<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 EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
June 30, 1997 1-13640
SOUTHFIRST BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-1121255
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
126 North Norton Avenue, Sylacauga, Alabama 35150
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 205-245-4365
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Not applicable
- --------------------------------------------------------------------------------
(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
------ ------
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Common Stock, par value $.01 per share 847,600 shares
-------------------------------------- ----------------------------
Class Outstanding at July 31, 1997
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SouthFirst Bancshares, Inc.
Statements of Financial Condition
June 30, 1997 (Unaudited) and September 30, 1996
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1997 SEPTEMBER 30, 1996
- ------ ------------- ------------------
(AUDITED)
<S> <C> <C>
Cash and amounts due from depository institutions $ 3,981,164 $ 2,625,561
Interest - bearing deposits in other financial
institutions 3,350 --
Investment securities held to maturity at cost (fair
value of $153,853 at June 30, 1997 and $153,853 at
Sept. 30, 1996 153,853 153,853
Investment securities available for sale at fair value 17,134,015 21,792,852
Loans receivable 71,797,859 62,652,755
Less allowance for loan losses (284,988) (250,714)
------------ ------------
Net loans 71,512,871 62,402,041
Loans held for sale at fair value -- 131,100
Premises and equipment, net 1,826,537 1,802,482
Foreclosed real estate, net 157,717 --
Accrued interest receivable 558,910 553,606
Other assets 1,759,599 635,902
Investments in affiliates 195,033 184,537
------------ ------------
Total assets $ 97,283,049 $ 90,281,934
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 1,424,325 $ 1,087,042
Interest bearing 61,117,389 63,007,561
------------ ------------
Total deposits 62,541,714 64,094,603
------------ ------------
Advances by borrowers for property taxes and
insurance 341,525 392,280
Accrued interest payable 735,721 842,285
Borrowed funds 18,493,386 10,959,285
Income taxes payable 703,586 285,401
Accrued expenses and other liabilities 851,364 820,266
------------ ------------
Total liabilities $ 83,667,296 $ 77,394,120
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 2,000,000 shares
authorized, 863,200 shares issued, 847,600 and
823,700 shares outstanding in 1997 and 1996
respectively 8,632 8,632
Treasury stock, 15,600 shares and 39,500 shares in
1997 and 1996 respectively at cost (198,392) (500,802)
Additional paid in capital 7,909,443 7,704,856
Retained earnings, substantially restricted 5,752,152 5,690,301
Unrealized gain on investment securities available for
sale, net of tax 1,055,918 729,537
Deferred compensation (912,000) (744,710)
Total stockholders' equity $ 13,615,753 $ 12,887,814
------------ ------------
Total liabilities and stockholders' equity $ 97,283,049 $ 90,281,934
============ ============
</TABLE>
See accompanying notes to financial statements.
2
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SouthFirst Bancshares, Inc.
Statements of Earnings (Unaudited) for the
Nine Months Ending June 30, 1997 and June 30, 1996
And For The Three Months Ending June 30, 1997 and June 30, 1996
<TABLE>
<CAPTION>
Nine months ended June 30, Three months ended June 30,
-------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and dividend income:
Interest on loans $ 4,241,169 $ 3,587,803 $ 1,491,225 $ 1,261,842
Interest and dividend income on investment
securities held to maturity 6,740 9,254 2,154 1,879
Interest and dividend income on securities 311,177 419,980
----------- -----------
available for sale 1,023,258 1,290,538
----------- ----------- ----------- -----------
Total interest and dividend income 5,271,167 4,887,595 1,804,556 1,683,701
----------- ----------- ----------- -----------
Interest expense:
Interest on deposits 2,118,815 2,219,431 689,082 740,858
Interest on borrowed funds 676,922 380,585 256,927 157,328
----------- ----------- ----------- -----------
Total interest expense 2,795,738 2,600,016 946,009 898,186
----------- ----------- ----------- -----------
Net interest income 2,475,430 2,287,579 858,548 785,515
Provision for loan losses 36,465 1,200 18,765 --
----------- ----------- ----------- -----------
Net interest income after provision for loan
losses 2,438,965 2,286,379 839,783 785,515
Other income:
Settlement of lawsuit (note 2) -- 583,000 -- 75,000
Service charges and other fees 441,754 427,117 146,795 137,620
Gain on sale of loans 81,983 104,925 18,250 50,307
Insurance commissions 859 1,348 (573) 182
Profit(loss) from sale of equipment -- (7,543) -- (7,543)
Equity in loss of affiliates (44,504) (18,016) (6,432) 12,097
Other 252,022 51,251 222,430 22,428
----------- ----------- ----------- -----------
Total other income 732,114 1,142,082 380,469 290,091
Other expenses:
Compensation and benefits 1,469,938 1,650,182 563,387 473,793
Insurance expense 87,826 109,810 39,683 42,883
Net occupancy expense 139,933 115,393 53,796 37,781
Furniture and fixtures 166,720 118,076 55,830 36,794
Data processing 130,516 127,785 46,587 43,511
Office supplies and expenses 150,439 144,175 60,661 49,361
Deposit insurance premiums 49,591 132,146 10,404 43,785
Other 359,486 436,910 179,907 74,053
----------- ----------- ----------- -----------
Total other expenses 2,554,449 2,834,477 1,010,253 801,961
----------- ----------- ----------- -----------
Income before taxes 616,630 593,984 209,998 273,645
Income tax expense 246,541 214,781 85,771 85,265
----------- ----------- ----------- -----------
Net income $ 370,089 $ 379,204 $ 124,227 $ 188,380
=========== =========== =========== ===========
Net income per common share $ 0.43 $ 0.44 $ 0.15 $ 0.22
Weighted average common shares outstanding 853,893 856,822 822,116 864,005
</TABLE>
See accompanying notes to financial statements.
3
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SouthFirst Bancshares, Inc.
Statements of Cash Flows (Unaudited) for the
Nine Months Ending June 30, 1997 and 1996
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996
------------- -------------
<S> <C> <C>
Operating activities:
Net income $ 370,089 $ 379,204
Adjustments to reconcile net income to net cash
Cash provided by operating activities:
Depreciation and amortization 129,213 83,056
Equity in loss of unconsolidated affiliate 44,504 18,016
Gain on sale of loans 81,983 (104,925)
Loss on sale of premises and equipment -- 7,543
Increase (decrease) in deferred loan origination fees 25,138 28,696
Net amortization of premium on investment securities
available for sale 1,540 4,669
Provision for loan losses (36,465) --
Loans originated for sale 2,655,470 (3,525,404)
Proceeds from sale of loans 2,454,964 3,589,602
Decrease in accrued interest receivable (5,304) 50,915
Decrease(increase) in other assets (1,123,697) 220,005
Increase in accrued interest payable (106,564) (137,105)
Increase(decrease) in income taxes payable 218,143 (74,337)
Increase (decrease) in accrued expenses and other liabilities 31,100 27,201
------------ ------------
Net cash provided by operating activities 4,740,114 567,136
------------ ------------
Investing activities:
Investment in affiliated company $ (55,000) $ (175,000)
Investment in subsidiary 374,309 --
Maturities on interest bearing deposits in other financial institutions -- 300,000
Reinvestment of dividends/interest bearing deposits in other
financial institutions (168) (182)
Proceeds from maturity of investment securities held to maturity -- 357,000
Purchase of investment securities available for sale -- (4,070,385)
Purchase of discount on investments available for sale -- 2,813
Proceeds from sale of investments 5,828,103 3,640,274
Purchases of FHLB time deposits held to maturity -- --
Purchase of FHLB agency note available for sale (2,000,000) --
Reinvestment of mutual fund dividend (24,086) (14,238)
Gain on sale of investment securities available for sale 15,706 23,842
Principal repayments of MBS available for sale 598,055 2,403,595
Principal repayments of CMO's available for sale 762,762 280,451
Net increase in loans (14,318,537) (8,592,180)
Purchase of premises and equipment (153,268) (426,246)
------------ ------------
Net cash used in investing activities (8,972,124) (6,270,256)
------------ ------------
Financing activities:
Net (decrease) increase in NOW accounts and savings accounts $ 21,533 $ (16,367)
Net increase (decrease) in certificates of deposits (1,574,422) 2,473,936
Proceeds from borrowed funds 7,535,048 6,817,594
Cash dividends paid (308,237) (2,045,951)
Treasury stock purchased (34,606) (178,925)
Repayment of borrowed funds (947) (2,375,537)
Decrease in advances by borrowers for property taxes and
insurance (50,755) (25,110)
------------ ------------
Net cash provided by financing activities $ 5,587,614 $ 4,649,640
============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
SouthFirst Bancshares, Inc.
Statements of Cash Flows (Unaudited) for the
Nine Months Ending June 30, 1997 ad 1996
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996
------------- -------------
<S> <C> <C>
Increase (decrease) in cash and amounts due from depository
institutions $ 1,355,604 $ (1,053,480)
Cash and amounts due from depository institutions beginning
of year $ 2,625,561 $ 4,464,099
------------ ------------
Cash and amounts due from depository institutions end of year 3,981,165 3,410,619
============ ============
Supplemental information on cash payments:
Interest $ 2,118,815 $ 2,737,121
Income taxes 246,561 211,778
Supplemental information on non cash transactions:
Transfers to investment securities available for sale $ - $ 12,476,980
Change in net unrealized gain on investment available
for sale $ 326,382 $ 125,253
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
SOUTHFIRST BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION
Information filed on this Form 10-Q as of and for the quarter ended
June 30, 1997 was derived from the financial records of SouthFirst Bancshares,
Inc. (the "Corporation") and its wholly-owned subsidiaries, First Federal of the
South (the "Bank") and Benefit Financial Services, Inc. ("Benefit Financial"), a
Montgomery, Alabama-based employee benefits consulting firm. Collectively, the
Corporation and its subsidiaries are referred to herein as the "Company." On
February 13, 1995, the Bank converted from a mutual to a stock form of
ownership, whereby all of the stock of the Bank was purchased by the Corporation
upon the issuance of 830,000 shares of the Corporation's common stock (the
"Conversion").
In the opinion of management of the Company, the accompanying
unaudited consolidated financial statements contain all adjustments (none of
which are other than normal recurring accruals) necessary for a fair statement
of the financial position of the Company and the results of operations for the
three month and nine month periods ended June 30, 1997. The results contained in
these statements are not necessarily indicative of the results which may be
expected for the entire year.
(2) SETTLEMENT OF LAWSUIT
On May 23, 1996 the Bank entered into a final settlement agreement
with United States Fidelity & Guaranty Company ("USF&G"), under which litigation
between the Bank and USF&G was ended. Over the course of the litigation, the
Bank received, net of legal fees, $619,000. The litigation arose from a claim
filed by the Bank alleging, among other things, that USF&G had breached its
contractual obligations under a fidelity bond the Bank held with USF&G.
In the normal course of its business, the Company from time to time
is involved in legal proceedings. The Company believes there are no pending or
threatened legal proceedings which upon resolution are expected to have a
material effect upon the Company's financial condition.
(3) SUBSEQUENT EVENTS
On July 16, 1997, the Corporation declared a regular dividend of
$0.125 per share, payable on August 15, 1997 to stockholders of record on
August 1, 1997
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
REVIEW OF RESULTS OF OPERATIONS
OVERVIEW
Net income for the nine months ended June 30, 1997 decreased $9,115 or
2.46% when compared to the comparable period during fiscal 1996. Net interest
income increased $152,586 for the nine month period ending June 30, 1997
compared to the same period in fiscal 1996. Other income decreased $409,968 for
the nine month period ending June 30, 1997 compared to the same period in fiscal
1996. The decrease
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in other income was due to the $583,000 received in the first nine months of
fiscal 1996 as a settlement in the lawsuit with USF&G. See Note 2 to "Notes to
Financial Statements." The decrease in other income for the nine month period
ending June 30, 1997 was offset by a decrease in other expenses of approximately
$280,000 compared to the comparable period during fiscal 1996. Net income per
common share, based on weighted average shares outstanding was $0.43 and $0.15
for the nine months and three months ending June 30, 1997 respectively.
Further discussion of significant items affecting net earnings are
discussed in detail below.
NET INTEREST INCOME
Net interest income is the difference between the interest and fees
earned on loans, securities, and other interest-bearing assets (interest income)
and the interest paid on deposits and borrowed funds (interest expense). Higher
net interest income is a result of the relationship between the interest-earning
assets and the interest-bearing liabilities.
There was a slight increase in interest rates in the nine months ended
June 30, 1997, as compared to the same period in fiscal 1996. As of June 30,
1997 net interest margin increased 126 basis points as rates earned on
interest-earning assets increased 279 basis points to 10.76%, while cost of
funds increased 153 basis points to 6.44%, when compared to the comparable
period during fiscal 1996. As a result, net interest income before provision for
loan losses increased by $187,851 or 8.2% to $2,475,430 in the first nine months
of fiscal 1997 compared to $2,287,579 for the first nine months of fiscal 1996.
OTHER INCOME
Other income for the nine months ended June 30, 1997 decreased by
$409,968 to $732,114 compared to $1,142,082 for the nine months ended June 30,
1996 primarily due to the Bank's fidelity bond claim settlement with USF&G which
resulted in approximately $583,000 being received during the nine months ended
June 30, 1996. See Note 2 to "Notes to Financial Statements."
For the three month period ended June 30, 1997, other income
increased by approximately $90,000 compared to the same period in fiscal 1996.
This increase was primarily the result of an increase of approximately $200,000
in fee income earned by Benefit Financial. The increase in other income was
offset by a decrease of approximately $32,000 from gain on sale of loans and a
decrease of $75,000 from the settlement of the lawsuit with USF&G compared to
the same period in fiscal 1996.
OTHER EXPENSE
Total other expense decreased from $2,834,477 for the nine months
ended June 30, 1996 to $2,554,449 for the nine months ended June 30, 1997. This
decrease of $280,028 was due to several factors, including reduced costs
associated with the implementation of employee benefit plans that were
previously incurred in the first quarter of fiscal 1996, as well reductions in
other expenses which, during the nine months ended June 30, 1996, consisted
primarily of legal and accounting costs associated with the production of the
Corporation's first annual report on Form 10-K. The majority of these costs were
nonrecurring in nature and, therefore, were not incurred during the nine months
ended June 30, 1997.
For the three month period ended June 30, 1997, other expenses
increased by approximately $208,000 compared to the same period in fiscal 1996.
This increase was primarily due to costs associated with the recent
acquisition of Pension & Benefit Financial Services, Inc. by Benefit Financial,
as well as legal and
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accounting costs associated with the anticipated acquisition of First Federal
Savings & Loan Association of Chilton County by the Corporation in the fourth
quarter of 1997.
INCOME TAX EXPENSE
The Corporation's effective tax rate for the nine month period ended
June 30, 1997 was 39.9% compared to the federal statutory rate of 34.0%. The
Corporation's effective tax rate was higher than the statutory rate due
primarily to state income taxes. Income tax expense increased $31,760 or 14.7%
to $246,541 for the nine months ended June 30, 1997, as compared to $214,781
for the nine months ended June 30, 1996, due to the increase in pre-tax
earnings.
REVIEW OF FINANCIAL CONDITION
OVERVIEW
Management continuously monitors the financial condition of the
Company in order to protect depositors, increase retained earnings, and protect
current and future earnings.
Return on average stockholders' equity is one way of assessing the
return the Corporation has generated for its stockholders. The table below sets
forth the return on average stockholders' equity and other performance ratios of
the Company for the periods indicated.
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
JUNE 30,
-------------------
1997 1996
---- ----
<S> <C> <C>
Return on assets 0.70% 0.58%
Return on equity 5.05% 3.66%
Equity-to-assets ratio 13.90% 15.85%
Interest rate spread 4.32% 3.06%
Net interest margin 5.05% 3.66%
Total risk-based capital ratio 21.47% 22.23%
Nonperforming loans to loans 0.71% 0.77%
Allowance for loan losses to loans 0.56% 0.44%
Allowance for loan losses to nonperforming loans 78.94% 57.36%
Ratio of net charge-offs to average loans outstanding 0.00% 0.02%
Book value per common share outstanding $15.95 $15.28
</TABLE>
Significant factors affecting the Company's financial condition during
the nine months ended June 30, 1997 are detailed below:
ASSETS
Total assets increased $7,001,116 or 7.7% from $90,281,934 at
September 30, 1996 to $97,283,049 at June 30, 1997. During this nine month
period, net loans receivable increased by $9,110,830 due to increased loan
demand in residential mortgages and in residential construction loans.
Mortgage-backed securities and collateralized mortgage obligations ("CMOs")
decreased by approximately $4.7 million with
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principal pay downs being used to fund the residential mortgage and residential
construction loans. Other assets increased approximately $1.1 million primarily
due to the purchase of Pension & Benefit Financial Services, Inc. by Benefit
Financial during the quarter.
LIABILITIES
Total liabilities increased $6,273,176 or 8.1% from $77,394,120 at
September 30, 1996 to $83,667,296 at June 30, 1997. This increase was primarily
due to advance borrowing from the Federal Home Loan Bank of Atlanta increasing
by approximately $7.5 million or 68.7% from September 30, 1996 to June 30, 1997.
This increase reflected the funding requirements as a result of increased
residential mortgage and construction loan demand. The increase in borrowing was
offset by a decrease in total deposits of approximately $1.5 million or 2.4 %
from $64,094,603 at September 30, 1996 to $62,541,714 at June 30, 1997. Accrued
interest payable decreased approximately $107,000 or 12.65% from $842,285 at
September 30, 1996 to $735,721 at June 30, 1997. In addition, income taxes
payable increased approximately $418,000 from $285,401 at September 30, 1996 to
$703,586 at June 30, 1997 primarily as a result from an increase in deferred
taxes due to unrealized gains on Federal Home Loan Mortgage Corporation
securities.
LOAN QUALITY
A major key to long-term earnings growth is the maintenance of a
high-quality loan portfolio. The Bank's directive in this regard is carried
out through its policies and procedures for extending credit to the Bank's
customers. The goal and result of these policies and procedures is to provide a
sound basis for new credit extensions and an early recognition of problem assets
to allow the most flexibility in their timely disposition.
At June 30, 1997 the allowance for loan losses was $284,988, as
compared to $250,714 at September 30, 1996. The Bank recorded small
provisions for loan losses of $36,465 and $1,200 the first nine months of fiscal
1997 or 1996, respectively, because charge-offs were insignificant during these
periods. Nonperforming loans at June 30, 1997 were approximately $361,000 as
compared to approximately $546,000 at September 30, 1996. Foreclosed real estate
during the nine months ended June 30, 1997 was $157,717. There was no foreclosed
real estate for the comparable time period in fiscal 1996. At June 30, 1997 and
September 30, 1996, the allowance for loan losses represented 0.56% and 0.44%,
respectively, of loans outstanding. The provision for loan losses and the
adequacy of the allowance for loan losses is based upon management's continuing
evaluation of the collectibility of the loan portfolio under current economic
conditions and includes analysis of underlying collateral value and other
factors which could affect the collectibility. Management considers the
allowance for loan losses to be adequate based upon the evaluations of specific
loans, internal loan rating systems and guidelines provided by the banking
regulatory authorities governing the Bank. Although loans have increased,
management believes loan loss reserves are adequate due to the fact it has not
experienced significant loan charge-offs.
LIQUIDITY AND INTEREST SENSITIVITY
Liquidity is the ability of an organization to meet its financial
commitments and obligations on a timely basis. These commitments and obligations
include credit needs of customers, withdrawals by depositors, and payment of
operating expenses and dividends.
The Bank is required under applicable federal regulations to
maintain specified levels of cash and "liquid" investments in qualifying types
of United States Treasury and Federal Agency securities, and other investments
generally having maturities of five years or less. Such investments serve as a
source of
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funds upon which the Bank may rely to meet deposit withdrawals and other
short-term needs. The required level of such investments is calculated based on
a "liquidity base" consisting of net withdrawable accounts plus borrowing
payable on demand or with maturities of one year or less. Management's
objectives continue to include maintaining liquidity in excess of the required
regulatory amount of 5.0% of net deposits and short-term borrowing in order to
provide greater flexibility and to better match maturities of the requirements
of normal operations, potential deposit outflows and loan demand. The Bank
closely monitors its cash flow position to assure necessary liquidity and to
take advantage of market opportunities. At September 30, 1996 and June 30, 1997,
the Bank's liquid assets represented 12.88% and 9.28%, respectively, of its
liquidity base. Management believes that the Bank's liquidity is adequate to
fund all outstanding commitments and other cash needs.
Changes in interest rates will necessarily lead to changes in the net
interest margin. It is the Bank's goal to minimize volatility in the net
interest margin by taking an active role in managing the level, mix and
maturities of assets and liabilities.
To reduce the adverse effect of changes in interest on its net
interest margin, the Bank is pursuing various strategies to improve the rate
sensitivity of its assets and stabilize net interest income.
CAPITAL ADEQUACY AND RESOURCES
Management is committed to maintaining capital at a level sufficient
to protect depositors, provide for reasonable growth, and fully comply with all
regulatory requirements. Management's strategy to achieve this goal is to retain
sufficient earnings while providing a reasonable return on equity.
The Office of Thrift Supervision (the "OTS") has issued guidelines
identifying minimum regulatory "tangible" capital equal to 1.50% of adjusted
total assets, a minimum 3.0% core capital ratio, and a minimum risk-based
capital of 8.0% of risk- weighted assets. The Bank has provided the majority of
its capital requirements through the retention of earnings and issuance of
common stock in the Corporation's initial public offering.
At June 30, 1997, the Bank satisfied all regulatory capital
requirements. The Bank's compliance with the current standards is as follows:
<TABLE>
<CAPTION>
PERCENT OF
ASSET
AMOUNT BASE
------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Tangible Capital $12,560 13.05%
Core Capital 12,560 13.05
Risk-based Capital 12,560 21.47
</TABLE>
The OTS has proposed an amendment to its capital regulations
establishing a minimum core capital ratio of 3.0% for savings associations rated
composite 1 under the OTS CAMEL rating system. For all other savings
associations, the minimum core capital ratio will be 3.0% plus at least an
additional 100 to 200 basis points. In determining the amount of additional core
capital, the OTS will assess both the quality of risk management systems and the
level of overall risk in each individual savings association through the
supervisory process on a case-by-case basis.
The OTS also requires savings institutions with more than a normal
level of interest rate risk to maintain additional capital except institutions
with less than $300 million in assets and at least a 12 percent
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risk-based capital ratio are not subject to this interest rate risk capital
component ("IRR") unless notified by the OTS. The Bank is not currently
required to maintain additional capital based on IRR.
IMPACT OF ACCOUNTING PRONOUNCEMENTS
On March 3, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("FAS") No. 128, "Earnings per
Share" and FAS No. 129, "Disclosure of Information About Capital Structure"
(collectively, the "Statements"). The Statements change the methods for
calculating and disclosing earnings per share and are effective for financial
statements issued for both interim and annual periods ending after December 15,
1997.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.
Certain statements contained in this filing are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, such as statements relating to financial results and plans for future
business development activities, and are thus prospective. Such forward-looking
statements are subject to risks, uncertainties and other factors which could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Potential risks and uncertainties
include, but are not limited to, economic conditions, competition and other
uncertainties detailed from time to time in the Company's Securities and
Exchange Commission filings.
PART II. OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES
In connection with the purchase by Benefit Financial of substantially
all of the assets of Pension & Benefit Financial Services, Inc. ("Pension
Benefit") on April 11, 1997, the Corporation issued, in the aggregate, 26,500
shares of its $.01 par value common stock to the principals and certain
employees of Pension Benefit. The 26,500 shares of Corporation common stock were
allocated among the following individuals: (i) Malcomb J. Massey, the President
and Chief Executive Officer of Pension Benefit, received 15,512 shares of
Corporation common stock pursuant an employment agreement between himself and
Benefit Financial, (ii) Ruth M. Roper, an Executive Vice President of Pension
Benefit, received 5,623 shares of Corporation common stock pursuant to an
employment agreement between herself and Benefit Financial, (iii) Bill G.
Lambert, also an Executive Vice President of Pension Benefit, received 4,665
shares of Corporation common stock pursuant a consulting agreement between
himself and Benefit Financial, (iv) Sally Lewis, an employee of Pension
Benefit, received 350 shares of Corporation common stock and (v) Lori Gibson,
also an employee of Pension Benefit, received 350 shares of Corporation common
stock. Under the terms of Mr. Massey's and Ms. Roper's employment agreements,
the shares of Corporation common stock received by them will vest in equal
annual increments over a period of 15 years beginning on April 11, 1997. Under
the terms of Mr. Lambert's consulting agreement, the shares of Corporation
common stock received by him will vest in equal annual increments over a period
of five years beginning on April 11, 1997. As Messrs. Massey and Lambert and
Ms. Roper, Ms. Lewis and Ms. Gibson are sophisticated investors, were afforded
access to information on the Company and were the only offerees solicited to
purchase the Corporation's common stock, the Corporation did not register the
shares of common stock issued to them pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
11
<PAGE> 12
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. No report on Form 8-K was filed during
the quarter ended June 30, 1997.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHFIRST BANCSHARES, INC.
Date: August 1, 1997 By: /s/ Donald C. Stroup
----------------------------------
Donald C. Stroup, President and
Chief Executive Officer
(principal executive officer)
Date: August 1, 1997 By: /s/ Joe K. McArthur
----------------------------------
Joe K. McArthur, Executive Vice
President and Chief Financial
Officer
(principal financial and
accounting officer)
13
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SOUTHFIRST BANCSHARES, INC. FOR THE NINE MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,981
<INT-BEARING-DEPOSITS> 3
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
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<INVESTMENTS-MARKET> 154
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<TOTAL-ASSETS> 97,283
<DEPOSITS> 62,542
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0
0
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<INTEREST-DEPOSIT> 2,119
<INTEREST-EXPENSE> 2,796
<INTEREST-INCOME-NET> 2,475
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<INCOME-PRETAX> 617
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