<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarter ended Commission File No.
March 31, 1995 33-14902
SOUTHERN BANK GROUP, INC.
(Exact name of Registrant)
Georgia 58-1723394
(State or other (I.R.S. Employer
jurisdiction of identification No.)
incorporation or
organization)
11180 Alpharetta Highway
Roswell, Georgia 30076
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone number
including area code: 404-475-9999
Indicate by checkmark whether the registrant (1) has filed all report
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filings for the past 90 days.
YES________ NO________
Indicate the number of shares of outstanding or each of the issuer's
class of common stock, as of March 31, 1995.
Common Stock 1,838,601
<PAGE> 2
SOUTHERN BANK GROUP, INC.
Quarterly Report on Form 10Q
For the Quarter Ended March 31, 1995
Part I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
1. FINANCIAL STATEMENTS (1)
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (5)
Part II - OTHER INFORMATION
ITEM PAGE
- ---- ----
3. EXHIBITS AND REPORTS ON FOR 8-K (15)
4. SIGNATURE (16)
</TABLE>
<PAGE> 3
SOUTHERN BANK GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
March 31, December 31,
--------- ------------
1995 1994
--------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks................................................ $ 3,601 $ 3,983
Federal funds ......................................................... 5,340 5,540
Investment securities held to maturity, at cost (market value of
$7,394 and $7,771 respectively)................................... 7,508 8,017
Investment securities available for sale, at market................... 12,761 10,784
Federal Home Loan Bank Stock, at cost................................. 314 314
Loans, less allowance for loan losses of
$1,031 and $1,028, respectively.................................... 66,172 69,627
Premises and equipment, net........................................... 4,146 4,247
Other real estate..................................................... 412 414
Accrued interest receivable and other assets.......................... 1,469 1,448
-------- --------
Total assets............................................ $101,723 $104,374
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand............................................................ $ 14,275 $ 15,461
NOW accounts ..................................................... 13,074 12,268
Money market accounts............................................. 14,798 16,890
Savings accounts.................................................. 3,938 4,674
Time, $100,000 and over........................................... 8,329 10,743
Other time........................................................ 32,320 29,969
Total deposits........................................................ 86,734 90,005
Accrued interest payable and other liabilities........................ 638 474
-------- --------
Total liabilities....................................... 87,372 90,479
======== ========
Shareholders' equity :
Common stock, $1 par value; 10,000,000 shares authorized;
1,838,601 shares issued and outstanding............................ 1,839 1,839
Paid-in capital....................................................... 12,890 12,890
Accumulated deficit................................................... (216) (525)
Unrealized holding (loss)gain on investment securities available
for sale, net of income tax effect............................... (162) (309)
-------- --------
Total shareholders............................................... 14,351 13,895
-------- --------
Total liabilities and shareholders' equity....................... $101,723 $104,374
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
(1)
<PAGE> 4
SOUTHERN BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands)
<TABLE>
- -----------------------------------------------------------------------------------------
<CAPTION>
For the three months ended March 31,
-------------------------------------
Interest income: 1995 1994
--------- ---------
<S> <C> <C>
Interest and fees on loans.......................... $ 1,765 $ 1,511
Federal funds sold ................................. 58 20
Investment securities held to maturity.............. 101 105
Investment securities available for sale............ 195 126
--------- ---------
Total interest income........................ 2,119 1,762
Interest expense ....................................... 896 766
--------- ---------
Net interest income..................................... 1,223 996
Provision for loan losses .............................. - 5
--------- ---------
Net interest income after provision for loan losses..... 1,223 991
--------- ---------
Non-interest income:
Service charges on deposit accounts................. 115 130
Credit card processing fees......................... 59 47
Losses on sales of investment securities............ - (9)
Gains on sales of loan participations............... - 15
Mortgage brokerage fees............................. 5 8
Other income........................................ 18 21
--------- ---------
Total non-interest income.................... 197 212
--------- ---------
Non-interest expense:
Salaries and other personnel ....................... 408 478
Occupancy .......................................... 187 212
Postage and freight................................. 29 30
Office supplies,printing and stationery............. 15 21
Data processing..................................... 44 43
Professional services............................... 64 59
Insurance and taxes................................. 79 81
Other real estate .................................. (6) 3
Credit Card Processing.............................. 46 36
Other operating .................................... 86 78
--------- ---------
Total non-interest expense.................. 952 1,041
--------- ---------
Income before income tax benefit........................ 468 162
Income tax provision ................................... (159) (55)
--------- ---------
Net income ............................................. $ 309 $ 107
========= =========
Net income per share.................................... $ 0.17 $ 0.06
========= =========
Weighted average common shares
outstanding......................................... 1,838,601 1,838,601
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(2)
<PAGE> 5
SOUTHERN BANK GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
- -----------------------------------------------------------------------------------------
<CAPTION>
For the three months
period ended March 31,
1995 1994
------- -------
<S> <C> <C>
Net cash provided by operating activities $ 440 $ 409
Cash flows from investing activities:
Purchase of investment securities held to maturity - (2,017)
Purchase of investment securities available for sale (1,893) (6)
Proceeds from maturities and prepayments of
investment securities held to maturity 504 -
Proceeds from maturities and prepayments of
investment securities available for sale 148 427
Net decrease(increase) in loans 3,490 (1,271)
Proceeds from sales of other real estate 2 27
Capital expenditures (2) (163)
------- -------
Net cash provided by (used in) investing activities 2,249 (3,003)
------- -------
Cash flows from financing activities:
Net (decrease) increase in deposits (3,271) 761
------- -------
Net cash (used in) provided by financing activities (3,271) 761
------- -------
Net decrease in cash and cash equivalents (582) (1,833)
Cash and cash equivalents at the beginning of the period 9,523 11,018
------- -------
Cash and cash equivalents at the end of the period $ 8,941 $ 9,185
======= =======
Supplelmental disclosure of cash flow information:
Cash paid during the period:
Income taxes $ - $ -
======= =======
Interest $ 895 $ 842
======= =======
Supplemental disclosure of non-cash investing
and financing activities
Transfer of loans to other real estate $ - $ -
======= =======
Loan financing of sales of other real estate $ - $ 33
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
(3)
<PAGE> 6
SOUTHERN BANK GROUP, INC.
Notes to Consolidated Financial Statements
March 31, 1995 and 1994
(Unaudited)
1. Summary of Significant Accounting Policies:
The Company's accounting and reporting policies conform to generally
accepted accounting principles. The consolidated financial statements included
herein are unaudited but reflect all adjustments which, in the opinion of
management, are necessary to a fair presentation of the Company's consolidated
financial operations for the three month period ended March 31, 1994 and 1993.
All such adjustments are of a normal recurring nature.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan" ("SFAS 114"). This standard requires that impaired loans by measured on
the present value of expected future cash flows discounted at loan's effective
interest rate or, as a practical expedient, at the loans observable market
price or the fair value of the collateral if the loan is collateral dependent.
The impact of adopting SFAS 114 was not material.
These financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in the Company's
annual report to shareholders for the fiscal year ended December 31, 1994.
(4)
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(DOLLARS IN THOUSANDS)
Southern Bank Group, Inc. (the "Company"), is a bank holding company
which owns all the capital stock of Northside Bank and Trust Company (the
"Bank") and Southern Mortgage Group, Inc. (the "Mortgage Company"), which has
been inactive since October 22, 1991. The Bank is engaged in the general
commercial banking business in North Fulton County and the contiguous area. In
addition to the Bank's main office, the Bank has three branches, including one
branch located in a supermarket.
The following discussion and analysis sets forth the major factors
which affected the Company's results of operations and financial condition as
reflected in the unaudited financial statements for the three months ended
March 31, 1995 and 1994.
OVERVIEW
The Company reported net income of $309 and $107 for the quarter ended
March 31, 1995 and 1994, respectively. In general the improvement in the
Company's net income can be attributed to (1) an improving net interest margin
and (2) a reduction in non-interest expense.
Net interest income before a provision for loan losses for the first
three months of 1995 was up $227 or 23% from the same period in 1994. The
improvement relates to a rising interest rate environment which positively
impacted the Company's net interest margin on earning assets. (For further
discussion see the NET INTEREST INCOME section) While non-interest income for
the first quarter of 1995 remained relatively flat compared to same period in
1994, non-interest expense declined $89 or 9%. (For further discussion see
the NON-INTEREST EXPENSE section)
Return on average equity was 8.93% for the period ended March 31, 1995
compared to 3.19% for the same period in 1994. Return on average assets was
1.21% and .42% for the three months ended March 31, 1995 and 1994,
respectively.
(5)
<PAGE> 8
PROPOSED SALE OF COMPANY
On December 15, 1994, the Company signed a letter of intent to
exchange all of the outstanding shares of Southern Bank Group, Inc. for
.5275665 of SouthTrust Corporation ("SouthTrust") common stock. SouthTrust is
a multibank holding company headquartered in Birmingham, Alabama.
Under the terms of a Definitive Merger Agreement executed on March 17,
1995, the exchange ratio may be adjusted by SouthTrust based upon a defined
formula if SouthTrust stock is trading below $16 per share at the effective
date of the combination.
The transaction requires approvals by the applicable regulatory
authorities and the Southern Bank Group shareholders. The sale is anticipated
to close during the second quarter of 1995.
Expenses associated with this transaction are being expensed as
incurred and are included in professional service expense in the Consolidated
Statement of Income.
INTEREST INCOME
Net interest income of $1,223 during the first quarter of 1995
resulted in a net interest margin of 5.24% on average earning assets of
$94,685. This compares to a net interest margin of 4.33% on average earning
assets of $93,360 generating net interest income of $996 for the same period in
1994. The 91 basis point increase in the net interest margin is attributable
to an increase in the prime lending rate charged to the Bank's loan customers
which averaged 8.72% during the first quarter of 1995 compared to 6.02% during
the same period in 1994.
Average earning assets increased $1,325 from $93,360 for the three
months ending March 31, 1994 to $94,685 for the same period in 1995 due to an
$1,492 increase in federal funds sold and a $2,114 increase in investment
securities. These increases were offset by a $2,281 decrease in the Bank's
loan portfolio which averaged $70,292 for the three months ending March 31,
1995 compared to $72,573 for the same period in 1994.
In addition to an increase in earning assets, the Company's net
interest margin also benefited from rising interest rates as a large percentage
(approximately 60%) of the Bank's loan portfolio is indexed to the Bank's prime
lending rate. Accordingly, the increasing prime rate resulted in a 174 basis
point increase in the yield on total loans for the first three months of 1995
compared to the same period in 1994. The yield on federal funds sold also
increased (265 basis points) for this period as federal fund rates are also
sensitive to prime rate increases.
Average interest-bearing deposits increased $143 from $74,104 for the
quarter ended March 31, 1994 to $74,247 for the same period in 1995. The cost
of interest-bearing deposits increased 71 basis points due to the rising
interest rate environment discussed above. Average non-interest bearing
deposits for the quarter ended March 31, 1995 were $14,320 and represented 16%
of the Bank's average total deposits for the quarter.
(6)
<PAGE> 9
AVERAGE YIELD/RATE ANALYSIS
<TABLE>
<CAPTION>
For the three months ended For the three months ended
March 31, 1995 March 31, 1994
----------------------------- ---------------------------
Interest Average Average Interest Average Average
Earned/ Amount Yield/ Earned/ Amount Yield/
Paid Outstanding Rate Paid Outstanding Rate
-------- ----------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Federal funds sold ......................... $ 58 $ 3,994 5.89% $ 20 $ 2,502 3.24%
Investment securities held to maturity..... 101 7,680 5.33 105 7,990 5.33
Investment securities available
for sale.................................. 195 12,719 6.22 126 10,295 4.96
Loans ...................................... 1,765 70,292 10.18 1,511 72,573 8.44
------ ------- ----- ------ ------- ----
Total earnings assets....................... 2,119 94,685 9.08 1,762 93,360 7.65
------ ------- ----- ------ ------- ----
Interest-bearing deposits:
Interest checking........................... 70 12,562 2.26 61 11,106 2.23
Money market deposit accounts.......... 145 15,437 3.81 114 18,364 2.52
Savings..................................... 31 4,132 3.04 31 4,290 2.93
Time deposits............................... 650 42,116 6.26 560 40,344 5.63
------ ------- ----- ------ ------- ----
Total interest-bearing
deposits and liabilities.............. 896 74,247 4.89 766 74,104 4.19
------ ------- ----- ------ ------- ----
Net earning assets............................ $20,438 $19,256
======= =======
Net interest margin........................... $1,223 $ 996
====== ======
Interest spread............................... 4.18% 3.46%
==== ====
Net interest margin on earning
assets...................................... 5.24% 4.33%
==== ====
</TABLE>
In computing yields on earning assets loan fees of $88 and $96 for the
three months ended March 31, 1995 and 1994, respectively, are included in
interest income.
(7)
<PAGE> 10
PROVISION FOR LOAN LOSSES
The Company did not make a provision for loan losses during the first
quarter of 1995 as the Bank reflected net recoveries of $3 and there was a
$3,455 decrease in the size of the loan portfolio. The Company did make a
provision for loan losses of $5 for the quarter ended March 31, 1994 as the
Bank experienced an increase in the credit card portfolio. See further
discussion in the ASSET QUALITY section. The allowance for loan losses as a
percentage of total loans was 1.55% and 1.42% at March 31, 1995 and 1994,
respectively.
NON-INTEREST INCOME
Non-interest income consists primarily of service charges on deposit
accounts, gains on investment securities transactions, credit card fees and
other miscellaneous income.
Non-interest income was $197 and $212 for the first quarter of 1995
and 1994, respectively. Although non-interest income remained relatively
flat, fees from the credit card program did increase $12 or 26% from $47
reported for the first quarter of 1994. The Bank became a direct issuer of
MasterCard/Visa(R) credit cards during the third quarter of 1993. Becoming a
direct card issuer has allowed the Bank to earn interest income on the credit
card balances, fees associated with the cardholder services and fees from the
credit card merchant program. As this program grows, fees are expected to
rise.
There were no gains on sales of loan participations during the first
quarter of 1995 but the Bank did report gains of $15 for the same period in
1994. During the past three years, the Company had curtailed its efforts to
originate SBA-guaranteed loans in order to focus attention on improving asset
quality. With the improvement in asset quality over the past two years, the
Company has begun underwriting SBA-guaranteed loans and selling the guaranteed
portion in the secondary market.
Service and other charges on deposit accounts were down $15 or 12%
from 1994. Most of the decrease relates to a reduction in non-sufficient funds
charges as customers are encouraged to avoid overdraft conditions and to take
advantage of overdraft protection transfer and credit arrangements.
NON-INTEREST EXPENSE
Non-interest expenses were $952 and $1,041 for the quarter ended March
31, 1995 and 1994, respectively. Most of the $89 decrease can be attributed
to a reduction in salary and other personnel expense.
Salary expense for the quarter ended March 31, 1995 was $408 compared
to salary expense of $478 for the same period in 1994. The $70 decrease can be
attributed to a reduction in full-time equivalent employees ("FTE"). At March
31, 1994, the Company had 64 FTE employees compared to 56 at March 31, 1995.
Some of the reduction (2) can be attributed to a revision in the Company's
management structure with remainder attributed to staff vacancies created by
normal attrition. Management has elected not replace certain positions in
anticipation of the proposed sale of the Company. See PROPOSED SALE OF COMPANY
section.
(8)
<PAGE> 11
Occupancy expense for first quarter of 1995 was $187, a $25 decrease
from the same period in 1994. During 1993, the Bank purchased a stand alone
branch facility with the intent of relocating one of the supermarket locations.
In connection with relocating this branch, leasehold amortization expense was
increased during the first quarter of 1994 to reduce the carrying value of the
leasehold improvement in the supermarket branch to zero at the time of the
branch relocation on March 1, 1994. There was no leasehold amortization for
the grocery store branch in 1995 as it was officially closed on March 31, 1994.
(9)
<PAGE> 12
ASSET QUALITY
The Bank maintains an allowance for loan losses at a level sufficient
to absorb potential losses in the loan portfolio. The level of the allowance
is based on internally-generated credit quality ratings and regular reviews of
specific criticized assets. In addition to considering internal and industry
data, management considers the general economic conditions in the Bank's market
area that might impact the future collectibility of loans or the underlying
collateral. Additionally, the credit risks associated with off-balance sheet
items is regularly analyzed by reviewing loan commitments and letters of
credit.
The credit quality rating system is administered by senior management
of the Bank. An independent loan review function also performs a systematic,
periodic review of the credit quality ratings assigned by management. Each
loan originated is assigned a quality rating based on the financial strength
and debt service capacity of the loan customer, current appraisals and other
estimates of collateral value. Additionally, loans with quality ratings of
watch to loss are required to have monthly documented updates describing the
financial condition of the borrower, a review of collateral values, a review of
the ongoing performance of the loan and any industry/economic factors that may
impact the ultimate collectibility of a loan.
The loan review function periodically reviews a sample of loans in the
portfolio to ensure that there is adequate documentation on the borrower's
current financial condition, that the present credit quality rating can be
substantiated and to document the results of these reviews for the Bank's Audit
Committee. This review is accomplished through regular reviews of credit
memos, loan reports, collateral reports and participation by the Loan Review
Officer in all Loan Committees.
Finally, all credit quality rating changes must be approved by senior
management and the loan review area. This system of internal controls around
the credit quality rating system is an integral part of management's evaluation
of the adequacy of the Bank's allowance for loan losses.
The Bank computes the level of allowances required to provide for
potential losses inherent in the loan portfolio by incorporating these credit
quality ratings. The formula requires a percentage of 5%, 15%, 50% and 100%
for loans rated watch, substandard, doubtful and loss, respectively. The
remainder of the portfolio is provided for by using varying percentages based
on the particular type of loans in each category. Industry standards have been
used in conjunction with the Bank's historical loan loss experience as past
credit underwriting weaknesses have skewed the Bank's historical loan loss
experience.
In addition to the formula computation of the loan loss reserve,
senior management performs a quarterly specific review of all loans with a
credit quality rating of watch to loss. This review is intended to quantify
the greatest potential loss associated with each loan in relation to the
financial condition of the loan customer and the value of the underlying
collateral. These specific loses are factored into the loan loss computation
to determine the adequacy of the allowance. Both of these computations are
then reviewed by the Loan Review Officer to either modify or approve the
conclusion reached on the adequacy of the allowance for loan losses.
(10)
<PAGE> 13
There was no provision made during the first quarter of 1995 and
management has concluded through the actions described above that the level of
the allowance is adequate to meet any specific or unforeseen loan losses that
may occur. Bank management is committed to the maintenance of an adequate
allowance.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
MARCH 31, March 31,
1995 1994
--------- ---------
<S> <C> <C>
Balance losses at beginning of year............. $1,028 $1,016
Charge-offs:
Commercial, financial and agricultural....... 73 3
Real estate-construction and land
development............................... - -
Real estate - mortgage....................... 17 27
Installment loans to individuals............. 31 4
------ ------
121 35
Recoveries:
Commercial, financial and agricultural 99 22
Real estate - construction and land
development.............................. - -
Real estate - mortgage....................... 23 -
Installment loans to individuals............. 2 23
------ ------
124 45
Net recoveries ................................. 3 10
------ ------
Additions charged to operations................. - -
------ ------
Balance at end of year.......................... $1,031 $1,031
====== ======
Ratio of net recoveries to average loans
outstanding during the period................ .004% .14%
====== ======
Ratio of allowance for loans losses to loans
at end of period............................. 1.53% 1.42%
====== ======
</TABLE>
Net recoveries of $3 were credited to the allowance during the first
quarter of 1995 versus net recoveries of $10 for the same period in 1994.
An analysis of non-accrual loans:
<TABLE>
<CAPTION>
March 31, December 31,
1995 % 1994 %
--------- --- ------------ ---
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural........................ $516 77% $278 48%
Real Estate - construction and
land development..................... - - - -
Real estate - mortgage................. 132 20 326 40
Installment and other consumer......... 19 3 45 12
---- --- ---- ---
Total........................... $667 100% $649 100%
==== === ==== ===
</TABLE>
(11)
<PAGE> 14
Non-performing assets consist of non-accrual loans and other real
estate owned. Loans are classified as non-accrual generally when a loan
becomes 90 days past due, or when it appears that future collection of interest
in accordance with the contractual terms is doubtful. Management has adopted a
conservative position with regard to placing a loan on non-accrual status and
does not necessarily wait until the interest is 90 days past due to make this
decision. Loans are not returned to an accruing status until management is
satisfied that the likelihood of future debt service capacity is proven.
Furthermore, a loan must be current with regard to interest and principal
payments and should have shown sustained performance with regard to principal
and interest payments for a period of not less than six months.
The allowance for loans losses as a percentage of non-accrual loans
was 155% at March 31, 1995 versus 158% at December 31, 1994.
The table below shows the trend in non-performing, past due and
restructured loans of the Bank. As of March 31, 1995, the level of these
assets increased $18 from the total reported at December 31, 1994. The slight
increase can be attributed to a specific credit being converted to the
non-accrual category. After analyzing the borrower's financial condition, it
became apparent that the existing cash flow was not adequate to support the
repayment of a revolving line so the loan was placed into a non-accrual status.
After analyzing the underlying collateral and the history of the borrower, the
ultimate collectibility of the debt is not in doubt.
NON-PERFORMING, PAST DUE AND RESTRUCTURED LOANS
<TABLE>
<CAPTION>
March 31, December 31,
--------- -----------------------------------------
1995 1994 1993 1992 1991
--------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans...................................... $ 667 $ 649 $ 455 $1,512 $4,293
Other real estate...................................... 412 414 1,188 2,041 3,943
----- ------ ------ ------ ------
Total non-performing................................... 1,079 1,063 1,643 3,553 8,236
Accruing potential problem loans
(90 days past due)............................ 2 - 186
Potential problem loans
(current)..................................... - - 400
Restructured loans..................................... - - 652
------ -----------------------------------------
Non-performing assets plus
potential problem loans and
restructured loans................................ $1,081 $1,063 $2,295 $3,953 $8,422
====== ====== ====== ====== ======
</TABLE>
(12)
<PAGE> 15
At March 31, 1995, other real estate owned remained relatively
unchanged with a decline of only $2 from the balance at December 31, 1994.
Other real estate at March 31, 1995 consists primarily of an undeveloped
commercial lot and a commercial auto service facility. These assets are
recorded at fair value, net of estimated selling costs.
LIQUIDITY
The Company's primary sources of funds are increases in deposits, loan
repayments, maturities of investment securities and cash provided by operating
activities. Liquidity refers to the ability of the Company to meet its cash
flow requirements and fund its commitments. The Company actively manages the
levels, types and maturities of earning assets in relation to the sources
available to fund current and future needs to ensure that adequate funding will
be available at all times. The Federal Deposit Insurance Corporation (the
"FDIC") suggests that banks maintain a minimum liquidity ratio of not less than
25% which is defined as net deposits and short term assets divided by net cash,
short term investments and marketable assets. As of March 31, 1995, the Bank's
liquidity ratio was 31.30%.
At March 31, 1995, U.S. Treasury, municipal and U.S. Government
Corporation and Agency securities with a book value of $ 16,226 are scheduled
to mature within the next five years. Of this amount, securities totalling
$2,989 are scheduled to mature within one year. These investments, along with
federal funds sold of $5,340 as of March 31, 1995, will provide a ready source
of funds liquidity. Management believes the Company's present liquidity
position is adequate to meet future commitments. While Management knows of no
demands, commitments or events that will result in, or that are likely to
result in, the Company's liquidity increasing or decreasing dramatically,
federal fund lines of $3,000 are maintained with several major correspondent
banks. In addition, the Bank became a member of the Federal Home Loan Bank of
Atlanta (the "FHLB") on August 27, 1993. Membership in the FHLB will enable
the Bank to use the FHLB funding programs to fund up to $3,000 on a matching
basis residential mortgage programs which may be originated and held by the
Bank. These funds, combined with additional funds available through repurchase
agreements and public funds, should provide for sufficient flexibility should
contingencies arise. Management anticipate increased competition for
depositors funds and expects to continue to explore alternative sources of
liquidity and funding.
At March 31, 1995, the Company had aggregate unrealized gains and
losses on investment securities held to maturity of approximately $27 and $141,
respectively. The Company has the ability to hold these investment securities
to maturity and intends to hold these securities through the foreseeable
future.
At March 31, 1995, $12,761 of the Company's investment securities were
classified as available for sale. These securities are made up of U.S.
Treasuries, U.S. Government Corporations and Agencies and mortgage-backed
securities. An unrealized holding loss on investment securities available for
sale of $162 net of related tax effects is included as a separate component of
stockholders' equity.
At March 31, 1995, the Company had aggregate unrealized gains and
losses on investment securities available for sale of approximately $12 and
$258, respectively. The Company had no sales of investment securities during
the first quarter of 1995.
(13)
<PAGE> 16
CAPITAL RESOURCES
At March 31, 1995, consolidated shareholders' equity was $14,351
compared with $13,895 at December 31, 1994. Average shareholders' equity as a
percentage of average assets was 14% for the quarter ended March 31, 1995
versus 13% for the year ended December 31, 1994. Management believes present
capital levels are adequate to support the Bank's operating activities.
The Company and the Bank are subject to capital requirements of the
Georgia Department of Banking and Finance and the FDIC. The FDIC has
established minimum capital ratios ("leverage ratio") of tier one capital (as
defined) to total average assets of 4.00%. At March 31, 1995, the Bank's
leverage ratio was 11.21%.
The FDIC and Federal Reserve Bank (the"FRB") have adopted final
risk-based capital guidelines for banks and bank holding companies. Under
these guidelines as of December 31, 1992, the Company and the Bank are expected
to meet a minimum ratio of total capital to risk-weighted assets of 8.00% (of
which at least 4.00% must consist of Tier 1 Capital, as defined).
The following table sets forth information with respect to the
Company's capital ratios at March 31, 1995 when compared with existing leverage
and risk-based ratios.
<TABLE>
<CAPTION>
MARCH 31, 1995
-------------------
COMPANY
AMOUNT RATIO
-------------------
<S> <C> <C>
RISK BASED CAPITAL RATIOS:
Tier 1 Capital $14,208 18.86%
Tier 1 Capital, Minimum Requirement 3,013 4.00%
-------------------
Excess $11,195 14.86%
===================
Total Capital $15,151 20.11%
Total Capital, Minimum Requirement 6,027 8.00%
-------------------
Excess $ 9,124 12.11%
===================
</TABLE>
(1) For purposes of computing capital ratios, $305 of the Bank's deferred
tax asset was not included in Tier 1 or Tier 2 capital as a majority
of the balance is not expected to be realized as a reduction of income
taxes otherwise payable within the next twelve months.
(2) For purposes of computing capital ratios, the unrealized losses on
investments securities available for sale were not included in Tier 1
or Tier 2 capital in compliance with the guidelines set forth by the
Bank's primary regulator for the treatment of this item.
(14)
<PAGE> 17
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
While the Company and its subsidiaries are from time to time parties
to various legal proceedings arising in the ordinary course of business,
management believes after consultation with legal counsel that there are no
proceedings threatened or pending against the Registrant or its subsidiaries
that will, individually or in the aggregate, have a material adverse effect on
the business or consolidated financial condition of the Registrant.
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits are required to be filed Item 601,
Regulation S-K
(15)
<PAGE> 18
Pursuant to the requirements of the Securities Exchange of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
DATE May 15, 1995 /s/ Dana F. Ponder
---------------------------- ------------------------
Dana F. Ponder
Principal Accounting Officer
(Duly Authorized Officer)
DATE May 15, 1995 /s/ Dana F. Ponder
---------------------------- ------------------------
Dana F. Ponder
Principal Accounting Officer
(16)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SOUTHERN BANK GROUP, INC. FOR THE THREE MONTHS ENDED
MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,601
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,340
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,075
<INVESTMENTS-CARRYING> 7,508
<INVESTMENTS-MARKET> 7,394
<LOANS> 66,172
<ALLOWANCE> 1,031
<TOTAL-ASSETS> 101,723
<DEPOSITS> 86,734
<SHORT-TERM> 0
<LIABILITIES-OTHER> 638
<LONG-TERM> 0
<COMMON> 1,839
0
0
<OTHER-SE> 12,512
<TOTAL-LIABILITIES-AND-EQUITY> 101,723
<INTEREST-LOAN> 1,765
<INTEREST-INVEST> 296
<INTEREST-OTHER> 58
<INTEREST-TOTAL> 2,119
<INTEREST-DEPOSIT> 896
<INTEREST-EXPENSE> 896
<INTEREST-INCOME-NET> 1,223
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 952
<INCOME-PRETAX> 468
<INCOME-PRE-EXTRAORDINARY> 468
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 309
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
<YIELD-ACTUAL> 9.08
<LOANS-NON> 667
<LOANS-PAST> 2
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 669
<ALLOWANCE-OPEN> 1,028
<CHARGE-OFFS> 121
<RECOVERIES> 124
<ALLOWANCE-CLOSE> 1,031
<ALLOWANCE-DOMESTIC> 1,031
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
