and state income taxes. The effective tax
rates during the two periods were 34.3% in 2000 and 30.6% in 1999.
Financial Condition
Average total assets during the second quarter of 2000 were
$186,305,665, up from $162,016,870 from the second quarter of 1999. 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 second quarter by $3,880,749 to $145,037,356.
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, however; in the year since June 30, 1999, the loan
portfolio has increased substantially. Commercial and real estate
lending remains the largest part of the portfolio.
16
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Loan Portfolio (Con't)
The Bank is also a part 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 the amount recognized in the consolidated balance sheets.
At June 30, 2000, commitments to extend credit, including unused lines
of credit, totaled $27,362,000 while letters of credit totaled
$728,000.
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)
---------June 30,--------
-
2000 1999
(Unaudited)
Loans past due 90 or more days
still accruing interest $ 564 $ 114
Nonperforming assets:
Nonaccruing loans $ 734 $ 913
Other real estate owned 656 182
$ 1,390 $ 1,095
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 June 30, 2000, the
allowance for loan losses was $2,341,661 or 1.61% of gross loans.
Given the inherent risk contained in the portfolio, including the non-
accrual 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.
17
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Loan Portfolio Con't)
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 $109,500 during the second quarter of 2000 and
$75,000 during the second quarter of 1999.
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 June 30, 2000, the held to maturity portfolio
totaled $347,275.
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 June 30, 2000,
this portfolio had an estimated fair value of $18,048,521, $361,519
less than the amortized cost. Such deficit represents an unrealized
loss.
This 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 $16,687,488 at quarter-end or 84.0% of the available for sale
portfolio. Tax exempt municipals totaling $1,708,308 comprised 7.4%.
The remainder of the portfolio, which totals $1,473,383, consists of
bank holding company stock, Georgia Bankers Stock, and stock which the
Bank is required to hold for membership in the Federal Reserve Bank
and the Federal Home Loan Bank.
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.
18
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANSLYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Deposits and Other Funding Sources
Total deposits at June 30, 2000 of $166,287,083 were up from
their first quarter total of $160,918,995. Although the second
quarter has traditionally not been a large growth period, deposits are
well above the second quarter 1999 totals of $143,484,922.
Noninterest bearing deposits increased $1,607,492 to $24,343,320
during the quarter. Interest bearing deposits increased $3,760,596,
or 2.7%, to $138,183,167 during the quarter. Increases were
experienced primarily in certificates of deposit.
In addition to deposits, the Bank may generate funding by the use
of borrowing.
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.
19
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 June 30, 2000.
20
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, 2000 By:
Paul T. Bennett
President
Date: August 12, 2000 By:
Olivia Bennett
Vice President
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