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, 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 September 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
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2000 1999
ASSETS
Cash and due from banks $ 6,661,287 $ 11,695,998
Deposits in other banks -
interest bearing $ 774,000 $ 869,000
Investment securities:
Available for sale $ 18,764,499 $ 18,306,239
Held to maturity $ 247,300 $ 747,339
Georgia Bankers stock $ 547,283 $ 547,283
Federal Home Loan Bank stock $ 426,100 $ 426,100
Federal Funds Sold $ 11,064,000 $ 3,180,000
Loans $165,886,539 $132,282,615
Less: Unearned discount ( 314,055) ( 216,397)
Reserve for loan losses ( 2,854,069) ( 2,168,877)
$162,718,415 $129,897,341
Bank premises and equipment $ 5,977,384 $ 4,097,405
Intangible assets $ 2,136,123 $ 208,562
Other assets $ 6,990,572 $ 3,832,154
Total Assets $216,306,963 $173,807,421
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED BALANCE SHEETS (con't)
(UNAUDITED)
September 30, December 31,
2000 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits: Demand - noninterest
bearing $ 23,794,897 $ 21,462,802
Demand - interest bearing 24,686,933 23,089,387
Savings 11,639,017 10,520,013
Time 127,558,606 97,727,773
$187,679,453 $152,799,975
Borrowing 6,227,199 2,669,743
Accrued expenses and other
liabilities 2,412,623 1,294,354
Federal funds purchased - 1,140,000
Note payable - FHLB 2,053,333 93,333
Total Liabilities $198,372,608 $157,997,405
Stockholders' Equity
Common stock $1 par value; shares
authorized - 1,000,000, shares issued
and outstanding - September 30, 2000
and December 31, 1999, 399,500
and 399,500, respectively $ 399,500 $ 399,500
Surplus 3,070,831 3,070,831
Undivided profits 14,642,324 12,520,614
Accumulated other comprehensive
income ( 178,300) ( 180,929)
Total Stockholders' Equity $ 17,934,355 $ 15,810,016
Total Liabilities and
Stockholders' Equity $216,306,963 $173,807,421
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 2000 30, 1999 30, 2000 30, 1999
Interest Income:
Interest & fees
on loans $ 4,442,206 $ 3,353,084 $ 12,108,231 $ 9,510,983
Interest on
Federal funds sold 154,695 97,544 399,011 383,674
Interest on deposits
with other banks 11,381 19,570 36,524 59,403
Interest on
investment
securities:
U.S. Treasury 19,709 35,725 69,823 118,110
U.S. Government
agencies 227,944 198,693 663,175 540,063
Mortgage backed
bonds 8,520 8,926 25,399 29,609
State & municipal
subdivisions 18,880 20,853 60,584 65,925
Other 16,301 18,593 53,313 77,436
Total Interest
Income $ 4,899,636 $ 3,752,988 $ 13,416,060 $10,785,203
Interest Expense:
Interest on
deposits $ 2,187,669 $ 1,498,150 $ 5,732,172 $ 4,428,683
Interest on other
borrowings 147,653 61,838 275,751 180,719
Total Interest
Expense $ 2,335,322 $ 1,559,988 $ 6,007,923 $ 4,609,402
Net interest
income $ 2,564,314 $ 2,193,000 $ 7,408,137 $ 6,175,801
Provision for loan
losses 112,500 84,000 309,500 234,000
Net interest income
after provision
for loan losses $ 2,451,814 $ 2,109,000 7,098,637 $ 5,941,801
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (con't)
(UNAUDITED)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 2000 30, 1999 30, 2000 30, 1999
Other Operating Income:
Service charge on
deposit accounts $ 441,659 $ 401,246 $ 1,157,885 $ 1,072,165
Commission on
Insurance 15,293 16,127 61,460 45,207
Other income 89,459 84,534 487,418 289,959
Computer processing
Fees 117,312 98,712 338,869 286,161
Gain (loss) on sale
of securities 1 80 5 130
Total Other
Operating Income $ 663,724 $ 600,699 $ 2,045,637 $ 1,693,622
Other Operating
Expenses:
Salaries $ 753,778 $ 745,096 $ 2,463,733 $ 2,215,183
Profit sharing &
personnel expense 149,459 147,002 449,233 417,309
Occupancy expense 113,231 95,924 333,999 304,519
Furniture &
fixtures expense 274,218 194,484 672,650 548,686
Payroll taxes 54,682 46,601 155,993 146,226
Data processing 45,543 45,471 134,273 162,562
Other operating
Expenses 796,641 434,642 1,736,208 1,271,602
Total Other
Operating Expenses $ 2,187,552 $ 1,709,220 $ 5,946,089 $ 5,066,087
Income before
income taxes $ 927,986 $ 1,000,479 $ 3,198,185 $ 2,569,336
Applicable income
taxes 308,203 320,885 1,076,475 796,555
Net Income $ 619,783 $ 679,594 $ 2,121,710 $ 1,772,781
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)
(UNAUDITED)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 2000 30, 1999 30, 2000 30, 1999
Other comprehensive
income, net of tax:
Unrealized gains
(losses) on
Securities $ 77,320 $( 66,591) $ 2,629 $( 324,610)
Other Comprehensive
Income (Loss) $ 77,320 $( 66,591) $ 2,629 $( 324,610)
Comprehensive
Income $ 697,103 $ 613,003 $ 2,124,339 $ 1,448,171
Per share data based
on weighted average
outstanding shares
Weighted average
outstanding
shares 399,500 399,500 399,500 399,500
Net Income $ 1.55 $ 1.70 $ 5.31 $ 4.44
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
September September
30, 2000 30, 1999
Cash Flows from Operating Activities:
Net income $ 2,121,710 $ 1,772,781
Add expenses not requiring cash:
Provision for depreciation and
Amortization 581,744 397,554
Provision for loan losses 309,500 234,000
Bond portfolio gains (losses) 5 130
Gain on sale of other real estate owned - -
Increase (decrease) in taxes payable 40,049 226,989
Increase (decrease) in interest
payable 431,771 ( 92,852)
Increase (decrease) in other liabilities 361,284 161,428
(Increase) decrease in interest
receivable ( 815,180) ( 403,764)
(Increase) decrease in prepaid expenses ( 39,785) 28,068
(Increase) decrease in other assets ( 1,080,917) 103,178
Recognition of unearned loan income ( 2,342) -
Net Cash Used in Operating Activities $ 1,907,839 $ 2,427,512
Cash Flows from Investing Activities:
Proceeds from sale of investment
securities - available for sale $ - $ -
Proceeds from maturities of
investment securities - available
for sale 1,298,593 5,338,681
Purchase of investment securities -
available for sale ( 1,740,917) ( 6,600,000)
Net loans to customers (14,719,953) (11,950,087)
Purchase of premise and equipment ( 1,180,737) ( 370,373)
Proceeds from sale of premises and
equipment - -
Proceeds from maturity of investment
securities - held to maturity 500,000 -
Purchase of investment securities -
held to maturity - -
Purchase of equity securities - ( 250,000)
Premium paid for branch deposits ( 2,000,000) -
The accompanying notes are an integral part of these financial
statements.
SOUTH BANKING COMPANY
ALMA, GEORGIA
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
September September
30, 2000 30, 1999
Cash Flows from Investing Activities:(con't)
Purchase of branch fixed assets $( 1,200,000) $ -
Purchase of CB Financial Corp stock - -
Net purchase of branch loans and deposits ( 993,634) -
Purchase of FHLB stock - ( 29,900)
Net Cash Used in Investing Activities $(20,036,648) $(13,861,679)
Cash Flows from Financing Activities:
Net increase(decrease)in demand
deposits, NOW and money market $( 1,535,390) $( 3,965,508)
Net increase(decrease)in savings
and time deposits 18,041,032 5,141,383
Net increase(decrease)in borrowings 3,557,456 ( 125,621)
Dividends paid - -
Redemptions of company stock - -
Increase(decrease)in federal
funds sold ( 1,140,000) -
Increase(decrease)note payable - FHLB 1,960,000 ( 40,001)
Net Cash Provided (Used) From
Financing Activities $ 20,883,098 $ 1,010,253
Net Increase(Decrease)in Cash
and Cash Equivalents $ 2,754,289 $(10,423,914)
Cash and Cash Equivalents at
Beginning of Period 15,744,998 25,309,085
Cash and Cash Equivalents at
End of Period $ 18,499,287 $ 14,885,171
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 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.
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
established 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.
On July 31, 2000, Pineland Bank of Metter, Georgia acquired
certain branches of Flag, Inc. in Pineland's trade area. Pineland
paid a $2,000,000 premium for the deposits of the branches and
assumed the loans and fixed assets at book value, which
approximates fair market value. All transactions of the acquired
branches have been included since August 1, 2000, which was the
date of transfer.
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, 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 September 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
September 30, 2000, total capital increased $697,103 to $17,934,355.
This increase in capital resulted from net earnings of $619,783 and a
decrease of $77,320 in unrealized gains on securities available for
sale, net of taxes.
At September 30, 2000, South Banking Company had no binding
commitments for capital expenditures.
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.
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 2000 was $619,783, down
$59,811 from $679,594 in the third quarter of 1999. On a per share
basis, earnings registered a similar decrease from $1.70 to $1.55.
These levels of income represent annualized returns on average assets
of 1.31% and 1.63%. respectively. Return on average equity also
decreased from 18.21% to 14.69%. 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 2000 totaled
$2,564,314, up $371,314 from $2,193,000 in the third 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 $188.6 million, which includes the purchase
of Flag's branches, are $38.1 million in excess of the third 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 $1,223,957 from $3,218,249 in the third quarter of
1999 to $4,442,206 in the third quarter of 2000. This increase
reflects the volatile repricing of the Banks' substantial portfolio of
one-year adjustable rate loans; however, the recent increases in the
prime rate has begun to positively impact interest income.
Interest expense, the other component of net interest income,
increased $775,334 when compared to the third quarter of last year
including the fact that the average balance of interest bearing
liabilities was up $9.1 million. This is the result of higher
interest rates. The overall cost of interest bearing liabilities for
the quarter of 5.58% is 80 basis points higher than in the third
quarter of 1999, reflecting several rate increases implemented in late
1999 and early 2000.
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 4.81% for the quarter, down from
5.22% in the third 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 $112,500 and $84,000
during the three months ended September 30, 2000 and 1999,
respectively.
Noninterest Income
Following is a comparison of noninterest income for the three
months ended September 30, 2000 and 1999.
Three Months Three Months
Ended Ended
September 30, September 30,
2000 1999
Service charges on deposits $ 441,659 $ 401,246
Other service charges, commissions
& fees 15,293 16,127
Other income 206,772 183,326
Total Noninterest Income $ 663,724 $ 600,699
Total noninterest income for the three months ended September 30,
2000 was $63,025 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.
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 third quarter of 2000 of $2,187,552
was $478,332 or 28.00% greater than during the third quarter of 1999.
The majority of this increase was due to increased cost related
to the new branch acquisition.
Income Taxes
The Company's provision for income taxes, which totaled $308,203
in the third quarter of 2000 and $320,885 in the third quarter of 1999
includes both federal and state income taxes. The effective tax rates
during the two periods were 33.2% in 2000 and 32.1% in 1999.
Financial Condition
Average total assets during the third quarter of 2000 were
$204,457,000, up from $166,277,174 from the third 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 third quarter by $20,844,483 to $165,881,539.
Loans acquired in the Flag branch acquisition amounted to $19,031,599
of this increase. The increase from operations totaled $1,812,884.
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 September 30, 1999, the
loan portfolio has increased substantially. Commercial and real
estate lending remains the largest part of the portfolio.
The Company 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, 2000, commitments to extend credit, including unused
lines of credit, totaled $23,880,000 while letters of credit totaled
$440,000.
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,-----
-
2000 1999
(Unaudited)
Loans past due 90 or more days
still accruing interest $ 806 $ 277
Nonperforming assets:
Nonaccruing loans $ 862 $ 790
Other real estate owned 1,408 180
$ 2,270 $ 970
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, 2000,
the allowance for loan losses was $2,854,069 or 1.72% of gross loans.
Given the inherent risk contained in the portfolio, including the
nonaccrual loans 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 $112,500 during the third quarter of 2000 and
$84,000 during the third quarter of 1999.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Securities Portfolio and Federal Funds Sold
The Banks' securities portfolio consists of available for sale
and held to maturity securities while no securities are maintained in
a trading account. At September 30, 2000, the held to maturity
portfolio totaled $247,300.
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,
2000, this portfolio had an estimated fair value of $18,527,524,
$236,975 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 $16,914,525 at quarter-end or 90.0% of the available for sale
portfolio. Tax exempt municipals totaling $1,349,973 comprised 4.8%.
The remainder of the portfolio, which totals $1,473,383, consists of
bank holding company stock, Georgia Bankers Stock, and stock which the
Company is required to hold for membership in the Federal Reserve Bank
and the Federal Home Loan Bank.
The Company 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 Company 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.
SOUTH BANKING COMPANY
ALMA, GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONNS
Deposits and Other Funding Sources
Total deposits at September 30, 2000 of $187,679,453, which
included $18,373,838 from the Flag acquisition, were up from their
second quarter total of $166,287,083. Although the third quarter has
traditionally not been a large growth period, deposits are well above
the third quarter of 1999 totals of $147,165,820.
Noninterest bearing deposits decreased $548,423 to $23,794,897
during the quarter. Interest bearing deposits increased $25,701,389
to $163,884,556 during the quarter. Increases were experienced
primarily in certificates of deposit. The acquisition of Flag's
branches accounted for $1,344,679 increase in noninterest bearing
deposits and $17,029,189 of interest bearing deposits.
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 principals, 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 - 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 nine-month period ended September 30, 2000.
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
