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 June 30, 1997. Commission file #0-15423
SOUTH ALABAMA BANCORPORATION,INC.
(Exact name of registrant as specified in its charter)
Alabama 63-0909434
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification Number)
100 St. Joseph 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 June 30,
1997: 4,231,386
Page 1 of 22
SOUTH ALABAMA BANCORPORATION,INC AND SUBSIDIARIES
INDEX TO FORM 10 - Q
PART I. Financial Information Page Number
Consolidated Statements of Condition
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations
Six Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Operations
Three Months Ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements
June 30, 1997 7-11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12-20
PART II. Other Information 21
. . PART I. FINANCIAL INFORMATION
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited)
(Dollars in thousands)
A S S E T S
<S> <C> <C>
Cash and Due from Banks $ 18,991 $ 20,230
Federal Funds Sold 5,175 9,683
Total Cash and Cash Equivalents 24,166 29,913
Interest Bearing Deposits 100 100
Securities Available for Sale (at Market) 100,642 100,912
Securities Held to Maturity
(Market value of $14,080 and $17,015,
respectively) 13,947 16,861
Loans 195,203 189,160
Less: Unearned Loan Income <128> <130>
Allowance for Loan Losses <2,597> <2,600>
Loans, Net 192,478 186,430
Premises and Equipment 6,921 7,151
Other Real Estate Owned,Net 38 15
Accrued Income Receivable 3,494 3,453
Intangible assets 4,076 4,160
Other Assets 793 1,082
Total $346,655 $350,077
L I A B I L I T I E S
Non-interest Bearing Demand Deposits $ 57,493 $ 58,196
Interest Bearing Demand Deposits 94,943 102,385
Savings Deposits 23,304 22,823
Large Denomination Time Deposits
(of $100 or more) 43,898 34,980
Time Deposits 75,359 76,903
Total Deposits 294,997 295,287
Short-Term Borrowing 6,124 5,162
Other Liabilities 2,072 2,540
Total Liabilities 303,193 302,989
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 5,500,000
Shares Outstanding 4,231,386 42 42
Capital Surplus 33,147 33,092
Retained Earnings 9,929 13,701
Net Unrealized Gain (Loss) on Securities
Available for Sale 344 253
Total Shareholders' Equity 43,462 47,088
Total $346,655 $350,077
(See accompanying notes to consolidated financial statements.)
</TABLE>
3
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
<CAPTION>
Six Months Ended June 30
1997 1996
(Dollars in thousands except
per share amounts)
Interest Revenue:
<S> <C> <C>
Loans $ 8,924 $ 6,846
Investments:Taxable 2,765 1,717
Non-Taxable 768 406
Other 267 278
Total Interest Revenue 12,724 9,247
Interest Expense:
Deposits 5,085 3,729
Other 124 81
Total Interest Expense 5,209 3,810
Net Interest Revenue 7,515 5,437
Provision for Loan Losses 106 131
Net Interest Revenue After Provision
for Loan Losses 7,409 5,306
Non-Interest Revenue:
Trust Department Income 560 548
Service Charges on Deposit Accounts 657 435
Securities Gains and Losses,net 2 103
Gain on Sale of Other Real Estate Owned 0 18
Other Income, Charges and Fees 189 170
Total Non-Interest Revenue 1,408 1,274
Non-Interest Expense:
Salaries 2,424 1,888
Pensions and Employee Benefits 599 498
Net Occupancy Expense 403 317
Furniture and Equipment Expense 455 387
Intangible Amortization 84 0
Other Expense 1,540 1,253
Total Non-Interest Expense 5,505 4,343
Income Before Income Taxes 3,312 2,237
Income Tax Expense 949 698
Net Income $2,363 $ 1,539
Earnings Per Common Share $ 0.56 $ .51
Average Shares Outstanding (000's) 4,229 3,002
(See accompanying notes to consolidated financial statements.)
</TABLE>
4
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
<CAPTION>
Three Months Ended June 30
1997 1996
(Dollars in thousands except
per share amounts)
Interest Revenue:
<S> <C> <C>
Loans $ 4,509 $ 3,457
Investments:Taxable 1,360 860
Non-Taxable 390 214
Other 162 86
Total Interest Revenue 6,421 4,617
Interest Expense:
Deposits 2,609 1,824
Other 59 39
Total Interest Expense 2,668 1,863
Net Interest Revenue 3,753 2,754
Provision for Loan Losses 45 30
Net Interest Revenue After Provision
for Loan Losses 3,708 2,724
Non-Interest Revenue:
Trust Department Income 280 274
Service Charges on Deposit Accounts 341 225
Securities Gains and Losses,net (7) (8)
Gain on Sale of Other Real Estate Owned 0 18
Other Income, Charges and Fees 98 95
Total Non-Interest Revenue 712 604
Non-Interest Expense:
Salaries 1,225 973
Pensions and Employee Benefits 288 251
Net Occupancy Expense 197 162
Furniture and Equipment Expense 233 197
Intangible Amortization 42 0
Other Expense 777 605
Total Non-Interest Expense 2,762 2,188
Income Before Income Taxes 1,658 1,140
Income Tax Expense 466 355
Net Income $1,192 $ 785
Earnings Per Common Share $ 0.28 $ .26
Average Shares Outstanding (000's) 4,231 3,002
(See accompanying notes to consolidated financial statements.)
</TABLE>
5
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
Six Months Ended June 30,
1997 1996
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 2,363 $ 1,539
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 721 417
Provision for loan losses 106 131
Securities gains and losses,net <2> <103>
Gain on sale of other real estate owned 0 <18>
(Increase) decrease in:
Income receivable <41> <166>
Other assets 242 <236>
Increase (decrease) in other liabilities <468> <189>
Net cash provided by operating activities 2,921 1,375
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest bearing
deposits 0 252
Net increase in loans <6,177> <6,526>
Purchase of premises and equipment <171> <1,245>
Net decrease in other real estate owned 0 326
Proceeds from sale of securities
available for sale 1,998 4,780
Proceeds from maturities of investments 10,311 4,598
Purchase of investments <9,221> <16,944>
Net cash used in investing activities <3,260> <14,759>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits <290> <2,509>
Net increase (decrease) in short-
term borrowing 962 <811>
Proceeds rom issuance of stock 55 0
Dividends paid <6,135> <600>
Net cash used in financing activities <5,408> <3,920>
NET INCREASE <DECREASE> IN CASH
AND CASH EQUIVALENTS <5,747> <17,304>
Cash and cash equivalents at beginning
of period 29,913 32,404
Cash and cash equivalents at end of
period $24,166 $15,100
Supplemental disclosures of cash flow
information:
Interest paid in cash $ 5,286 $ 3,859
Income taxes paid in cash 895 840
(See accompanying notes to consolidated financial statements.)
</TABLE>
6
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, 1996.
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.
7
NOTE C: The allowance for losses on loans for the six month periods
ended June 30, 1997 and 1996 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
Allowance for loan losses:
<S> <C> <C>
Balance at beginning of period $ 2,600 $ 2,222
Provision charged to
operating expense 106 131
Losses charged off <155> <458>
Recoveries 46 62
Balance at end of period $ 2,597 $ 1,957
</TABLE>
NOTE D: In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share." This statement
establishes standards for computing and presenting earnings
per share (EPS) and applies to entities with publicly held
common stock or potential common stock. This Statement
simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15, "Earnings per Share,"
and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation
of basic EPS and requires dual presentation of basic and
diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the
diluted EPS computation.
This statement is effective for financial statements issued
for periods ending after December 15, 1997, including interim
8
periods; earlier application is not permitted. This Statement
requires restatement of all prior-period EPS data presented.
The Company will adopt the Statement at fiscal year-end 1997.
Assuming the adoption of SFAS No. 128 had been consummated at
January 1, 1996, the earnings per share amounts, on a pro
forma basis would have been as follows:
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
<S> <C> <C>
Basic earnings per share $0.56 $0.51
Diluted earnings per share $0.56 $0.51
</TABLE>
NOTE E: In June 1996, the FASB issued SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 125 provides
accounting and regulatory standards for transfers and
servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-
components approach that focuses on control. Under that
approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and
the liabilities it has incurred, derecognizes financial assets
when control has been surrendered, and derecognizes
liabilities when extinguished.
This statement is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring
after December 31, 1996, and is to be applied prospectively.
Earlier or retroactive application is not permitted. The
Company adopted the provisions of the Standard on January 1,
1997. Based on the Company's current operating activities,
9
the adoption of this statement did not have an impact of the
Company's financial condition of results of operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting of
Comprehensive Income", which establishes standards for
reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full
set of financial statements. This statement also requires
that all items that are required to be recognized under
accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the
same prominence as other financial statements. This statement
is effective for fiscal years beginning after December 15,
1997. Earlier application is permitted. Reclassification of
financial statements for earlier periods provided for
comparative purposes is required.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information",
which establishes standards for the way that public business
enterprises report information about operating segments in
annual financial statements and requires that those
enterprises report selected information about operating
segments in interim financial reports to stockholders. This
statement also establishes standards for related disclosures
about products and services, geographic areas, and major
customers. This statement requires the reporting of financial
and descriptive information about an enterprise's reportable
operating segments. This statement is effective for financial
10
statements for periods beginning after December 15, 1997. In
the initial year of application, comparative information for
earlier years is to be restated.
NOTE F: On October 31, 1996, the Company acquired First Monco
Bancshares, Inc. ("FMB") and its wholly-owned subsidiary, the
Monroe County Bank. This transaction was accounted for under
the purchase method of accounting and, accordingly, the 1997
consolidated statement of income includes the Monroe County
Bank's operations.
The Company issued approximately 1.2 million shares of its
common stock for all the outstanding common shares of FMB.
The purchase price of the outstanding common shares of FMB
totaled approximately $16.6 million, which exceeded the fair
value on the net tangible assets acquired by approximately
$4.2 million.
Assuming the acquisition of FMB had been consummated at
January 1, 1996, the consolidated results of operations on a
pro forma basis for the six months ended June 30, 1996 would
have been as follows,(in thousand, except per share data):
<TABLE>
<S> <C>
Net Interest Income $7,129
Net Income $2,025
Earnings per share $ 0.48
</TABLE>
11
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, First National Bank, Brewton, and the Monroe County Bank. This
analysis focuses upon significant changes in financial condition between
December 31, 1996 and June 30, 1997 and significant changes for the
three month periods ended June 30, 1997 and 1996, as well as significant
changes in the results of operations for the two six months periods
ending June 30, 1997 and 1996.
On October 31, 1996, First Monco Bancshares, Inc., a Monroeville,
Alabama, bank holding company, was merged into the Company. The merger
between First Monco Bancshares, Inc. and the Company has been accounted
for as a purchase (the "Monroeville purchase").
This report on Form 10-Q contains certain forward looking
statements with respect to financial condition, liquidity, non-
performing assets and results of operations, including the Notes to
Consolidated Financial Statements and statements in the following
discussion. The Company cautions readers that forward looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward
looking statements. Factors that may cause actual results to differ
materially from those contemplated included, among others, the stability
of interest rates, the rate of growth of the economy in the Company's
market area, the success of the Company's marketing efforts, the ability
12
to expand into new segments of the market area, competition, changes in
technology, the strength of the consumer and commercial credit sectors,
levels of consumer confidence, the impact of regulation applicable to
the Company and the performance of stock and bond markets.
Financial Condition
Total assets at June 30, 1997 were $346.7 million, a decrease of
$3.4 million, or 1.0 percent, from $350.1 million at December 31, 1996.
The decrease in investment securities of $3.2 million, or 2.7 percent,
and the decrease in federal funds sold of $4.5 million, or 46.6 percent,
was used in part to fund the increase in loans of $6.0 million, or 3.2
percent and the payment of a $5.3 million special dividend of $1.25 per
share.
Time deposits, consisting of certificates of deposit, decreased
$1.5 million or 2.0 percent. Large denomination time deposits increased
$8.9 million, or 25.5 percent. Approximately $2.0 million of the
increase in large denomination time deposits is attributable to one
governmental agency. The Company does not actively seek large
denomination time deposits as a source of funding. Non-interest bearing
demand deposits decreased $703 thousand, or 1.2 percent, while interest
bearing demand deposits decreased $7.4 million, or 7.3 percent, due to
seasonal fluctuation. Core deposits, defined as total deposits less
time deposits, decreased by $7.7 million. Short-term borrowing
increased $962 thousand, or 18.6 percent, from year-end 1996. The
increase occurred primarily due to an increase in federal funds
purchased.
The Company's equity as a percent of total assets at June 30, 1997
was 12.5 percent, compared to 13.5 percent at December 31, 1996. The
primary capital ratio (defined as the sum of common and preferred stock,
capital surplus, retained earnings, allowance for loan losses and
contingency and capital reserves divided by total assets) was 13.3
13
percent, compared to 14.2 percent at year-end. The decrease in both
ratios is attributable to the special dividend of $5.3 million paid in
the second quarter of 1997.
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-
weighted" assets in determining "risk-weighted" capital ratios. The
Company's Tier I capital, which is shareholders' equity less goodwill
and unrealized gains and losses on available for sale securities, was
$42.7 million at December 31, 1996 and $39.0 million at June 30, 1997.
Tier II capital, which is Tier I plus the allowable portion of the
allowance for loan losses, was $45.3 million at December 31, 1996 and
$41.6 million at June 30, 1997. The ratios, expressed as a percent of
total risk-weighted assets for Tier I and Tier II, were 19.31 percent
and 20.48 percent, respectively, at December 31, 1996, and 17.31 percent
and 18.46 percent, respectively, at June 30, 1997. Both the December
1996 and the June 1997 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 June 30, 1997 are shown below (dollars in thousands):
14
<TABLE>
<CAPTION>
June 30,
1997
Tier I capital--
<S> <C>
Tangible Common shareholders'
equity $39,042
Tier II capital--
Allowable portion of the allowance
for loan losses 2,596
Total capital (Tiers I and II) $41,638
Risk-weighted assets $225,509
Quarterly average assets 342,863
Risk-based capital ratios:
Tier I capital 17.31%
Total capital (Tiers I and II) 18.46%
</TABLE>
During the second quarter of 1997 the Company declared a regular
quarterly dividend of $0.10 per share, payable July 1, 1997, to
shareholders of record June 16, 1997. In addition, the Company declared
a special dividend of $1.25 per share, payable May 1, 1997, to
shareholders of record April 7, 1997.
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 $79.6 million at June 30, 1997. These assets
represented 23.0 percent of total assets at quarter end as compared to
24.3 percent at December 31, 1996. The net change in cash and cash
equivalents for the six month period ended June 30, 1997 was a decrease
of $5.7 million, due in part to the payment of the $5.3 million special
dividend. Cash includes currency on hand and demand deposits with other
15
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.
16
<TABLE>
Summary of Non-Performing Assets
(Dollars in Thousands)
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Accruing loans 90 days or more past due $ 267 $ 190
Loans on non-accrual 526 1,098
Renegotiated loans 0 0
Total non-performing loans 793 1,288
Other real estate owned 38 15
Total non-performing assets $ 831 $1,303
Accruing Loans 90 days or more past due
as a percent of loans 0.14% 0.10%
Total non-performing loans as a
percent of loans 0.41% 0.68%
Total non-performing assets as a percent
of loans and other real estate owned 0.43% 0.69%
</TABLE>
Non-performing loans decreased by $495 thousand from year-end 1996.
This decrease consists primarily of principal payments of certain loans
on non-accrual.
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 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
17
loan repayment terms.
Results of Operations
THE SECOND QUARTER
The Company recorded net income of $1.2 million, or $0.28 per share,
during the second quarter of 1997 compared to net income in the second
quarter of 1996 of $785 thousand, or $0.26 per share. The increase in
total interest revenue of $1.8 million, or 39.1 percent, and the increase
in interest expense of $805 thousand, or 43.2 percent, were due primarily
to the Monroeville purchase. Management provided $45 thousand for loan
losses during the first six months of 1997 compared to a $30 thousand
provision for the first six months of 1996. Net charge offs during the
first six months of 1997 were $109 thousand compared to $396 thousand in
the first six months of 1996. The allowance for loan losses at June 30,
1997 and December 31, 1996 as a percent of loans was 1.33 percent and
1.37 percent respectively. The decrease in the allowance for loan
losses as a percentage of loans was due primarily to net charge offs in
the first six months of 1996 and to the increase in loans. The
allowance for loan losses represented 3.27 times non-performing loans at
June 30, 1997 and 2.02 times non-performing loans at December 31, 1996.
Management reviews the adequacy of the allowance for 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 loan losses was considered adequate at
June 30, 1997.
Non-interest revenue was $712 thousand for the second quarter of
1997, compared to $604 thousand for the same period in 1996, an increase
of 17.9 percent. Excluding the Monroeville purchase, non-interest
revenue decreased $33 thousand or 5.5 percent due primarily to the
decrease in gain on sale of other real estate owned of $18 thousand.
18
Salary and employee benefit expense increased $289 thousand, or 23.6
percent, caused by an increase in full time equivalent employees from
159 at June 30, 1996 to 196 at June 30, 1997 and by merit increases.
The Monroeville purchase accounted for an increase of 35 full time
equivalent employees and for $290 thousand of the increase in salary and
employee benefits. Net occupancy expense increased $35 thousand when
compared to the same period in 1996, while furniture and equipment
expense increased $36 thousand. Both increases are due primarily to the
Monroeville purchase.
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 second quarter 1997
increased by $172 thousand, or 28.4 percent, due primarily to the
Monroeville purchase.
Income tax expense was $466 thousand for the second quarter of
1997, compared to $355 thousand for the same period in 1996. The
increase in income tax expense in 1997 compared to 1996 resulted
primarily from an increase in taxable income.
THE SIX MONTHS
The Company recorded net income of $2.4 million, or $0.56 per share
during the first six months of 1997 compared to net income in the first
six months of 1996 of $1.5 million, or $0.51 per share. Total interest
revenue increased by $3.5 million, or 37.6 percent, due to increased
volume in loans and investment securities and to the Monroeville
purchase. Interest expense increased $1.4 million, or 36.7 percent, due
primarily to the Monroeville purchase. Management provided $106
thousand for loan losses during the first six months of 1997 compared to
$131 thousand for the first six months of 1996.
19
Non-interest revenue was $1.4 million for the first six months of
1997, compared to $1.3 million for the same period in 1996, an increase
of 10.5 percent. Excluding securities gains and losses and the gain on
sale of other real estate owned, non-interest revenue increased by $253
thousand.
Non-interest expense in the six month period was $5.5 million in
1997, an increase of $1.2 million from 1996. Excluding the Monroeville
purchase, non-interest expense increased by $30 thousand. Salary and
employee benefits increased $637 thousand, or 26.7 percent, a combination
of merit increases and an increase in full time equivalent employees due
to the Monroeville purchase. Other expense increased by $287 thousand
due primarily to the Monroeville purchase.
Income tax expense was $949 thousand for the first six months of
1997, compared to $698 thousand for the same period in 1996. The
increase in income tax expense in 1997 compared to 1996 resulted
primarily from higher levels of taxable income.
20
Item 4. Submission of Matters to a Vote of Security Holders
The stockholders approved, during the annual meeting on May 8, 1997, the
Election of the Directors. A total of 3,739,242 shares of Common Stock,
or 88.46 percent of the total outstanding, were represented either in
person or by proxy at the meeting. The Election of the Board of
Directors was approved as to each nominee, as follows:
<TABLE>
<CAPTION>
Votes in Votes Broker
Nominee Favor Against Abstaining Non-Votes
<S> <C> <C> <C> <C>
John B. Barnett, III 3,732,177 7,065 0 0
Stephen G. Crawford 3,739,242 0 0 0
Haniel F. Croft 3,734,670 4,572 0 0
David C. DeLaney 3,739,242 0 0 0
Lowell J. Friedman 3,720,722 18,520 0 0
Broox G. Garrett, Jr. 3,739,242 0 0 0
James P. Hayes, Jr. 3,739,242 0 0 0
Clifton C. Inge 3,739,242 0 0 0
W. Bibb Lamar, Jr. 3,739,242 0 0 0
Thomas E. McMillan, Jr. 3,739,242 0 0 0
J. Richard Miller, III 3,739,242 0 0 0
J. Stephen Nelson 3,739,242 0 0 0
Earl H. Weaver 3,739,242 0 0 0
</TABLE>
The stockholders also approved, at the May 8, 1997 meeting, the amendment
to the South Alabama 1993 Incentive Compensation Plan. The vote was as
follows:
<TABLE>
<S> <C>
For approval of the plan 3,705,939
Against approval of the plan 7,456
Abstain 25,847
Broker Non-Votes 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
There were no reports filed of Form 8-K for the three month period
ended June 30, 1997.
21
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
08/14/97 /s/W. Bibb Lamar, Jr.
Date W. Bibb Lamar, Jr.
President
08/14/97 /s/F. Michael Johnson
Date F. Michael Johnson
Chief Financial Officer
22
<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>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 18,991
<INT-BEARING-DEPOSITS> 100
<FED-FUNDS-SOLD> 5,175
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 100,642
<INVESTMENTS-CARRYING> 13,947
<INVESTMENTS-MARKET> 14,080
<LOANS> 195,075
<ALLOWANCE> (2,597)
<TOTAL-ASSETS> 346,655
<DEPOSITS> 294,997
<SHORT-TERM> 6,124
<LIABILITIES-OTHER> 2,072
<LONG-TERM> 0
0
0
<COMMON> 43,118
<OTHER-SE> 344
<TOTAL-LIABILITIES-AND-EQUITY> 346,655
<INTEREST-LOAN> 8,924
<INTEREST-INVEST> 3,533
<INTEREST-OTHER> 267
<INTEREST-TOTAL> 12,724
<INTEREST-DEPOSIT> 5,085
<INTEREST-EXPENSE> 5,209
<INTEREST-INCOME-NET> 7,515
<LOAN-LOSSES> 106
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 5,505
<INCOME-PRETAX> 3,312
<INCOME-PRE-EXTRAORDINARY> 2,363
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,363
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.56
<YIELD-ACTUAL> 4.79
<LOANS-NON> 526
<LOANS-PAST> 267
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,938
<ALLOWANCE-OPEN> 2,600
<CHARGE-OFFS> 155
<RECOVERIES> 46
<ALLOWANCE-CLOSE> 2,597
<ALLOWANCE-DOMESTIC> 2,093
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 504
</TABLE>
