UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
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 0-25478
First Southern Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Delaware 63-1133624
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 South Court Street, Florence, Alabama 35630
(Address of principal executive offices) (Zip Code)
(205) 764-7131
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer s classes of
common stock, as of the latest practicable date: 1,984,969 shares of $.01 par
value common stock as of October 30, 1996.
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FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
FORM 10-QSB
SEPTEMBER 30, 1996
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated statements of financial condition (unaudited)
Consolidated statements of income (unaudited)
Consolidated statement of stockholders equity (unaudited)
Consolidated statements of cash flows (unaudited)
Selected notes to consolidated financial statements (unaudited)
ITEM 2 - MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
ITEM 2 - CHANGES IN SECURITIES
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
ITEM 5 - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
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FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - UNAUDITED (In thousands)
December 31, September 30,
1995 1996
ASSETS ------ ------
Cash and cash equivalents $ 8,971 $ 9,227
Investment securities available for sale, at market 8,792 6,944
Mortgage-backed securities, available for sale,
at market 431 0
Mortgage-backed securities, held to maturity, at cost 2,704 1,978
Loans held for sale, at cost, which approximates market 625 237
Loans receivable, net 151,480 155,592
Foreclosed real estate 1,098 198
Premises and equipment, net 3,043 3,438
Federal Home Loan Bank stock, at cost 1,357 1,357
Accrued interest receivable 1,528 1,539
Deferred income taxes 0 1
Other assets 826 958
------ ------
TOTAL ASSETS $180,855 $181,469
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $131,867 $132,036
Advances from Federal Home Loan Bank 16,770 23,657
SAIF assessment payable 0 1,093
Income taxes currently payable 92 6
Deferred income taxes 407 0
Other liabilities 224 316
------ ------
Total liabilities 149,360 157,108
COMMITMENTS AND CONTINGENCIES 0 0
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 500,000 shares
authorized; none issued and outstanding 0 0
Common stock, $.01 par value; 8,000,000 shares
authorized; 2,049,875 and 2,076,969 shares
issued in 1995 and 1996, respectively 20 21
Additional paid-in capital 19,586 15,231
Retained earnings - Substantially restricted 14,203 12,348
Unearned employee compensation - ESOP (1,531) (797)
Unearned employee compensation - MRDP 0 (1,184)
Net unrealized loss on securities available for sale (26) (54)
Treasury stock, at cost (757) (1,204)
------ ------
Total stockholders' equity 31,495 24,361
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $180,855 $181,469
See accompanying selected notes to consolidated financial statements.
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FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED (In thousands, except per share
amounts)
Three months ended Nine months ended
September 30, September 30,
1995 1996 1995 1996
------ ------ ------ ------
INTEREST INCOME:
Loans $3,288 $3,627 $9,178 $10,539
Mortgage-backed securities 72 44 218 153
Investment securities 134 101 376 322
Other 45 71 274 226
------ ------ ------ ------
Total interest income 3,539 3,843 10,046 11,240
INTEREST EXPENSE:
Deposits 1,400 1,532 4,086 4,669
Advances from Federal Home Loan
Bank and other 275 392 789 947
------ ------ ------ ------
Total interest expense 1,675 1,924 4,875 5,616
------ ------ ------ ------
NET INTEREST INCOME 1,864 1,919 5,171 5,624
PROVISION FOR LOAN LOSSES 154 60 413 210
NET INTEREST INCOME AFTER ------ ------ ------ ------
PROVISION FOR LOAN LOSSES 1,710 1,859 4,758 5,414
NON INTEREST INCOME:
Loan fees and service charges 73 102 211 286
Net gain on sale of loans 19 187 31 251
Gains (losses) on real estate owned 0 (88) 15 (275)
Other 29 5 59 23
------ ------ ------ ------
Total non interest income 121 206 316 285
NON INTEREST EXPENSES:
Compensation and employee benefits 514 632 1,468 2,603
Building and occupancy expense 112 146 305 378
Data processing expense 77 87 230 287
Advertising 45 54 104 115
Insurance expense 128 1,207 358 1,439
Other 115 170 351 606
------ ------ ------ ------
Total non interest expenses 991 2,296 2,816 5,428
------ ------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES 840 (231) 2,258 271
INCOME TAX EXPENSE (BENEFIT) 303 (156) 814 (75)
------ ------ ------ ------
NET INCOME (LOSS) $537 ($75) $1,444 $346
EARNINGS (LOSS) PER SHARE $0.28 ($0.04) N/A $0.18
DIVIDENDS PER SHARE - REGULAR $0.000 $0.125 $0.125 $0.375
DIVIDENDS PER SHARE - SPECIAL $0.000 $0.000 $0.000 $3.400
See accompanying selected notes to consolidated financial statements.
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FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED (Dollars in thousands)
Net
unrealized
Retained Unearned loss on
Common stock Additional earnings employee securities Total
Issued In treasury paid-in Substantially compensation available net
Shares Amount Shares Amount capital restricted ESOP MRDP for sale equity
------ ------ ------ ------ ------- ---------- ----- ----- -------- ------
Balances at December
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31, 1995 2,049,875 $20 (49,906) ($757) $19,586 $14,203 ($1,531) $0 ($26) $31,495
Net income for the
nine months ended
September 30, 1996 0 0 0 0 0 346 0 0 0 346
Acquisition of
treasury stock 0 0 (97,000) (1,280) 0 0 0 0 0 (1,280)
Common stock grants
to MRDP 27,094 1 54,906 833 458 0 0 (1,292) 0 0
ESOP shares committed
for release 0 0 0 0 239 0 734 0 0 973
Amortization of MRDP
unearned compensation 0 0 0 0 0 0 0 108 0 108
Cash dividends 0 0 0 0 (5,052) (2,201) 0 0 0 (7,253)
Increase in unrealized
loss on securities
available for sale, net
of related income taxes 0 0 0 0 0 0 0 0 (28) (28)
------ ------ ------ ------ ------- ---------- ----- ----- -------- ------
Balances at September
30, 1996 2,076,969 $21 (92,000) (1,204) $15,231 $12,348 ($797) (1,184) ($54) $24,361
See accompanying selected notes to consolidated financial statements.
</TABLE>
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FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (In thousands)
Nine months ended
September 30,
1995 1996
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,444 $346
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 134 160
Provision for loan losses 413 210
Provision for deferred income taxes (benefit) (201) (403)
Amortization/accretion of premiums/discounts
on investment and mortgage-backed securities (1) 1
Amortization of deferred loan fees (232) (149)
Fair market value of ESOP shares
committed for release 74 973
employee compensation, net
Amortization of unearned compensation - MRDP 0 108
Gains (losses) on real estate owned (15) 275
(Increase) decrease in:
Loans held for sale (50) 388
Accrued interest receivable (395) (11)
Other assets 191 (132)
Increase (decrease) in:
SAIF assessment payable 0 1,093
Income taxes currently payable 298 (86)
Other liabilities 61 92
------ ------
Net cash provided by operating activities 1,721 2,865
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in total loans (17,440) (5,120)
Proceeds from sale of:
Investment and mortgage-backed securities 0 331
Real estate owned 79 1,605
Proceeds from maturities of:
Investment and mortgage-backed securities 3,318 2,640
Acquisition of:
Investment and mortgage-backed securities (4,056) 0
Premises and equipment (126) (555)
Mortgage backed securities (505) 0
Capitalized improvements to real estate owned 0 (33)
------ ------
Net cash provided by (used in) investing activities (18,730) (1,132)
See accompanying selected notes to consolidated financial statements.
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FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (In thousands)
Nine months ended
September 30,
1995 1996
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts (2,228) 169
Net proceeds from sale of stock in Initial
Public Offering 17,937 0
Cash dividends paid (188) (7,253)
Proceeds from FHLB advances 19,000 12,000
Proceeds from other borrowings 0 500
Reductions in FHLB advances (16,786) (5,113)
Reductions in other borrowings 0 (500)
Acquisition of treasury stock 0 (1,280)
------ ------
Net cash provided by (used in) financing activities 17,735 (1,477)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 726 256
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 2,726 8,971
------ ------
CASH AND CASH EQUIVALENTS - END OF PERIOD $3,452 $9,227
SUPPLEMENTAL INFORMATION FOR CASH FLOW:
Noncash transactions:
Loans foreclosed and transferred to real estate owned $72 $947
Increase (decrease) in net unrealized loss on securities
available for sale ($144) $28
Increase (decrease) in provision for additional minimum
pension liability, net of related income tax benefit $166 $0
Cash paid during the period for:
Income taxes $726 $661
Interest $4,844 $5,578
See accompanying selected notes to consolidated financial statements.
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FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 - BASIS OF PRESENTATION
The consolidated interim financial statements as of September 30, 1996 and for
the period then ended include the accounts of the Registrant, First Southern
Bancshares, Inc. ("Bancshares"), and its wholly-owned subsidiary, First
Southern Bank (the "Bank"), formerly First Federal Savings and Loan
Association of Florence (the "Association"). All significant intercompany
balances and transactions have been eliminated in consolidation. Bancshares
and the Bank are collectively referred to herein as the "Company".
The Company's comparative consolidated operating results include those of
Bancshares and the Bank for the full quarter and nine-month periods ended
September 30, 1996, those of the Bank for the full quarter and nine-month
periods ended September 30, 1995, and those of Bancshares for the period April
13, 1995, the date of completion of the Company's initial public stock
offering (Note 2, below), through September 30, 1995.
The September 30, 1995 and 1996 financial statements included in this report
have been prepared by the Registrant without audit. In the opinion of
management, all adjustments (consisting only of normal recurring entries)
necessary for a fair presentation are reflected in the September 30, 1995 and
1996 interim financial statements. The results of operations for the period
ended September 30, 1996 are not necessarily indicative of the operating
results for the full year. The December 31, 1995 Consolidated Statement of
Financial Condition presented with the interim financial statements was
audited and received an unqualified opinion.
NOTE 2 - INITIAL PUBLIC OFFERING
On April 13, 1995, Bancshares completed an initial public offering of its $.01
par value common stock wherein a total of 2,049,875 common shares were issued
for net proceeds of $19,577,000 (net of offering costs of $922,000). Of the
net proceeds, approximately $9,789,000 was utilized to acquire all of the
capital stock issued by the Association (upon its conversion from a mutual to
a stock form of organization), approximately $1,640,000 was utilized to
finance the Bank Employee Stock Ownership Plan's (the ESOP ) purchase of
163,990 common shares, and approximately $8,148,000 was retained for general
corporate purposes.
NOTE 3 - UNEARNED EMPLOYEE COMPENSATION
EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors an internally leveraged employee stock ownership plan
that covers substantially all full-time Bank employees. The Bank makes
discretionary monthly contributions to the ESOP equal to the ESOP s debt
service requirements, currently $20,774 per month (including interest floating
at Wall Street Journal prime rate - 8.25% at September 30, 1996) over a
maximum 10-year period. All dividends received by the ESOP are used for debt
service. The ESOP s shares initially were pledged as collateral for its debt.
As the debt is repaid, shares are released from collateral and allocated to
active employees, based upon the proportion of debt service paid during the
period. The Company accounts for the ESOP in accordance with Statement of
Position (SOP) 93-6. Accordingly, the Company's loan to the Bank s ESOP is
reflected as a reduction of stockholders' equity as unearned employee
compensation. As shares are released from collateral, the Company reports
compensation expense equal to the current market price of the shares, and the
shares become outstanding for earnings per share computations. Dividends on
allocated ESOP shares are recorded as a reduction of retained earnings;
dividends on unallocated ESOP shares are recorded as a reduction of debt and
accrued interest.
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FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1996 MANAGEMENT RECOGNITION AND DEVELOPMENT PLAN
At the annual meeting on April 17, 1996, Bancshares stockholders approved
establishment of the 1996 Management Recognition and Development Plan (the
MRDP ). The MRDP was established in order to increase the proprietary and
vested interest of certain key Company employees and Directors in the growth,
development and financial success of the Company by granting them awards of a
maximum of 82,000 restricted shares of Bancshares common stock. Among other
provisions of the MRDP, the MRDP shares are restricted as to transferability
prior to vesting, which vesting is to occur over a five-year period at a rate
of 20% per year, commencing one year after the original date of grant.
In its April 17, 1996 meeting, the Company s Board of Directors approved the
award of 82,000 restricted shares of Bancshares common stock in accordance
with the terms and conditions of the MRDP. The restricted shares were
obtained from stock held in treasury (54,906 shares) and from authorized and
unissued common stock (27,094 shares) and were recorded to unearned employee
compensation at the then prevailing market price of Bancshares common stock
($15.75 per share). Unearned compensation related to the MRDP is reflected as
a reduction of stockholders equity and is being amortized to expense on a
ratable basis over the five-year vesting period.
NOTE 4 - STOCK OPTION PLAN
At the annual meeting on April 17, 1996, Bancshares stockholders approved
establishment of the 1996 Stock Option Plan (the Plan ). The Plan was
established in order to promote the interests of the Company by attracting,
retaining and motivating exceptional executive personnel and other key
employees and Directors of the Company. The Plan sets an exercise price not
less than 100% of the per share fair market value at the date of grant (110%
under certain circumstances), contains various anti-dilution/enlargement
provisions, and generally provides for vesting of awards at a rate of 20% per
year on each of the first through fifth anniversary dates of the grant.
Options are generally exercisable until the tenth anniversary date of the
grant.
The Plan provides that a maximum of 204,988 options to acquire Bancshares
common stock may be granted under the Plan. Commensurate with its April 17,
1996 stockholder approval, the Board of Directors granted awards aggregating
102,492 share options to the Company s Directors and certain key Company
employees, at an exercise price equal to the fair market value per share at
the date of grant ($15.75 per share, which amount was subsequently adjusted in
accordance with Plan provisions to $11.75 per share so as to give appropriate
recognition to the effects of 1996 Special dividends).
NOTE 5 - EARNINGS PER SHARE
Earnings per share are computed based upon the weighted average number of
shares outstanding during the period. Shares held by the Company s ESOP are
considered outstanding only at such time as they are committed for release.
MRDP shares are considered outstanding at their date of grant. The Company
completed its initial stock offering in April 1995. Accordingly, earnings per
share for the nine months ended September 30, 1995 are not applicable.
Weighted average shares outstanding for the quarter ended September 30, 1995
were 1,889,578 shares. Weighted average shares outstanding for the quarter
and nine-month periods ended September 30, 1996 were 1,903,033 shares and
1,889,331 shares, respectively.
NOTE 6 - STOCK REPURCHASE PROGRAM
In October 1995, the Company s Board of Directors approved a Stock Repurchase
Program whereby the Company could repurchase up to 102,493 shares of its
common stock. In June 1996, the Company s Board of Directors approved an
extension of the Stock Repurchase Program whereby the Company, upon completion
of the repurchase of the original 102,493 shares of its common stock, could
then repurchase up to an additional 102,493 shares of its common stock. The
ongoing program has resulted in the inception-to-date acquisition of 146,906
shares of Company common stock, of which 54,906 shares were utilized in
funding of the MRDP and 92,000 shares were held in treasury at September 30,
1996.
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FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 7 - SAIF PREMIUM ASSESSMENT
The Bank is a member of the Savings Association Insurance Fund ("SAIF"). On
September 30, 1996, the President of the United States signed an omnibus
appropriations bill which contained, among other provisions, a requirement
that member companies of SAIF pay a one-time premium assessment to
recapitalize the SAIF. The premium has been assessed at 65.7 basis points
applied to March 31, 1995 deposit balances and is due by November 30, 1996.
In accordance with an opinion of the Emerging Issues Task Force of the
Financial Accounting Standards Board, the Company has recorded the SAIF
premium assessment as of September 30, 1996 by charging to non-interest
expense the amount of its assessment ($1,093,000) and recording a
corresponding liability that amount.
Significantly greater than normal deposit balances existed at March 31, 1995
due primarily to the Company's receipt of subscriptions in connection with its
initial public stock offering. Management has sought relief from paying the
portion of the $1,093,000 assessment related to deposited stock subscription
orders. No assurances can be given that such relief will be granted by the
FDIC.
NOTE 8 - EVENT SUBSEQUENT TO SEPTEMBER 30, 1996
At its regular meeting on October 10, 1996, the Company's Board of Directors
approved a regular cash dividend of $.125 per share, payable on November 1,
1996 to stockholders of record as of October 22, 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
First Southern Bancshares, Inc. ("Bancshares"), a Delaware corporation
organized on November 22, 1994, is primarily engaged in the business of
directing and planning the activities of its wholly-owned subsidiary, First
Southern Bank (the "Bank"), formerly First Federal Savings and Loan
Association of Florence (the "Association"). Bancshares primary assets are
comprised of its investment in the Bank, short-term interest and a note
receivable from the Bank s Employee Stock Ownership Plan. Bancshares and the
Bank are collectively referred to herein as the "Company".
The Company's comparative consolidated operating results include those of the
Bank and the former Association for all periods presented herein and those of
Bancshares only for periods subsequent to April 13, 1995, the date of
completion of the Company's initial public stock offering.
The operating results of the Company depend primarily on net interest income,
which is the difference between interest income on interest-earning assets,
primarily loans and investment securities, and interest expense on
interest-bearing liabilities, primarily deposits and Federal Home Loan Bank
(FHLB ) advances.
The discussion and analysis included herein covers those material changes in
financial condition, liquidity and capital resources that have occurred since
December 31, 1995, as well as certain material changes in results of
operations during the three and nine-month periods ended September 30, 1995
and 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
General
Total assets increased minimally during the first nine months of 1996
($614,000), growing from $180.9 million at December 31, 1995 to $181.5 million
at September 30, 1996.
Cash and cash equivalents
Cash and cash equivalent balances remained relatively unchanged at September
30, 1996 when compared to December 31, 1995, reflecting a $256,000 increase to
$9.2 million at September 30, 1996 from December 31, 1995 balances of $9.0
million.
Investment and mortgage-backed securities
The Company did not purchase any investment or mortgage-backed securities
during the nine months ended September 30, 1996. The decrease in investment
and mortgage-backed security balances of $3.0 million from $11.9 million at
December 31, 1995 to $8.9 million at September 30, 1996 was primarily
comprised of security maturities and sales of $2.6 million and $331,000,
respectively. Proceeds from the maturity and sales of securities were
primarily used to fund increases in loan balances and to pay dividends.
At September 30, 1996, the Company had $85,000 of net unrealized losses on
investment securities classified as available for sale, which amount
represented 1.2% of the amortized cost basis ($7.0 million) of the related
securities. These securities were comprised primarily of U.S. Government and
Agency obligations with maturities of less than five years. If future market
interest rates were to increase, the unrealized losses on these securities
would, for a period of time, become greater. In a decreasing interest rate
environment, the fair value of the investments increases in relation to the
cost of the investment, thereby reducing the net unrealized loss and/or
increasing any unrealized gain on the related securities. However, assuming
that the securities are held to their individual dates of maturity, even in
periods of changing market interest rates, as the securities approach their
dates of maturity, the unrealized gain/loss will begin to decrease and
eventually be eliminated.
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Loans
The principal investing activity of the Company is the origination of loans in
its primary lending area of Northwest Alabama. During the nine months ended
September 30, 1996, net loans (including loans held for sale) increased by
2.4% or $3.7 million, from $152.1 million at December 31, 1995 to $155.8
million at September 30, 1996. The increase in net loan balances results from
management's continued efforts to expand and diversify the Company's loan
portfolio into commercial and other lending areas. Commercial lending is
generally considered to involve a greater degree of risk than residential
mortgage lending.
Single family residential loans aggregated $72.4 million, representing 47.6%
of total net loans at December 31, 1995. During the first three quarters of
1996, aggregate balances of single family residential loans decreased by $9.6
million, or 13.3%, to $62.8 million at September 30, 1996 or 40.3% of total
net loans. The decrease in single family residential loans was primarily
attributable to an August 1996 sale of loans with aggregate principal balances
of $9.7 million. The sale was made in order to provide the funds necessary to
fund new loans in accordance with management s continued plan of loan
diversification. This decrease was partially offset by a $546,000 increase in
multi-family loans from $12.0 million or 7.9% of total net loans at December
31, 1995 to $12.6 million or 8.1% of total net loans at September 30, 1996.
Commercial and other loans accounted for the majority of loan growth
experienced during the first three quarters of 1996, increasing by $12.7
million or 18.9%, from $67.7 million at December 31, 1995 (44.5% of total net
loans) to $80.4 million at September 30, 1996 (51.6% of total net loans).
Within the category of commercial and other loans, commercial mortgage and
business loans increased from $49.9 million or 32.8% of total net loans at
December 31, 1995 to $61.9 million or 39.7% of total net loans at September
30, 1996. These investing activities were funded primarily through the sale
of single family residential loans, the maturities of investment and
mortgage-backed securities, and increased borrowings from FHLB - Atlanta. The
increase in lending activity was generally reflected in transactions with
borrowers located within the Company s primary Northwest Alabama lending area.
A decrease in non performing assets at September 30, 1996 to $1.7 million
compared to $2.6 million at December 31, 1995 was primarily attributable to a
decrease in foreclosed real estate balances from $1.1 million at December 31,
1995 to $198,000 at September 30, 1996. This decrease was attributable to
1996 sales of repossessed real estate with aggregate carrying amounts of $1.9
million (which sales resulted in an aggregate net loss of $275,000) and was
partially offset by $947,000 in 1996 loan foreclosures. The loss attributable
to foreclosed real estate was partially offset by income tax benefits of
$113,000 (included in 1996 income tax benefit) related to the simultaneous
sale and charitable contribution of appreciated property in accordance with
applicable provisions of the Internal Revenue Code, thereby serving to reduce
the net after-tax loss on sales of repossessed real estate to $62,000.
In the opinion of management at September 30, 1996, due to the adequacy of
collateral in relation to the past due loan balances, no significant losses
were anticipated to be realized on such past due loans, although no assurances
can be given. Non performing assets to total assets were 0.94% and 1.43% at
September 30, 1996 and December 31, 1995, respectively. At December 31, 1995,
the allowance for loan losses was $1.5 million and represented 0.99% of total
net loans and 58.4% of non performing assets. At September 30, 1996, the
allowance for loan losses was $1.6 million and represented 1.02% of total net
loans and 93.3% of non performing assets. While management believes the
allowance for losses at September 30, 1996 is adequate to cover all losses
inherent in the Company s portfolios of loans, there can be no assurance that
the Company will not be required to increase the allowance in the future.
At September 30, 1996, the Company had loan commitments for variable rate
loans (excluding loans in process), and unused commercial business lines of
credit, of $9.5 million. The Company had no significant commitments for
fixed-rate loans at September 30, 1996.
Deposits, FHLB advances and other notes payable
Deposit balances remained relatively constant during the first three quarters
of 1996, experiencing a $169,000 increase from December 31, 1995 balances of
$131.9 million to $132.0 million at September 30, 1996.
At September 30, 1996, savings certificates amounted to $96.2 million, or
72.9%, of the Company s total deposits, including $77.3 million which were
scheduled to mature by September 30, 1997. Historically, the Company has been
able to retain a significant amount of its deposits as they mature.
Management of the Company believes it has adequate resources to fund all loan
commitments by savings deposits and FHLB of Atlanta advances and sale of
mortgage loans. Furthermore, the Company believes that it can adjust the
offering rates of savings certificates to retain deposits in changing interest
rate environments.
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The Company obtained advances from FHLB during the first three quarters of
1996 aggregating $12.0 million, made repayments on the FHLB daily-rate
advances aggregating $5.0 million, and made scheduled principal payments under
the terms of certain of the advance agreements aggregating $113,000. The
advances were used primarily to fund loan increases and to pay dividends. The
Company had unused credit availability with the FHLB of $6.3 million at
September 30, 1996.
Stockholders' equity
September 30, 1996 aggregate stockholders' equity of $24.4 million reflects a
22.7% decrease from December 31, 1995, or $7.1 million less than December 31,
1995 aggregate stockholders equity of $31.5 million. The decrease is
primarily attributable to the Company s payment of $7.3 million in cash
dividends ($0.375 per share total regular dividends and a $3.40 per share
special dividend). Payment of the special dividend was made in order to
return to the Company s stockholders an amount which management believed to
represent capital in excess of current Company requirements.
Additionally contributing to the reduction in aggregate stockholders equity
was the $1.3 million acquisition of 97,000 shares of treasury stock during the
first nine months of 1996. The treasury stock was acquired under the
provisions of a Stock Repurchase Program (as discussed in Note 6 of Selected
Notes to Financial Statements). The ongoing program has resulted in the
acquisition of an aggregate 146,906 shares of Company common stock for
treasury, of which 54,906 shares were utilized in funding of the MRDP (as
discussed in Note 3 of Selected Notes to Financial Statements) and 92,000
remain in treasury at September 30, 1996.
The above described primary causes of the decrease in stockholders equity
were in part offset by net income for the nine months ended September 30, 1996
($346,000) and the recording of the fair value of ESOP shares committed for
release during the first three quarters of 1996 ($973,000) and the
amortization of unearned MRDP compensation of $108,000. The significant
impact of the ESOP shares committed for release is directly related to the
Company s payment of the special dividend during the second quarter of 1996.
As set forth in Note 3 of Selected Notes to Financial Statements, the Company
records shares committed for release from collateral in accordance with the
provisions of SOP 93-6. In accordance with the terms of the ESOP, 1996
dividends received by the ESOP during the first three quarters of 1996 were
used for debt service, thereby releasing an additional 61,906 shares from
collateral. As shares are released from collateral they are recorded at fair
market value at the date of release to unearned employee compensation (a
contra-equity account) and additional paid in capital.
The Company is required to maintain specific amounts of capital pursuant to
FDIC requirements. As summarized below, the Company is in compliance with all
such requirements at September 30, 1996:
Percentage of
adjusted total
Amount assets
------ ------
Primary capital ratios:
GAAP capital $24,361
Adjustments (43)
Tier 1 capital 24,318 13.40 %
Minimum Tier 1 (leverage) requirement 7,259 4.00
------ ------
Excess $17,059 9.40 %
Risk-based capital ratios:
Core (Tier I) capital $24,318 17.50 %
Minimum core capital 5,560 4.00
------ ------
Excess $18,758 13.50 %
Risk-based capital $25,910 18.64 %
Minimum risk-based capital requirement 11,120 8.00
------ ------
Excess $14,790 10.64 %
<PAGE>
Liquidity
The Company must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit
withdrawals, to satisfy financial commitments and to take advantage of
investment opportunities. The Company s primary sources of funds are deposits
and proceeds from principal and interest payments on loans, mortgage-backed
securities and investment securities and borrowings from the FHLB and local
financial institutions. While maturities and scheduled amortization of loans
and mortgage-backed securities are a predictable source of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest
rates, economic conditions and competition.
As an Alabama state-chartered bank which is not a member of the Federal
Reserve System, the Bank is required by the Alabama State Banking Board to
maintain at all times a reserve (comprised of cash on hand and deposits due
from other banks) based upon average daily deposits of the Bank. Since
becoming subject to this regulation, the Bank has fully complied with its
requirements. At September 30, 1996, the Bank s qualifying reserves of $9.2
million significantly exceeded the required reserve of $181,000.
COMPARISON OF OPERATING RESULTS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
General
The Company incurred a net loss for the three months ended September 30, 1996
of $75,000 as compared with $537,000 in net income for the three months ended
September 30, 1995. The 1996 decrease of $612,000 was primarily attributable
to the third quarter 1996 one-time SAIF premium assessment of $1.1 million
(charged to non- interest expenses) and was partially offset by a decrease in
total income tax expense of $459,000.
Net Interest Income
Net interest income for the three-month period ended September 30, 1996 was
$1.9 million, representing a $55,000 or 2.9% increase from the three-month
period ended September 30, 1995. The modest improvement in net interest
income primarily results from the effects a $14.3 million increase in
third-quarter 1996 average interest-earning assets, offset by the effects of a
$6.7 million decrease in the average excess of interest-earning assets over
interest- bearing liabilities.
Interest Income
Interest income for the three months ended September 30, 1996 was $3.8 million
compared with $3.5 million for the three months ended September 30, 1995,
representing an increase of $304,000 or 8.6%. The increase was primarily
attributable to an increase of $14.3 million, or 9.0%, in average interest-
earning assets in the third quarter of 1996 to $174.2 million over those in
the comparable period of 1995 of $159.9 million. This increase was primarily
attributable to management s ongoing efforts to expand and diversify the
Company's lending activities. Funding of the increase in average interest-
earning assets was provided by a $21.1 million increase in average interest-
bearing liabilities. The average yield on interest-earning assets remained
relatively constant, reflecting a modest decrease from 8.86% for the three
months ended September 30, 1995 to 8.82% for the three months ended September
30, 1996.
Interest on loans receivable increased $339,000 to $3.6 million during the
three months ended September 30, 1996 as compared to the same period in 1995.
The increase was primarily attributable to an increase of $15.6 million in
average loan balances in the third quarter of 1996 ($160.7 million) from the
comparable period in 1995 ($145.1 million). The increase in average loan
balances was comprised of a $29.5 million increase in the average balances of
non-mortgage loans from $48.4 million in 1995 to $77.9 million in 1996, offset
by a $13.9 million decrease in average mortgage loan balances from $96.7
million in 1995 to $82.8 million in 1996. The average yield on total loans
remained relatively constant as between the third quarters of 1995 and 1996,
decreasing 4 basis points from 9.07% in 1995 to 9.03% in 1996.
<PAGE>
<PAGE>
Interest on mortgage-related securities decreased by $28,000 from $72,000
during the three months ended September 30, 1995 to $44,000 during the same
period in 1996. The effect on interest income of the average balance of
mortgage-related securities decreasing by $1.2 million during the three months
ended September 30, 1996 as compared to the three months ended September 30,
1995 was further enhanced by a decrease in 1996 average yields from such
securities from 8.42% in the third quarter of 1995 to 8.09% in the third
quarter of 1996.
Income from the investment securities portfolio decreased by $33,000 from
$134,000 during the three months ended September 30, 1995 to $101,000 during
the same period in 1996 as the result of a $2.1 million decrease in the
average size of the portfolio in the three months ended September 30, 1996
($6.9 million) compared to the three months ended September 30, 1995 ($9.0
million). The proceeds from the maturities of investment securities was
primarily utilized in the funding of new loans and the payment of 1996
dividends. The average yield on investment securities remained relatively
constant, reflecting a modest decrease from 5.96% for the three months ended
September 30, 1995 to 5.85% for the three months ended September 30, 1996.
Other interest income is comprised of earnings on short-term FHLB certificates
of deposit, the overnight account at the FHLB of Atlanta, FHLB dividends, and
earnings on money market funds. The $26,000 increase in other interest income
in the third quarter of 1996 to $71,000 when compared to the third quarter of
1995 other interest income of $45,000 resulted primarily from an increase of
$2.0 million in average invested balances from $2.4 million during the third
quarter of 1995 to $4.4 million during the comparable 1996 period, the effects
of which were partially offset by a decrease in interest yields from 7.66% in
1995 to 6.53% in 1996. The increase in average balances was primarily
attributable to the temporary investment of a portion of the proceeds ($4.0
million) of an August 1996 non-recurring sale of mortgage loans.
Interest Expense
Interest expense for the three months ended September 30, 1996 was $1.9
million compared with $1.7 million for the three months ended September 30,
1995, representing an increase of $249,000 or 14.9%.
Interest on deposits rose $132,000 or 9.5% from $1.4 million in the third
quarter 1995 to $1.5 million in the third quarter 1996. The increase was
primarily attributable to a $12.6 million increase in average deposits in the
third quarter of 1996 ($128.3 million) as compared to the third quarter of
1995 ($115.7 million) and was partially offset by a decrease of 6 basis points
in the interest cost on average deposit balances from 4.84% in the third
quarter of 1995 to 4.78% in the third quarter of 1996.
Other interest expense is comprised primarily of FHLB of Atlanta and other
short-term local borrowings and increased by $117,000 to $392,000 when
compared with the 1995 quarterly total of $275,000, due primarily to an
increase in average borrowings of $8.5 million during the three months ended
September 30, 1996 ($26.5 million) from 1995 average levels of $18.0 million.
The increase caused by larger average advance balances was partially offset by
decreased interest costs on borrowed funds of 20 basis points, from 6.10% in
1995 to 5.90% in 1996 largely as a consequence of the adjustable rate nature
of the majority of the FHLB of Atlanta borrowings.
Provision for Loan Losses.
Provisions for loan losses are charged to earnings to bring the total
allowance to a level considered adequate by management to provide for losses
based on prior loss experience, volume and type of lending conducted by the
Company, industry standards and past due loans in the Company s portfolio.
Management also considers general economic conditions and other factors
relating to the collectibility of the Company s loan portfolio.
For the third quarter of fiscal year 1995, the Company provided $154,000 for
its anticipated loan losses. During 1996, the Company, as in prior years,
reevaluated the adequacy of its allowance for probable loan losses, giving
special consideration to the changing components of its loan portfolio and the
increased level of risk associated with its increasing non single-family
mortgage loan portfolio. As a result of this review, and after giving
consideration to the Company s write-off history and an analysis of the
Company s allowance for losses as compared with industry and peer averages,
among other things, it was determined that a reduction in the total
year-to-date 1996 provision of $60,000 was necessary to adjust the allowance
for loan losses balance to an amount considered adequate to provide for
losses.
<PAGE>
<PAGE>
Non-interest Income.
Non-interest income for the quarter ended September 30, 1996 reflected an
increase of $85,000, or 71.1%, to $206,000 from 1995 third quarter non-
interest income of $121,000. The third quarter 1996 increase was primarily
attributable to an August 1996 non-recurring sale of single family loans on
which the Company recognized a $155,000 gain, coupled with a $29,000 increase
in loan fees and servicing charges. These increases were partially offset by
the recognition of an $88,000 loss on disposition of foreclosed real estate in
1996 and by a decrease in other non-interest income of $24,000 from $29,000 in
1995 to $5,000 in 1996.
Non-interest Expense.
Non-interest expenses increased $1.3 million to $2.3 million for the third
quarter of 1996 compared to $1.0 for the comparable period in 1995. This
increase primarily resulted from the Company s third quarter 1996 recognition
of the one-time SAIF premium assessment of $1.1 million (included with other
non-interest insurance expenses) and an increase in expenses relating to
aggregate employee compensation of $118,000 (from $514,000 during the third
quarter of 1995 to $632,000 in the comparable 1996 period). Contributing to
the increase in employee compensation were third quarter 1996 compensation
expense charges aggregating $65,000 related to the Company s amortization of
its deferred MRDP expense, which expense was not incurred in 1995, and overall
salary rate increases experienced in 1996.
Other classifications of non-interest expenses increased an aggregate of
$109,000 in the third quarter of 1996 when compared to the same period in 1995
due primarily to general cost increases incurred in 1996 over those
experienced in 1995.
Income Taxes
Income tax expense for the three months ended September 30, 1996 reflected a
benefit of $156,000 related to the Company s pretax operating loss of $231,000
for the third quarter of 1996, the deductibility for income tax purposes of
the Company s charitable contribution of appreciated property in accordance
with applicable provisions of the Internal Revenue Code, and the differing
income tax treatment afforded certain of the Company s transactions with and
dividend payments to its ESOP and MRDP during the third quarter of 1996.
COMPARISON OF OPERATING RESULTS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
General
The Company's net income for the nine months ended September 30, 1996 was
$346,000 compared with $1.4 million for the nine months ended September 30,
1995. The 1996 decrease of $1.1 million was primarily attributable to
increases in 1996 non-interest expenses of $2.6 million and a decrease in
non-interest income of $31,000, and was partially offset by increased net
interest income after provision for loan losses of $656,000 and a decrease in
income taxes of $889,000.
Net Interest Income
Net interest income for the nine-month period ended September 30, 1996 was
$5.6 million, representing a $741,000 or 15.2% increase from the nine-month
period ended September 30, 1995. The improvement in net interest income was
due primarily to a $17.3 million increase in interest-earning assets coupled
with a $4.0 million increase in the 1996 excess average interest-earning
assets over interest-bearing liabilities, which increases were partially
offset by an 18 basis point reduction in the 1996 interest rate spread (3.69%)
from that obtained in the first three quarters of 1995 (3.87%). The
increases in 1996 interest-earning assets and excess average interest-earning
assets over interest-bearing liabilities were due primarily to the 1995 timing
of the Company s receipt and investment of the net cash proceeds of its
initial public stock offering.
<PAGE>
<PAGE>
Interest Income
Interest income for the nine months ended September 30, 1996 was $11.2 million
compared with $10.0 million for the nine months ended September 30, 1995,
representing an increase of $1.2 million or 11.9%. The increase was primarily
attributable to an increase of $17.3 million, or 11.1%, in average interest-
earning assets in the first three quarters of 1996 to $172.7 million over
those in the comparable period of 1995 of $155.4 million. This increase was
primarily attributable to the timing of the April 1995 infusion of $17.9
million capital into the Company as a result of the Company s completion of
its initial public stock offering and management s ongoing efforts to expand
and diversify the Company s lending activities. Additional funding of the
increase in average interest earning assets was provided by a $13.3 million
increase in average interest-bearing liabilities. The average yield on
interest-earning assets remained relatively constant, reflecting a modest
increase from 8.62% for the nine months ended September 30, 1995 to 8.68% for
the nine months ended September 30, 1996.
Interest on loans receivable increased $1.4 million to $10.5 million during
the nine months ended September 30, 1996 as compared to the same period in
1995. The increase was primarily attributable to an increase of $19.3 million
in average loan balances in the first three quarters of 1996 ($158.0 million)
from the comparable period in 1995 ($138.7 million). The increase in average
loan balances was comprised of a $28.6 million increase in the average
balances of non-mortgage loans from $43.0 million in 1995 to $71.6 million in
1996, offset by a $9.3 million decrease in average mortgage loan balances from
$95.7 million in 1995 to $86.4 million in 1996. Additionally, the average
yield on total loans increased from 8.82% in the first three quarters of 1995
to 8.89% during the first three quarters of 1996.
Interest on mortgage-related securities decreased by $65,000 from $218,000
during the nine months ended September 30, 1995 to $153,000 during the same
period in 1996. The effect on interest income of the average balance of
mortgage-related securities decreasing by $827,000 during the nine months
ended September 30, 1996 as compared to the nine months ended September 30,
1995 was enhanced by a decrease in 1996 average yields from such securities
from 8.54% in the first three quarters of 1995 to 7.91% in the first three
quarters of 1996.
Income from the investment securities portfolio decreased by $54,000 from
$376,000 during the nine months ended September 30, 1995 to $322,000 during
the same period in 1996 as the result of a $1.2 million decrease in the
average size of the portfolio in the nine months ended September 30, 1996
($7.4 million) compared to the nine months ended September 30, 1995 ($8.6
million). The average yield on investment securities remained relatively
constant between the periods, reflecting a decrease of one basis point from
5.80% in the first three quarters of 1995 to 5.79% in the first three quarters
of 1996.
Other interest income is comprised of earnings on short-term FHLB certificates
of deposit and the overnight account at the FHLB of Atlanta, FHLB dividends,
and earnings on money market funds. The $48,000 decrease in other interest
income in the first three quarters of 1996 to $226,000 when compared to the
first three quarters of 1995 other interest income of $274,000 is due
primarily to a decrease in average yields from 7.78% during the first three
quarters of 1995 to 6.44% during the first three quarters of 1996.
Interest Expense
Interest expense for the nine months ended September 30, 1996 was $5.6 million
compared with $4.9 million for the nine months ended September 30, 1995,
representing an increase of $741,000 or 15.2%.
Interest on deposits rose $583,000 or 14.3% from $4.1 million in the first
three quarters 1995 to $4.7 million in the first three quarters 1996. The
increase was attributable to an increase of 28 basis points in the interest
cost on average deposit balances from 4.55% in the first three quarters of
1995 to 4.83% in the first three quarters of 1996, and a $9.0 million increase
in average deposits in the first three quarters of 1996 ($128.8 million) as
compared to the first three quarters of 1995 ($119.8 million).
The 1996 increase in average interest cost was due to higher prevailing local
market interest rates between the two periods coupled with a change in the
composition of the deposit balances. The average balance in passbook accounts
during the first three quarters of 1995 ($25.8 million) was $6.0 million, or
23.2% greater than the comparable 1996 period ($19.8 million) due primarily to
the Company s 1995 receipt of subscriptions in connection with its initial
pubic stock offering, which subscriptions were maintained in passbook
accounts. In both 1995 and 1996, passbook accounts carried interest rates of
2.75%. The first three quarters 1996 decrease in passbook accounts was more
than offset by a $14.2 million increase in the average balance of certificates
of deposit from $82.2 million in the first three quarters of 1995 to $96.4
million in the first three quarters of 1996. The increase in certificate of
deposit balances was due primarily to the Company raising the rates paid on
its
<PAGE>
<PAGE>
certificates in relation to local market rates being offered by other
financial institutions in order to attract additional deposits. Certificates
of deposit carried interest costs of 5.44% and 5.57% during the first nine
months of 1995 and 1996, respectively.
Other interest expense is comprised of FHLB of Atlanta and other local
borrowings and increased by $158,000 to $947,000 when compared with the 1995
nine-month total of $789,000 due to an increase in average borrowings of $4.3
million during the nine months ended September 30, 1996 ($21.3 million) from
1995 average levels of $17.0 million. The increase caused by higher average
advance balances was lessened by decreased interest rates on borrowed funds of
26 basis points, from 6.18% in 1995 to 5.92% in 1996 as a consequence of the
adjustable rate nature of the majority of the FHLB of Atlanta borrowings.
Provision for Loan Losses.
Provisions for loan losses are charged to earnings to bring the total
allowance to a level considered adequate by management to provide for losses
based on prior loss experience, volume and type of lending conducted by the
Company, industry standards and past due loans in the Company s portfolio.
Management also considers general economic conditions and other factors
relating to the collectibility of the Company s loan portfolio.
For the first three quarters of fiscal year 1995, the Company provided
$413,000 for its anticipated loan losses. During 1996, the Company, as in
prior years, reevaluated the adequacy of its allowance for probable loan
losses, giving special consideration to the changing components of its loan
portfolio and the increased level of risk associated with its increasing non
single-family mortgage loan portfolio. As a result of this review, and after
giving consideration to the Company s write-off history and an analysis of the
Company s allowance for losses as compared with industry and peer averages,
among other things, it was determined that a total provision of $210,000 for
the nine months ended September 30, 1996 was necessary to provide an adequate
allowance for possible loan losses. These provisions were made based on
management s analysis of the various factors which affect the loan portfolio
and management s desire to hold the allowance at a level considered adequate
to provide for losses.
Non-interest Income.
Non-interest income decreased by $31,000 in the first three quarters of 1996
to $285,000 as compared to $316,000 reported in the comparable period of 1995.
This decrease was primarily attributable to 1996 losses recognized on the of
sale foreclosed real estate of $289,000, net of $14,000 in gains on foreclosed
real estate, as compared to $15,000 in gains recognized during the first three
quarters of 1995. This 1996 decrease was enhanced by a $36,000 decrease in
other non-interest income but was largely offset by 1996 increases in loan
fees and service charges ($75,000) and gains from loan sales ($220,000),
including a $155,000 gain recognized on an August 1996 non-recurring sale of
$9.7 million of single family loans.
Non-interest Expense.
Non-interest expenses increased $2.6 million to $5.4 million for the first
three quarters of 1996 compared to $2.8 million for the comparable period in
1995. This increase primarily resulted from an increase in expenses relating
to aggregate employee compensation of $1.1 million (from $1.5 million during
the first three quarters of 1995 to $2.6 million in the comparable 1996
period) and from an increase of $1.1 million in insurance expenses from
$358,000 during the first three quarters of 1995 to $1.4 million during the
comparable 1996 period.
The significant increase in employee compensation was caused by the 1996
recognition of $930,000 in ESOP related compensation expense necessitated when
the ESOP significantly reduced its debt to Bancshares (primarily through use
of dividends received), thereby committing for release a substantial portion
of the collateralized ESOP shares and the corresponding recognition of
employee compensation expense for the fair market value of shares committed
for release, net of the amounts representing dividends paid on allocated
shares. Additionally contributing to the increase in employee compensation
were the 1996 compensation expense charges aggregating $108,000 related to the
Company s amortization of its deferred MRDP expense, which expense was not
incurred in 1995, and overall salary rate increases experienced in 1996.
The increase in 1996 insurance expense over 1995 amounts was attributable to a
one-time SAIF premium assessment of $1.1 million which amount was recorded by
the Company in the third quarter of 1996.
<PAGE>
<PAGE>
Other classifications of non-interest expenses increased an aggregate of
$396,000 in the first three quarters of 1996 when compared to the same period
in 1995 due primarily to the 1996 incurrance of $54,000 in current period
expenses on the Company s largest foreclosed asset (which property was sold in
1996), certain general overhead expenses being incurred in 1996 related to the
Company s public company status, which expenses were not incurred to the same
degree in 1995, and general cost increases incurred in 1996 over those
experienced in 1995.
Income Taxes
Income tax expense for the nine months ended September 30, 1996 reflected a
benefit of $75,000 related to the Company s year-to-date pretax income of
$271,000. The income tax benefit arose based upon the deductibility for
income tax purposes of the Company s charitable contribution of appreciated
property (in accordance with applicable provisions of the Internal Revenue
Code), and due to the differing income tax treatment afforded certain of the
Company s transactions with and dividend payments to its ESOP and MRDP during
1996.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Neither the Registrant nor the Bank is a party to any material legal
proceedings at this time. From time to time, the Bank is involved in various
claims and legal actions arising in the ordinary course of business.
ITEM 2 - CHANGES IN SECURITIES
Not applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORT ON FORM 8-K
None.
<PAGE>
<PAGE>
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.
FIRST SOUTHERN BANCSHARES, INC.
Date November 5, 1996 /s/ Charles L. Frederick, Jr.
-----------------------------
Mr. Charles L. Frederick, Jr.
President and Chief Executive Officer
Date November 5, 1996 /s/ Thomas N. Ward
-------------------
Mr. Thomas N. Ward
Executive Vice President and
Chief Operating Officer
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5034
<INT-BEARING-DEPOSITS> 4193
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6944
<INVESTMENTS-CARRYING> 1978
<INVESTMENTS-MARKET> 2041
<LOANS> 155829
<ALLOWANCE> 1592
<TOTAL-ASSETS> 181469
<DEPOSITS> 132036
<SHORT-TERM> 22000
<LIABILITIES-OTHER> 322
<LONG-TERM> 1657
0
0
<COMMON> 21
<OTHER-SE> 24340
<TOTAL-LIABILITIES-AND-EQUITY> 181469
<INTEREST-LOAN> 10539
<INTEREST-INVEST> 475
<INTEREST-OTHER> 226
<INTEREST-TOTAL> 11240
<INTEREST-DEPOSIT> 4669
<INTEREST-EXPENSE> 5616
<INTEREST-INCOME-NET> 5624
<LOAN-LOSSES> 210
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5428
<INCOME-PRETAX> 271
<INCOME-PRE-EXTRAORDINARY> 346
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 346
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
<YIELD-ACTUAL> 4.34
<LOANS-NON> 141
<LOANS-PAST> 1366
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1509
<CHARGE-OFFS> 181
<RECOVERIES> 54
<ALLOWANCE-CLOSE> 1592
<ALLOWANCE-DOMESTIC> 1592
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
