SECURITIES 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, 1995. Commission file #0-15423
SOUTH ALABAMA BANCORPORATION,INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0909434
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification Number)
68 St. Francis Street, Mobile, Alabama 36602
(Address of principal executive offices) (Zip Code)
(334) 431-7800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 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 reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
Shares of common stock ($0.01 Par) outstanding at September
30,: 2,998,563
Page 1 of 16
SOUTH ALABAMA BANCORPORATION,INC AND SUBSIDIARIES
INDEX TO FORM 10 - Q
PART I. Financial Information Page Number
Consolidated Statements of Condition
September 30, 1995 and December 31, 1994 3
Consolidated Statements of Operations
Nine Months Ended September 30, 1995 and 1994 4
Consolidated Statements of Operations
Three Months Ended September 30, 1995 and 1994 5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994 6
Notes to Consolidated Financial Statements
September 30, 1995 7-8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-16
PART II. Other Information 16
PART I. FINANCIAL INFORMATION
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)
<CAPTION>
September 30, December 31,
1995 1994
(Unaudited)
(Dollars in thousands)
A S S E T S
<S> <C> <C>
Cash and Due from Banks $ 13,692 $ 11,649
Federal Funds Sold 15,000 4,650
Total Cash and Cash Equivalents 28,692 16,299
Interest Bearing Deposits 654 660
Securities Available for Sale (at Market) 19,221 19,572
Securities Held to Maturity 43,723 43,445
(Market value of $43,943 and $41,376,
respectively)
Loans 143,202 133,821
Less: Unearned Loan Income <130> <149>
Allowance for Possible Loan Losses <2,172> <2,212>
Loans, Net 140,900 131,460
Premises and Equipment 4,118 3,512
Other Real Estate Owned,Net 240 240
Accrued Income Receivable 2,109 2,239
Deferred Tax Asset 628 762
Other Assets 281 317
Total $240,566 $218,506
L I A B I L I T I E S
Non-interest Bearing Demand Deposits $ 37,720 $ 36,109
Interest Bearing Demand Deposits 67,042 74,784
Savings Deposits 14,036 13,113
Large Denomination Time Deposits
(of $100 or more) 36,514 22,370
Time Deposits 50,976 39,466
Total Deposits 206,288 185,842
Short-Term Borrowing 3,945 4,985
Other Liabilities 2,256 1,575
Total Liabilities 212,489 192,402
S H A R E H O L D E R S' E Q U I T Y
Common Stock
Par Value $0.01
Shares Authorized 4,500
Shares Outstanding 2,999 30 30
Capital Surplus 16,507 16,507
Retained Earnings 11,152 9,624
Net Unrealized Gain (Loss) on Securities
Available for Sale 388 (57)
Total Shareholders' Equity 28,077 26,104
Total $240,566 $218,506
(See accompanying notes to consolidated financial statements.)
</TABLE>
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
<CAPTION>
Nine Months Ended September 30
1995 1994
(Dollars in thousands except
per share amounts)
Interest Revenue:
<S> <C> <C>
Loans $10,074 $ 7,580
Investments:Taxable 2,492 2,773
Non-Taxable 512 560
Other 276 249
Total Interest Revenue 13,354 11,162
Interest Expense:
Deposits 5,240 3,655
Other 173 106
Total Interest Expense 5,413 3,761
Net Interest Revenue 7,941 7,401
Provision for Possible Loan Losses 7 39
Net Interest Revenue After Provision
for Possible Loan Losses 7,934 7,362
Non-Interest Revenue:
Trust Department Income 725 677
Service Charges on Deposit Accounts 636 619
Securities Gains and Losses,net 53 132
Other Income, Charges and Fees 211 270
Total 1,625 1,698
Non-Interest Expense:
Salaries 2,649 2,411
Pensions and Employee Benefits 696 671
Net Occupancy Expense 454 377
Furniture and Equipment Expense 631 499
Other Expense 1,848 2,031
Total 6,278 5,989
Income Before Income Taxes 3,281 3,071
Income Tax Expense 1,033 940
Net Income $2,248 $ 2,131
Earnings Per Common Share $ 0.75 $ .71
Average Shares Outstanding (000's) 2,999 2,999
(See accompanying notes to consolidated financial statements.)
</TABLE>
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
<CAPTION>
Three Months Ended September 30
1995 1994
(Dollars in thousands except
per share amounts)
Interest Revenue:
<S> <C> <C>
Loans $ 3,490 $ 2,778
Investments:Taxable 827 889
Non-Taxable 170 184
Other 146 87
Total Interest Revenue 4,633 3,938
Interest Expense:
Deposits 1,908 1,299
Other 54 48
Total Interest Expense 1,962 1,347
Net Interest Revenue 2,671 2,591
Provision for Possible Loan Losses 4 19
Net Interest Revenue After Provision
for Possible Loan Losses 2,667 2,572
Non-Interest Revenue:
Trust Department Income 242 226
Service Charges on Deposit Accounts 216 203
Securities Gains and Losses,net 2 0
Other Income, Charges and Fees 77 97
Total 537 526
Non-Interest Expense:
Salaries 897 882
Pensions and Employee Benefits 235 192
Net Occupancy Expense 157 136
Furniture and Equipment Expense 251 181
Other Expense 528 715
Total 2,068 2,106
Income Before Income Taxes 1,136 992
Income Tax Expense 366 299
Net Income $ 770 $ 693
Earnings Per Common Share $ 0.26 $ .23
Average Shares Outstanding (000's) 2,999 2,999
(See accompanying notes to consolidated financial statements.)
</TABLE>
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
Nine Months Ended September 30,
1995 1994
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 2,248 $ 2,131
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 544 364
Provision for possible loan loss 7 39
Securities gains and losses,net <53> <132>
(Increase) decrease in:
Deferred tax asset 134 <10>
Interest receivable 130 <310>
Other assets 36 24
Increase (decrease) in other liabilities 681 162
Net cash provided by operating activities 3,727 2,268
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest bearing
deposits 6 508
Net increase in loans <9,447> <9,760>
Purchase of premises and equipment <1,150> <440>
Net decrease in other real estate owned 0 49
Proceeds from sale of securities
available for sale 563 13,477
Proceeds from maturities of investments 6,413 16,986
Purchase of investments <6,405> <25,867>
Net cash used in investing activities <10,020> <5,047>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 20,446 2,221
Net increase (decrease) in short-
term borrowing <1,040> 2,003
Dividends paid <720> <570>
Net cash used in financing activities 18,686 3,654
NET INCREASE <DECREASE> IN CASH
AND CASH EQUIVALENTS 12,393 875
Cash and cash equivalents at beginning
of period 16,299 25,894
Cash and cash equivalents at end of
period $28,692 $26,769
Supplemental disclosures of cash flow
information:
Interest paid in cash $ 4,998 $ 3,698
Income taxes paid in cash 919 758
Supplemental schedule of noncash
investing and financing activities:
Other real estate acquired in
settlement of loans $ 0 $ 87
(See accompanying notes to consolidated financial statements.)
</TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE A: The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. The
information furnished reflects all adjustments, consisting of
normal and recurring accruals, which in the opinion of
management are necessary for a fair presentation of the
results of the interim periods. Results for interim periods
may not necessarily be indicative of results to be expected
for the year.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's
report on Form 10-K for the year ended December 31, 1994.
NOTE B: Per Share data is computed on the basis of the weighted
average number of shares of common stock outstanding during
the period. The dilutive effect of stock options is not
material.
NOTE C: The allowance for possible losses on loans for the nine month
periods ended September 30, 1995 and 1994 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
Allowance for possible loan losses:
<S> <C> <C>
Balance at beginning of period $ 2,212 $ 2,250
Provision charged to
operating expense 7 39
Losses charged off <115> <172>
Recoveries 68 77
Balance at end of period $ 2,172 $ 2,194
</TABLE>
NOTE D: During May 1993, the Financial Accounting Standards
Board issued Statements of Financial Accounting Standards
(SFAS) No. 114, "Accounting by Creditors for the Impairment of
a Loan". This statement was later amended by SFAS No. 118.
The statements provide guidance on recognition of impairment
of a loan as well as methods for measurement of impairment.
SFAS No. 114 and No. 118 were adopted by the Company for the
year beginning January 1, 1995. Under the new standard, the
recorded investment in impaired loans at September 30, 1995
was $471 thousand. The reserve for impaired loans was $243
thousand at September 30, 1995.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Presented below is an analysis of the consolidated financial
condition and results of operations of South Alabama Bancorporation,
Inc. (the "Company") and its wholly owned subsidiaries, The Bank of
Mobile and First National Bank, Brewton. This analysis focuses upon
significant changes in financial condition between December 31, 1994 and
September 30, 1995 and significant changes in the results of operations
for the third quarter of 1995 compared to the third quarter of 1994, as
well as significant changes in the results of operations for the two
nine month periods ended September 30, 1995 and 1994.
Financial Condition
Total assets at September 30, 1995 were $240.6 million, an increase
of $22.1 million or 10.1 percent from $218.5 million at December 31,
1994. Loan growth of $9.4 million or 7.0 percent and the increase of
$10.4 million in federal funds sold were funded primarily by the
increase in time deposits.
Time deposits, consisting of certificates of deposit, increased
$11.5 million or 29.2 percent. This increase is due in part to two Bank
of Mobile promotions in 1995 aimed at attracting new customers with low
balance certificates of deposit. Large denomination time deposits also
increased $14.1 million or 63.2 percent. The Company does not actively
seek large denomination time deposits as a source of funding and
approximately $6 million of the increase in large denomination time
deposits is attributable to three short term certificates of deposits
purchased by existing customers. Interest bearing demand deposits
decreased $7.7 million or 10.4 percent as customers shifted from
interest bearing demand deposits to time deposits and other financial
instruments in an effort to take advantage of the general rise in
interest rates. Core deposits, defined as total deposits less time
deposits, decreased by $5.2 million caused primarily by the reduction in
interest bearing deposits. Savings deposits grew 7.0 percent to $14.0
million. Short-term borrowing decreased $1.0 million from year-end
1994.
The Company's equity as a percent of total assets at September 30,
1995 was 11.7 percent, compared to 11.9 percent at December 31, 1994.
The primary capital ratio (defined as the sum of common and preferred
stock, capital surplus, retained earnings, allowance for possible loan
losses and contingency and capital reserves divided by total assets) was
12.6 percent, compared to 13.0 percent at year-end.
The Company and its subsidiary banks are required by the various
depository institutions regulatory agencies to maintain certain capital-
to-asset ratios. Risk-based capital guidelines consider risk factors
associated with various components of assets, both on and off the
Statement of Condition. Under these guidelines, capital is measured in
two tiers. These capital tiers are used in conjunction with "risk-
adjusted" assets in determining "risk-adjusted" capital ratios. The
Company's Tier I capital, which is shareholders' equity less certain
adjustments, was $26.2 million at December 31, 1994 and $27.7 million at
September 30, 1995. Regulatory guidelines disallow a portion of capital
created by accounting for income taxes under SFAS No. 109 and all
capital created by accounting for securities under SFAS No. 115. Under
these guidelines, $388 thousand is disallowed at September 30, 1995 for
regulatory capital purposes. Tier II capital, which is Tier I plus the
allowable portion of the allowance for possible loan losses, was $28.4
million at December 31, 1994 and $29.9 million at September 30, 1995.
The new ratios, expressed as a percent of total risk-adjusted assets for
Tier I and Tier II, were 12.63 percent and 13.70 percent, respectively,
at December 31, 1994 and 11.66 percent and 12.58 percent, respectively,
at September 30, 1995. Both the December 1994 and the September 1995
ratios exceed the minimum ratios of four percent and eight percent for
Tier I and Tier II, respectively.
The components of the Company's risk-based capital calculations
for September 30, 1995 are shown below:
<TABLE>
<CAPTION>
September 30
1995
Tier I capital--
<S> <C>
Common shareholders' equity $28,077
Disallowed portion <388>
Tier I capital 27,689
Tier II capital--
Allowable portion of the allowance
for possible loan losses 2,172
Total capital (Tiers I and II) $29,861
Risk-adjusted assets $237,457
Quarterly average assets 224,551
Risk-based capital ratios:
Tier I capital 11.66%
Total capital (Tiers I and II) 12.58%
</TABLE>
The Company declared a regular quarterly dividend of $0.08 per
share, payable October 2, 1995, to shareholders of record September 18,
1995.
Liquidity
Liquidity management involves the ability to meet the day-to-day
cash flow requirements of customers, primarily depositors' withdrawals
and borrowers' requirements for funds. This is achieved by carefully
monitoring the amount of liquid assets available to meet these needs.
Liquid assets (cash and cash items, deposits with other banks, federal
funds sold and securities available for sale excluding pledged
securities) totaled $47.8 million at September 30, 1995. These assets
represented 19.9 percent of total assets at quarter end as compared to
16.7 percent at December 31, 1994. The net change in cash and cash
equivalents for the nine month period ended September 30, 1995 was an
increase of $12.4 million. Cash includes currency on hand and demand
deposits with other financial institutions. Cash equivalents are defined
as short-term and highly liquid investments, which are readily
convertible to known amounts of cash and so near maturity that there is
no significant risk of changes in value because of changes in interest
rates. The Company has federal fund lines of credit, Federal Reserve
discount window operations and Federal Home Loan Bank lines of credit
available.
Management is not aware of any trends, events or uncertainties that
will have or that are reasonably likely to have a material effect on the
liquidity, capital resources or operations of the Company. Management
is not aware of any current recommendations by regulatory authorities
which, if they were implemented, would have such an effect.
Non-Performing Assets
Non-performing assets include accruing loans 90 days or more past
due, loans on non-accrual, renegotiated loans and other real estate
owned. Commercial, business and installment loans are classified as
non-accrual by Management upon the earlier of: (i) a determination that
collection of interest is doubtful, or (ii) the time at which such loans
become 90 days past due, unless collateral or other circumstances
reasonably assure full collection of principal and interest.
<TABLE>
Summary of Non-Performing Assets
(Dollars in Thousands)
<CAPTION>
September 30 December 31,
1995 1994
<S> <C> <C>
Accruing loans 90 days or more past due $ 86 $ 4
Loans on non-accrual 525 560
Renegotiated loans 0 0
Total non-performing loans 611 564
Other real estate owned 240 240
Total non-performing assets $ 851 $ 804
Loans 90 days or more past due
as a percent of loans 0.06% --
Total non-performing loans as a
percent of loans 0.43% 0.42%
Total non-performing assets as a percent
of loans and other real estate owned 0.59% 0.60%
</TABLE>
The level of non-performing assets at September 30, 1995 increased
$47 thousand from year-end 1994.
Other real estate owned consists of one property. Because the
carrying value of this property approximates the net realizable value,
Management does not believe an allowance for possible losses on other
real estate owned is necessary.
The amount of impaired loans determined under SFAS No. 114 and 118
were not material. These credits were considered in determining the
adequacy of the allowance for possible loan losses and, while current,
are regularly monitored for changes within a particular industry or
general economic trends which could cause the borrowers severe financial
difficulties.
Any loans classified for regulatory purposes as loss, doubtful,
substandard or special mention, and not included above as non-performing
assets, do not (i) represent or result from trends or uncertainties
which management reasonably expects will materially impact future
operating results, or (ii) represent material credits about which
management is aware of any information which causes management to have
serious doubts as to the ability of such borrower to comply with the
loan repayment terms.
Results of Operations
THE THIRD QUARTER
The Company recorded net income of $770 thousand ($0.26 per share)
during the third quarter of 1995 compared to net income in the third
quarter of 1994 of $693 thousand ($0.23 per share).
The provision for possible loan losses in the second quarter of
1995 of $4 thousand compared to $19 thousand in 1994. The allowance for
possible loan losses at September 30, 1995 and December 31, 1994 as a
percent of loans was 1.52 percent and 1.65 percent respectively. The
decrease in the allowance for possible loan losses as a percentage of
loans was due to loan growth. The allowance for possible loan losses
represented 3.55 times non-performing loans at September 30, 1995 and
3.92 times non-performing loans at December 31, 1994. Management
reviews the adequacy of the allowance for possible loan losses on a
continuous basis by assessing the quality of the loan portfolio,
including non-performing loans, and adjusting the allowance when
appropriate. The allowance for possible loan losses was considered
adequate at September 30, 1995.
Salary and employee benefit expense increased $58 thousand or 5.4
percent, caused primarily by an increase in full time equivalent
employees from 142 at September 30, 1994 to 153 at September 30, 1995.
Merit increases accounted for the remainder of the increase. Net
occupancy expense increased $21 thousand when compared to the same
period in 1994, while furniture and equipment expense increased $70
thousand. Most of the increase in furniture and equipment expenses was
the result of a one time charge by the Bank of Mobile of expenses
associated with the relocation of its main office during the first
quarter of 1996.
Other expenses include data processing fees for the trust
departments, FDIC insurance, insurance costs, accounting and legal fees,
stationery and supplies, credit card service fees, loan collection fees
and advertising. Other non-interest expense in third quarter 1995
decreased by $187 thousand or 26.2 percent. The decrease in this
category was caused primarily by the refund of FDIC insurance from
reduced premium rates.
THE NINE MONTHS
The Company recorded net income of $2.2 million ($0.75 per share)
during the first nine months of 1995 compared to net income in the first
nine months of 1994 of $2.1 million ($0.71 per share). Total interest
revenue increased by $2.2 million or 19.6 percent due to increased
volume in loans as well as an increase in rates charged on loans.
Interest expense increased by $1.7 million or 43.9 percent due to the
general rise in interest rates and the increase in deposit levels
discussed on page 9. Management provided $7 thousand for possible loan
losses during the first nine months of 1995 compared to $39 thousand for
the first nine months of 1994. Net charge offs during the first nine
months of 1995 were $47 thousand compared to $95 thousand in the first
nine months of 1994.
Non-interest revenue was $1.6 million for the first nine months of
1995, compared to $1.7 million for the same period in 1994, a decrease
of 4.3 percent. Excluding securities gains and losses, non-interest
revenue increased by $6 thousand.
Non-interest expense in the nine month period was $6.3 million in
1995, an increase of $289 thousand from 1994. Salary and employee
benefits increased $263 thousand or 8.5 percent, a combination of merit
increase and an increase in staff. Other expense decreased by $183
thousand due to the lowering of FDIC insurance premiums.
Income tax expense was $1,033 thousand for the first nine months of
1995, compared to $940 thousand for the same period in 1994. The
increase in income tax expense in 1995 compared to 1994 resulted
primarily from higher levels of pretax income.
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
(b)Reports on Form 8-K
Management filed a Report on Form 8-K dated September 27, 1995 which
disclosed a change of independent accountants for the fiscal year ending
December 31, 1995.
Pursuant to the requirement of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SOUTH ALABAMA BANCORPORATION
11/13/95 /s/W. Bibb Lamar, Jr.
W. Bibb Lamar, Jr.
President
11/13/95 /s/F. Michael Johnson
F. Michael Johnson
Executive Vice-President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000783739
<NAME> SOUTH ALABAMA BANCORPORATION, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 13692
<INT-BEARING-DEPOSITS> 654
<FED-FUNDS-SOLD> 15000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19221
<INVESTMENTS-CARRYING> 43723
<INVESTMENTS-MARKET> 43943
<LOANS> 143202
<ALLOWANCE> 2172
<TOTAL-ASSETS> 240566
<DEPOSITS> 206288
<SHORT-TERM> 3945
<LIABILITIES-OTHER> 2256
<LONG-TERM> 0
<COMMON> 27689
0
0
<OTHER-SE> 388
<TOTAL-LIABILITIES-AND-EQUITY> 240566
<INTEREST-LOAN> 10074
<INTEREST-INVEST> 3004
<INTEREST-OTHER> 276
<INTEREST-TOTAL> 13354
<INTEREST-DEPOSIT> 5240
<INTEREST-EXPENSE> 5413
<INTEREST-INCOME-NET> 7941
<LOAN-LOSSES> 7
<SECURITIES-GAINS> 53
<EXPENSE-OTHER> 6278
<INCOME-PRETAX> 3281
<INCOME-PRE-EXTRAORDINARY> 2248
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2248
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
<YIELD-ACTUAL> 5.12
<LOANS-NON> 525
<LOANS-PAST> 86
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1105
<ALLOWANCE-OPEN> 2212
<CHARGE-OFFS> 115
<RECOVERIES> 68
<ALLOWANCE-CLOSE> 2172
<ALLOWANCE-DOMESTIC> 2172
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1226
</TABLE>
