SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000 or
Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 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)
N/A
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 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 May 11,
2000: 8,587,055
Page 1 of 20
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
INDEX TO FORM 10 - Q
PART I. Financial Information Page Number
Consolidated Statements of Condition
March 31, 2000 and December 31, 1999 3
Consolidated Statements of Operations
Three Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements
March 31, 2000 6-11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12-20
PART II. Other Information 20
PART I. FINANCIAL INFORMATION
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION (Unaudited)
<CAPTION>
March 31, December 31,
2000 1999
(Dollars in thousands)
ASSETS
<S> <C> <C>
Cash and Due from Banks $ 20,640 $ 21,208
Federal Funds Sold 7,584 9,022
Total Cash and Cash Equivalents 28,224 30,230
Interest Bearing Deposits 565 599
Securities Available for Sale (at Market) 132,130 134,563
Securities Held to Maturity
(Market value of $9,563 and $10,106,
respectively) 9,536 10,046
Loans 365,606 359,470
Less: Unearned Loan Income <1,528> <1,546>
Allowance for Loan Losses <4,286> <4,128>
Loans, Net 359,792 353,796
Premises and Equipment 12,746 12,889
Accrued Income Receivable 5,465 5,635
Intangible Assets 4,328 4,378
Other Assets 4,645 4,722
Total $557,431 $556,858
LIABILITIES
Non-interest Bearing Demand Deposits $ 81,551 $ 81,997
Interest Bearing Demand Deposits 131,314 134,505
Savings Deposits 36,418 33,482
Large Denomination Time Deposits
(of $100 or more) 91,056 89,776
Time Deposits 132,065 127,692
Total Deposits 472,404 467,452
Short-Term Borrowings 8,831 14,999
Long-Term Debt 7,000 7,000
Other Liabilities 4,107 3,325
Total Liabilities 492,342 492,776
SHAREHOLDERS' EQUITY
Common Stock
Par Value $0.01
Shares Authorized 20,000,000
Shares Outstanding 2000-8,587,055
1999-8,585,555 86 86
Capital Surplus 37,791 37,786
Retained Earnings 30,096 29,121
Accumulated Other Comprehensive Income <2,884> <2,911>
Total Shareholders' Equity 65,089 64,082
Total $557,431 $556,858
(See accompanying notes to consolidated financial statements.)
</TABLE>
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
<CAPTION>
Three Months Ended March 31,
2000 1999
(Dollars in thousands except
per share amounts)
<S> <C> <C>
Interest Revenue:
Loans $ 8,120 $ 7,164
Investments: Taxable 1,527 1,699
Non-Taxable 675 674
Other 86 275
Total Interest Revenue 10,408 9,812
Interest Expense:
Deposits 4,272 4,326
Short-Term Borrowings 168 70
Long-Term Debt 98 84
Total Interest Expense 4,538 4,480
Net Interest Revenue 5,870 5,332
Provision for Loan Losses 230 151
Net Interest Revenue After Provision
for Loan Losses 5,640 5,181
Non-Interest Revenue:
Trust Income 399 313
Service Charges on Deposit Accounts 697 566
Securities Gains and (Losses), net 0 19
Other Income, Charges and Fees 200 173
Total Non-Interest Revenue 1,296 1,071
Non-Interest Expense:
Salaries 1,978 1,870
Pensions and Employee Benefits 514 521
Net Occupancy Expense 282 256
Furniture and Equipment Expense 338 347
Intangible Amortization 50 50
Other Expense 1,178 1,061
Total Non-Interest Expense 4,340 4,105
Income Before Income Taxes 2,596 2,147
Income Tax Expense 763 596
Net Income $1,833 $ 1,551
Basic Earnings Per Common Share $ 0.21 $ .18
Diluted Earnings Per Common Share $ 0.21 $ .18
(See accompanying notes to consolidated financial statements.)
</TABLE>
<TABLE>
SOUTH ALABAMA BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
Three Months Ended March 31,
2000 1999
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,833 $ 1,551
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 418 370
Provision for loan losses 230 151
Securities (gains) and losses,net 0 <19>
(Increase) decrease in:
Income receivable 170 63
Other assets 63 <382>
Increase (decrease) in other liabilities 782 487
Net cash provided by operating activities 3,496 2,221
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest bearing
deposits 34 <358>
Net (increase) decrease in loans <6,480> <23,126>
Proceeds from the sale of other real
estate owned 254 0
Purchase of premises and equipment <173> <1,653>
Proceeds from sale of securities
available for sale 0 3,980
Proceeds from maturities of investments 5,723 25,332
Purchase of investments <2,791> <38,625>
Net cash provided by (used in) investing
activities <3,433> <34,450>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 4,952 3,165
Net increase (decrease) in short-
term borrowing <6,168> <1,071>
Net increase in long-term debt 0 0
Proceeds from issuance of stock 5 67
Dividends paid <858> <729>
Net cash provided by (used in) financing
activities <2,069> 1,432
NET INCREASE <DECREASE> IN CASH
AND CASH EQUIVALENTS <2,006> <30,797>
Cash and cash equivalents at beginning
of period 30,230 64,807
Cash and cash equivalents at end of
period $28,224 $34,010
Supplemental disclosures of cash flow
information:
Interest paid in cash $ 4,478 $ 4,546
Income taxes paid in cash 0 30
(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, 1999.
NOTE B: The allowance for losses on loans for the three month
periods ended March 31, 2000 and 1999 are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Allowance for loan losses:
Balance at beginning of period $ 4,128 $ 3,664
Provision charged to
operating expense 230 151
Losses charged off <229> <162>
Recoveries 157 97
Balance at end of period $ 4,286 $ 3,750
</TABLE>
NOTE C: Basic earnings per share were computed by dividing
net income by the weighted average number of shares of common
stock outstanding during the three month periods ended March
31, 2000 and 1999.
Diluted earnings per share for the three month periods ended
March 31, 2000 and 1999 were computed by dividing net
income by the weighted average number of shares of common
stock and the dilutive effects of the shares awarded under the
Stock Option plans, based on the treasury stock method using
an average fair market value of the stock during the
respective periods.
The following tables represent the earnings per share
calculations for the three month periods ended March 31, 2000
and 1999 (in thousands except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Income Shares Earnings per share
March 31, 2000
<S> <C> <C> <C>
Net income $1,833
Basic earnings per share:
Income available to common
shareholders $1,833 8,586 $0.21
Dilutive securities
Stock option plan shares 42
Dilutive earnings per share:
Income available to common
shareholders plus assumed
conversions $1,833 8,628 $0.21
Three Months Ended Income Shares Earnings per share
March 31, 1999
Net income $1,551
Basic earnings per share:
Income available to common
shareholders $1,551 8,577 $0.18
Dilutive securities
Stock option plan shares 88
Dilutive earnings per share:
Income available to common
shareholders plus assumed
conversions $1,551 8,665 $0.18
</TABLE>
NOTE D: The American Institute of Certified Public Accountants has
issued Statement of Position (SOP) 98-5, "Reporting on the
Costs of Start-up Activities." This SOP provides guidance on
the financial reporting of start-up costs and organization
costs. It requires costs of start-up activities and
organization activities to be expensed as incurred, and the
initial application of this SOP should be reported as the
cumulative effect of a change in accounting principle. This
SOP is effective for financial statements for fiscal years
beginning after December 15, 1998. Earlier application is
encouraged for fiscal years for which annual financial
statements previously have not been issued. The adoption of
this SOP did not have a material impact on the presentation of
the Company's financial condition or results of operations.
NOTE E: The Company adopted SFAS No. 130 January 1, 1998.
SFAS No. 130 established standards for reporting and display
of comprehensive income and its components.
The Company has classified the majority of its securities as
available for sale in accordance with FASB Statement No. 115.
For the three month period ended March 31, 2000, the net
unrealized gain (loss) on these securities increased by $43
thousand. For the three month period ended March 31, 1999, the
net unrealized gain (loss) on these securities decreased by
$960 thousand. Pursuant to Statement No. 115, any unrealized
gain or loss activity of available for sale securities is to
be recorded as an adjustment to a separate component of
shareholders' equity, net of income tax effect. Accordingly,
for the three month periods ended March 31, 2000 and 1999, the
Company recognized an increase of $27 thousand and a decrease
of $605 thousand, respectively, in the net unrealized gain
(loss) component of equity.
Since comprehensive income is a measure of all changes in
equity of an enterprise that result from transactions and
other economic events of the period, this change in unrealized
gain(loss) serves to increase or decrease comprehensive
income.
The following table represents comprehensive income for the
three month periods ended March 31, 2000 and 1999 (in
thousands):
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Net Income $1,833 $1,551
Other comprehensive income (loss),
net of tax
Unrealized gain (loss) on securities 27 (605)
Comprehensive income $1,860 $ 946
</TABLE>
NOTE F: There have been no material changes in reported market risk
since year-end.
NOTE G: Segment Reporting
Under SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," certain information is
disclosed for the five reportable operating segments of the
Company. The reportable segments were determined using the
internal management reporting system. They are composed of
the Company's significant subsidiaries. The accounting
policies for each segment are the same as those used by the
Company. The segment results include certain overhead
allocations and intercompany transactions that were recorded
at current market prices. All intercompany transactions have
been eliminated to determine the consolidated balances.
The results for the five reportable segments of the company
are included in the following tables (in thousands):
<TABLE>
Three Months Ended
March 31, 2000
<CAPTION>
Monroe- Sweet
Mobile Brewton ville Demopolis Water
Bank Bank Bank Bank Bank Other Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest income $ 3,721 $ 2,171 $ 1,909 $ 1,458 $ 1,174 $ 4 $ <29> $10,408
Total interest expense 1,678 859 775 733 522 0 <29> 4,538
Net interest income 2,043 1,312 1,134 725 652 4 0 5,870
Provision for loan losses 120 0 44 24 42 0 0 230
Net interest income after
provision 1,923 1,312 1,090 701 610 4 0 5,640
Total noninterest income 306 179 147 138 130 399 <3> 1,296
Total noninterest expense 1,383 774 690 498 451 547 <3> 4,340
Income before taxes 846 717 547 341 289 <144> 0 2,596
Provision for income taxes 301 182 156 91 79 < 46> 0 763
Net income $ 545 $ 535 $ 391 $ 250 $ 210 $ < 98> $ 0 $ 1,833
Other significant items:
Total assets $197,567 $109,089 $116,808 $76,226 $57,447 $69,406 $<69,112> $557,431
Total investment securities 33,733 33,085 44,554 16,506 13,788 0 0 141,666
Total loans 146,453 68,925 57,547 52,953 38,200 0 0 364,078
Investment in subsidiaries 49 71 0 0 66,548 <66,668> 0
Total interest income from
external customers 3,720 2,170 1,882 1,458 1,174 4 0 10,408
Total interest income from
affiliates 1 1 27 0 0 <29> 0
</TABLE>
<TABLE>
Three Months Ended
March 31, 1999
<CAPTION>
Monroe- Sweet
Mobile Brewton ville Demopolis Water
Bank Bank Bank Bank Bank Other Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest income $ 3,508 $ 2,067 $ 1,770 $ 1,364 $ 1,094 $ 10 $ <1> $ 9,812
Total interest expense 1,602 856 784 690 549 0 <1> 4,480
Net interest income 1,906 1,211 986 674 545 10 0 5,332
Provision for loan losses 83 14 0 45 9 0 0 151
Net interest income after
provision 1,823 1,197 986 629 536 10 0 5,181
Total noninterest income 244 122 136 140 115 317 <3> 1,071
Total noninterest expense 1,292 758 663 501 446 448 <3> 4,105
Income before taxes 775 561 459 268 205 <121> 0 2,147
Provision for income taxes 270 137 124 61 52 < 48> 0 596
Net income $ 505 $ 424 $ 335 $ 207 $ 153 $ < 73> $ 0 $ 1,551
Other significant items:
Total assets $198,779 $112,591 $117,250 $73,298 $56,231 $59,468 $<57,404> $560,213
Total investment securities 45,011 36,035 55,469 18,041 14,288 0 0 168,844
Total loans 138,634 67,793 45,859 50,035 33,770 0 0 336,091
Investment in subsidiaries 5 54 0 0 62,735 <62,794> 0
Total interest income from
external customers 3,508 2,066 1,770 1,364 1,094 10 0 9,812
Total interest income from
affiliates 0 1 0 0 0 0 <1> 0
</TABLE>
NOTE H: In June 1999, the FASB issued SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133." This
statement delays the effective date of Statement 133 from
fiscal quarters of all fiscal years beginning after June 15,
1999, with earlier application encouraged, to fiscal quarters
of all fiscal years beginning after June 15, 2000.
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, South Alabama
Bank, First National Bank, Brewton, The Monroe County Bank, The
Commercial Bank of Demopolis, Sweet Water State Bank and South Alabama
Trust Company, Inc. This analysis focuses upon significant changes in
financial condition between December 31, 1999 and March 31, 2000, and
significant changes for the three month periods ended March 31, 2000 and
1999.
On September 10, 1999, Sweet Water State Bancshares, Inc., the
parent company of Sweet Water State Bank, was merged into the Company.
This merger has been accounted for as a pooling-of-interests, and,
accordingly, the results of operations of Sweet Water State Bank have
been included in the consolidated results for all periods presented.
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. These statements can be identified by the use of words like
"expect," "may," "could," "should," "intend," "project," "estimate," or
"anticipate." 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 include, 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
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, the performance of stock and bond markets, and disruptions
of the operations of the Company or any other private or governmental
entity as a result of the "Year 2000 problem."
Financial Condition
Total assets at March 31, 2000 were $557.4 million, a slight
increase of $573 thousand from $556.9 million at December 31, 1999.
Federal funds sold decreased $1.4 million and investment securities
decreased $2.9 million from December 31, 1999. These decreases in
federal funds sold and investment securities were used in part to fund
the increase in loans of $6.1 million, or 1.7 percent, from $359.5
million at December 31, 1999 to $365.6 million at March 31, 2000. The
increase in total deposits of $5.0 million, or 1.1 percent, from $467.5
million at December 31, 1999 to $472.4 million at March 31, 2000 was
used primarily to reduce the amount of short term borrowings from $15.0
million at December 31, 1999 to $8.8 million at March 31, 2000, a
decrease of $6.2 million, or 41.1 percent.
Time deposits, consisting of certificates of deposit, increased
$4.4 million, or 3.4 percent. Large denomination time deposits
increased $1.3 million, or 1.4 percent. The Company does not actively
seek large denomination time deposits as a source of funding. Non-
interest bearing demand deposits were relatively unchanged, while
interest bearing demand deposits decreased $3.2 million, or 2.4 percent.
Core deposits, defined as total deposits less time deposits of $100
thousand or more, increased by $3.7 million. Long-term debt was
unchanged at $7.0 million.
The Company's equity as a percent of total assets at March 31, 2000
was 11.7 percent, compared to 11.5 percent at December 31, 1999. 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 13.0
percent, compared to 12.8 at year-end 1999.
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 accumulated other comprehensive income, was $62.6 million at
December 31, 1999 and $63.6 million at March 31, 2000. Tier I capital
plus Tier II capital, which is the allowable portion of the allowance
for loan losses, was $66.7 million at December 31, 1999 and $67.9
million at March 31, 2000. The ratios, expressed as a percent of total
risk-weighted assets for Tier I and Tier II capital, were 15.95 percent
and 17.00 percent, respectively, at December 31, 1999, and 16.01 percent
and 17.09 percent, respectively, at March 31, 2000. Both the December
1999 and the March 2000 ratios exceed the minimum ratios of four percent
and eight percent for Tier I and Tier II capital, respectively.
The components of the Company's risk-based capital calculations
for March 31, 2000 are shown below (dollars in thousands):
<TABLE>
<CAPTION>
March 31,
2000
<S> <C>
Tier I capital--
Tangible Common shareholders'
equity $63,645
Tier II capital--
Allowable portion of the allowance
for loan losses 4,286
Total capital (Tiers I and II) $67,931
Risk-weighted assets $397,446
Quarterly average assets 550,485
Risk-based capital ratios:
Tier I capital 16.01%
Total capital (Tiers I and II) 17.09%
</TABLE>
During the first quarter of 2000 the Company declared a regular
quarterly dividend of $0.10 per share, payable April 3, 2000, to
shareholders of record March 13, 2000.
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 $77.8 million at March 31, 2000. These assets
represented 14.0 percent of total assets at quarter end as compared to
16.4 percent at December 31, 1999. The net change in cash and cash
equivalents for the three month period ended March 31, 2000 was a
decrease of $2.0 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 available, if needed, federal fund lines of
credit, Federal Reserve discount window operations, Federal Home Loan
Bank lines of credit, and an operating line of credit from a
correspondent bank.
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>
March 31, December 31,
2000 1999
<S> <C> <C>
Accruing loans 90 days or more past due $ 261 $ 446
Loans on non-accrual 1,248 1,352
Renegotiated loans 0 0
Total non-performing loans 1,509 1,798
Other real estate owned 212 466
Total non-performing assets $1,721 $2,264
Accruing Loans 90 days or more past due
as a percent of loans 0.07% 0.12%
Total non-performing loans as a
percent of loans 0.41% 0.50%
Total non-performing assets as a percent
of loans and other real estate owned 0.47% 0.63%
</TABLE>
Non-performing assets decreased by $543 thousand from year-end
1999. Of this decrease $254 thousand resulted from the sale of property
classified as other real estate owned. The remaining decrease was
caused by a $185 thousand reduction in accruing loans 90 days or more
past due and a $104 thousand reduction in loans on non-accrual.
The amount of impaired loans determined under SFAS No. 114 and 118
was 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
loan repayment terms.
Results of Operations
THE FIRST QUARTER
The Company recorded net income of $1.8 million, or $0.21 per share,
during the first quarter of 2000, compared to net income in the first
quarter of 1999 of $1.6 million, or $0.18 per share. An increase in
average interest earning assets and a shift to loans from investment
securities and federal funds sold enabled the Company to increase total
interest revenue by $596 thousand, or 6.1 percent. Interest expense
increased by $58 thousand. The net interest margin increased to 4.66
percent in the first quarter of 2000 compared to 4.18 percent in the
first quarter of 1999.
Management provided $230 thousand for loan losses during the first
quarter of 2000, compared to a $151 thousand provision for the first
quarter of 1999. The increase in the provision was in response to the
Company's loan portfolio growth. Net charge offs during the first three
months of 2000 were $72 thousand compared to $65 thousand in the first
three months of 1999. The allowance for loan losses at March 31, 2000
and December 31, 1999 as a percent of loans was 1.17 percent and 1.15
percent respectively. The allowance for loan losses represented 2.84
times non-performing loans at March 31, 2000 and 2.30 times non-
performing loans at December 31, 1999. 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 March 31, 2000.
Non-interest revenue was $1.3 million for the first quarter of
2000, compared to $1.1 million for the same period in 1999, an increase
of 21.0 percent, due primarily to the increase in deposit account
service charges of $131 thousand. Three of the Company's subsidiary
banks have introduced new fee schedules and these new fee schedules are
having a positive impact on this category.
Salary and employee benefit expense increased $101 thousand, or 4.2
percent, from first quarter of 1999 to the first quarter of 2000, caused
primarily by merit increases. Net occupancy expense was $282 thousand
in the first quarter 2000, an increase of $26 thousand, or 10.2 percent,
from the same period of 1999. This increase was caused primarily by the
opening in December 1999 of a branch in Gulf Shores. Furniture and
equipment expense decreased $9 thousand.
Other expenses include data processing fees for the Trust Company,
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 first quarter 2000 increased
by $117 thousand, or 11.0 percent from first quarter 1999.
Income tax expense was $763 thousand for the first quarter of 2000,
compared to $596 thousand for the same period in 1999. The increase in
income tax expense in 2000 compared to 1999 resulted primarily from an
increase in taxable income.
YEAR 2000 PROBLEM
The Year 2000 ("Y2K") issue is a result of some computer software
programs and hardware systems using only two digits to indicate a year
and assuming that the first two digits of any year are "19." Through
this date, the Company has suffered no material disruptions related to
Y2K and expects none.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed of Form 8-K for the three month
period ended March 31, 2000.
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
05/15/2000 /s/W. Bibb Lamar, Jr.
Date W. Bibb Lamar, Jr.
President
05/15/2000 /s/F. Michael Johnson
Date F. Michael Johnson
Chief Financial Officer
Exhibit Index
The following is a list of exhibits filed herewith.
27 Financial Data Schedule
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 20,640
<INT-BEARING-DEPOSITS> 565
<FED-FUNDS-SOLD> 7,584
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 132,130
<INVESTMENTS-CARRYING> 9,536
<INVESTMENTS-MARKET> 9,563
<LOANS> 364,078
<ALLOWANCE> (4,286)
<TOTAL-ASSETS> 557,431
<DEPOSITS> 472,404
<SHORT-TERM> 8,831
<LIABILITIES-OTHER> 4,107
<LONG-TERM> 7,000
0
0
<COMMON> 67,973
<OTHER-SE> (2,884)
<TOTAL-LIABILITIES-AND-EQUITY> 557,431
<INTEREST-LOAN> 8,120
<INTEREST-INVEST> 2,202
<INTEREST-OTHER> 86
<INTEREST-TOTAL> 10,408
<INTEREST-DEPOSIT> 4,272
<INTEREST-EXPENSE> 4,538
<INTEREST-INCOME-NET> 5,870
<LOAN-LOSSES> 230
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,340
<INCOME-PRETAX> 2,596
<INCOME-PRE-EXTRAORDINARY> 1,833
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,833
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.21
<YIELD-ACTUAL> 4.66
<LOANS-NON> 1,248
<LOANS-PAST> 261
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,449
<ALLOWANCE-OPEN> 4,128
<CHARGE-OFFS> 229
<RECOVERIES> 157
<ALLOWANCE-CLOSE> 4,286
<ALLOWANCE-DOMESTIC> 3,736
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 550
</TABLE>
