<PAGE>
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 June 30, 2000
-------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to________
Commission file number 0-25478
--------------------------
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)
(256) 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: 1,259,011 shares of $.01
par value common stock as of August 9, 2000.
<PAGE>
FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
FORM 10-QSB
June 30, 2000
TABLE OF CONTENTS
--------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated statements of financial condition (unaudited) 1
Consolidated statements of income (unaudited) 2
Consolidated statement of stockholders, equity (unaudited) 3
Consolidated statements of cash flows (unaudited) 4
Selected notes to consolidated financial statements (unaudited) 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 17
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS 17
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 17
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS 17
ITEM 5 - OTHER INFORMATION 17
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 19
<PAGE>
FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - UNAUDITED (In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,906 $ 6,406
Investment securities available for sale, at market 4,408 4,382
Mortgage-backed securities, held to maturity, at cost 3,527 3,444
Loans held for sale, at cost, which approximates market 80 183
Loans receivable, net 155,738 152,119
Foreclosed real estate and other assets 918 1,406
Premises and equipment, net 3,663 3,569
Federal Home Loan Bank stock, at cost 1,685 1,866
Accrued interest receivable 1,855 1,898
Deferred income taxes 592 455
Other assets 426 724
-------- --------
TOTAL ASSETS $178,798 $176,452
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $126,870 $130,230
Advances from Federal Home Loan Bank 33,665 30,289
Other notes payable 2,000 500
Securities sold under agreement to repurchase 1,487 1,508
Income taxes currently payable 183 2
Other liabilities 624 799
-------- --------
Total liabilities 164,829 163,328
-------- --------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 500,000 shares authorized; none
issued and outstanding - -
Common stock, $.01 par value; 4,000,000 shares authorized;
2,076,969 shares issued and outstanding 21 21
Additional paid-in capital 11,425 11,429
Retained earnings - Substantially restricted 13,856 13,500
Unearned employee compensation - ESOP (112) (70)
Unearned employee compensation - MRDP (290) (181)
Net unrealized gain (loss) on securities available for sale (104) (118)
Treasury stock, at cost (10,827) (11,457)
-------- --------
Total stockholders' equity 13,969 13,124
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $178,798 $176,452
======== ========
</TABLE>
See accompanying selected notes to consolidated financial statements.
1
<PAGE>
FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED (In thousands, except per share
amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 2000 1999 2000
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $3,240 $3,449 $6,482 $6,838
Mortgage-backed securities 33 59 49 118
Investment securities 59 71 97 142
Other 136 57 284 110
-------- ------- ------- -------
Total interest income 3,468 3,636 6,912 7,208
INTEREST EXPENSE:
Deposits 1,316 1,443 2,656 2,835
Federal Home Loan Bank advances and other 443 541 882 1,078
-------- ------- ------- -------
Total interest expense 1,759 1,984 3,538 3,913
-------- ------- ------- -------
NET INTEREST INCOME 1,709 1,652 3,374 3,295
PROVISION FOR LOAN LOSSES 148 1,127 343 1,285
-------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,561 525 3,031 2,010
-------- ------- ------- -------
NON INTEREST INCOME:
Loan fees and service charges 151 147 308 297
Net gains on sale of loans 60 28 138 47
Gains(losses) on real estate owned 2 - 4 5
Other 3 9 15 20
-------- ------- ------- -------
Total non interest income 216 184 465 369
-------- ------- ------- -------
NON INTEREST EXPENSES:
Compensation and employee benefits 732 716 1,444 1,440
Building and occupancy expense 153 185 293 356
Data processing expense 124 102 214 210
Advertising 42 28 80 68
Insurance expense 50 30 92 59
Other 146 157 306 311
-------- ------- ------- -------
Total non interest expenses 1,247 1,218 2,429 2,444
-------- ------- ------- -------
INCOME BEFORE INCOME TAXES 530 (509) 1,067 (65)
INCOME TAX EXPENSE 207 (196) 420 (27)
-------- ------- ------- -------
NET INCOME $ 323 $ (313) $ 647 $ (38)
======== ======= ======= =======
BASIC EARNINGS PER SHARE $0.20 (0.25) $0.39 $(0.03)
======== ======= ======= =======
DILUTED EARNINGS PER SHARE $0.20 $(0.23) $0.39 $(0.03)
======== ======= ======= =======
DIVIDENDS PER SHARE
Regular cash dividends $0.125 $0.125 $0.25 $0.25
-------- ------- ------- -------
Total dividends per share $0.125 $0.125 $0.25 $0.25
======== ======= ======= =======
</TABLE>
See accompanying selected notes to consolidated financial statements.
2
<PAGE>
FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED (In thousands)
<TABLE>
<CAPTION>
Common stock Additional
Issued In treasury paid-in
Shares Amount Shares Amount capital
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1998 2,076,969 $21 (408,262) $ (6,056) $11,414
Net income for the year
ended December 31, 1999 - - - - -
Change in net unrealized gain
(loss) on securities available
for sale, net of reclassification
adjustments and tax effects - - - - -
Total comprehensive income - - - - -
Cash dividends - - - - -
Options exercised - - 936 11 (1)
Acquisition of treasury stock - - (356,272) (4,782) -
ESOP shares committed
for release - - - - 12
Amortization of MRDP
unearned compensation - - - - -
---------- --------- --------- --------- ---------
Net for the period - - (355,336) (4,771) 11
---------- --------- --------- --------- ---------
Balances at December 31, 1999 2,076,969 $21 (763,598) $(10,827) $11,425
Net income (loss) for the six months
ended June 30, 2000 - - - - -
Change in net unrealized gain
(loss) on securities available
for sale, net of reclassification
adjustments and tax effects - - - - -
Total comprehensive income - - - - -
Cash dividends - - - - -
Options exercised - - - - -
Acquisition of treasury stock - - (53,745) (630) -
ESOP shares committed
for release - - - - 4
Amortization of MRDP
unearned compensation - - - - -
---------- --------- --------- --------- ---------
Net for the period - - (53,745) (630) 4
---------- --------- --------- --------- ---------
Balances at June 30, 2000 2,076,969 $21 $(817,343) $(11,457) $11,429
========== ========= ========= ========= =========
<CAPTION>
Accumulated
Retained Unearned other Total
earnings employee compre- stock-
Substantially compensation hensive holders'
restricted ESOP MRDP income equity
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1998 $13,340 $(172) $(550) $ 11 $18,008
Net income for the year
ended December 31, 1999 1,246 - - - 1,246
Change in net unrealized gain
(loss) on securities available
for sale, net of reclassification
adjustments and tax effects - - - (115) (115)
---------
Total comprehensive income - - - 1,131
---------
Cash dividends (730) - - - (730)
Options exercised - - - - 10
Acquisition of treasury stock - - - - (4,782)
ESOP shares committed
for release - 60 - - 72
Amortization of MRDP
unearned compensation - - 260 - 260
---------- --------- --------- --------- ---------
Net for the period 516 60 260 (115) (4,039)
---------- --------- --------- --------- ---------
Balances at December 31, 1999 $13,856 $(112) $(290) $(104) $13,969
Net income (loss) for the six months
ended June 30, 2000 (38) - - - (38)
Change in net unrealized gain
(loss) on securities available
for sale, net of reclassification
adjustments and tax effects - - - (14) (14)
---------
Total comprehensive income - - - (52)
---------
Cash dividends (318) - - - (318)
Options exercised - - - - -
Acquisition of treasury stock - - - - (630)
ESOP shares committed
for release - 42 - - 46
Amortization of MRDP
unearned compensation - - 109 - 109
---------- --------- --------- --------- ---------
Net for the period (356) 42 109 (14) (845)
---------- --------- --------- --------- ---------
Balances at June 30, 2000 $13,500 $ (70) $(181) $(118) $13,124
========== ========= ========= ========= =========
</TABLE>
See accompanying selected notes to consolidated financial statements
3
<PAGE>
FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (In thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
1999 2000
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 647 $ (38)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 161 165
Provision for loan losses 343 1,285
Provision for deferred income taxes (benefit) (46) 137
Amortization/accretion of premiums/discounts on investment
and mortgage-backed securities 6 (1)
Amortization of deferred loan fees (48) (22)
Fair market value of ESOP shares
committed for release and charged to
employee compensation 38 46
Amortization of unearned compensation - MRDP 139 109
(Gains) losses on real estate owned 4 5
(Increase) decrease in:
Loans held for sale 514 (103)
Accrued interest receivable 38 (43)
Other assets (99) (297)
Increase (decrease) in:
Income taxes currently payable (219) (181)
Other liabilities (607) 176
---------- ----------
Net cash provided by operating activities 871 1,238
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in:
Total loans 4,173 2,356
Proceeds from maturity of:
Mortgage-backed securities (2,704) 49
Investment securities (4,543) 6
Real estate owned (494) (493)
Acquisition of:
Mortgage-backed securities - 35
Investment securities - 6
Federal Home Loan Bank stock 354 (181)
Premises and equipment (63) (71)
---------- ----------
Net cash provided by (used in) investing activities (3,277) 1,707
---------- ----------
</TABLE>
See accompanying selected notes to consolidated financial statements.
4
<PAGE>
FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (In thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
1999 2000
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts (1,081) 3,360
Cash dividends paid (378) (318)
Proceeds from (reduction in) FHLB advances (75) (3,376)
Proceeds from other borrowings - (1,500)
Proceeds from securities sold under agreement to repurchase - 19
Acquisition of treasury stock, net (339) (630)
----------- -----------
Net cash provided by (used in) financing activities (1,873) (2,445)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,279) 500
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 13,188 5,906
CASH AND CASH EQUIVALENTS - ----------- -----------
END OF PERIOD $ 8,909 $ 6,406
=========== ===========
SUPPLEMENTAL INFORMATION FOR CASH FLOW:
Noncash transactions:
Increase (decrease) in net unrealized loss on securities
available for sale $ (69) $ 14
Loans foreclosed and transferred to real estate owned $ 659 $ 539
Cash paid during the period for:
Interest $ 3,558 $ 3,949
Income taxes $ 456 $ 420
</TABLE>
See accompanying selected notes to consolidated financial statements.
5
<PAGE>
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 June 30, 2000 and for the
quarter and six months then ended include the accounts of the Registrant, First
Southern Bancshares, Inc. (the "Bancshares"), and its wholly-owned subsidiary,
First Southern Bank (the "Bank"). All significant intercompany balances and
transactions have been eliminated in consolidation. Bancshares and the Bank are
collectively referred to herein as the "Company".
The June 30, 1999 and 2000 interim financial statements included in this report
have been prepared by the Company without audit. In the opinion of management,
all adjustments (consisting only of normal recurring entries) necessary for a
fair presentation are reflected in the June 30, 1999 and 2000 interim financial
statements. The results of operations for the quarter and six months ended June
30, 2000 are not necessarily indicative of the operating results for the full
year. The December 31, 1999 Consolidated Statement of Financial Condition
presented with the interim financial statements is derived from the Consolidated
Statement of Financial Condition filed as part of the Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 1999. Such Consolidated
Statement of Financial condition included therein was audited and received an
unqualified opinion.
NOTE 2 - EARNINGS PER SHARE
Basic and diluted earnings per share are computed based upon the weighted
average common shares outstanding during the period. A reconciliation of the
weighted average of common shares outstanding used in the earnings per share
computation to total shares outstanding follows:
<TABLE>
<CAPTION>
Six months ended
June 30
--------------------
1999 2000
---- ----
<S> <C> <C>
Common shares outstanding 2,076,969 2,076,969
Treasury shares (426,308) (806,428)
Unreleased ESOP shares (16,026) (8,726)
Options - uncontingent 5,853 -
---------- -----------
Basic EPS 1,640,489 1,261,815
Options - contingent 8,033 -
Unreleased ESOP shares 16,026 8,726
---------- -----------
Diluted EPS 1,664,547 1,270,541
========== ===========
</TABLE>
NOTE 3 - SUBSEQUENT EVENT
On July 13, 2000, the Company's Board of Directors declared a cash dividend of
$.125 per share, payable July 31, 2000 to stockholders of record as of July 22,
2000.
6
<PAGE>
NOTE 4 - COMMITMENTS AND CONTINGENCIES
At June 30, 2000, the Company had $1.3 million of outstanding net loan
commitments, $10.0 million of unused portions on lines of credit, and $10,000 of
outstanding letters of credit.
In June of 2000, the Company recorded losses of approximately $925,000 related
to apparent fraudulent loans involving a loan officer and commercial loan
customers. The Bank has fidelity bond insurance which may cover a part or all
of the related losses involved in this apparent conspiracy. The amount of the
recovery, if any, is unestimatable, and therefore, no such recovery is reflected
in the accompanying financial statements.
When determining the adequacy of the allowance for loan losses, management
considers changes in the size and character of the loan portfolio, changes in
non performing and past due loans, historical loan loss experience, the existing
risk of individual loans, concentrations of loans to specific borrowers or
industries and existing and prospective economic conditions. The allowance for
loan losses at June 30, 2000 is $1.5 million, or 1.0% of net loans, and 26.7% of
non performing assets, which represents an increase of $100,000 from $1.4
million at December 31,1999.
In the opinion of management at June 30, 2000, the allowance for loan losses was
adequate at that date. There can be no assurance that the Company will not be
required to increase the allowance in the future.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
First Southern Bancshares, Inc. ("Bancshares") is primarily engaged in the
business of directing and planning the activities of its wholly-owned
subsidiary, First Southern Bank (the "Bank"). Bancshares' primary assets are
comprised of its investment in the Bank and a note receivable from the Bank's
Employee Stock Ownership Plan ("ESOP"). Bancshares and the Bank are
collectively referred to herein as the "Company".
The consolidated operating results of the Company include those of the Bank and
Bancshares. All significant intercompany transactions and balances have been
eliminated in consolidation. 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
advances from Federal Home Loan Bank ("FHLB") and other financial institutions.
Net earnings are also effected by non-interest income and non-interest expenses,
such as compensation and benefits, building and occupancy expense, and
provisions for federal and state taxes.
The discussion and analysis included herein covers those material changes in
financial condition, liquidity and capital resources that have occurred since
December 31, 1999, as well as certain material changes in results of operations
during the quarter and six months ended June 30, 1999 and 2000.
Forward-looking Statements Safe-harbor Statement
This report may contain forward-looking statements that are subject to numerous
assumptions, risks and uncertainties. Statements pertaining to future periods
are subject to uncertainty because of the possibility of changes in underlying
factors and assumptions. Actual results could differ materially from those
contained in or implied by such forward-looking statements for a variety of
factors including: sharp and rapid changes in interest rates; significant
changes in the economic scenario from the current anticipated scenario which
could materially change anticipated credit quality trends and the ability to
generate loans; significant delay in or inability to execute strategic
initiatives designed to grow revenues and/or control expenses; and significant
changes in accounting, tax or regulatory practices or requirements.
7
<PAGE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
General
The Company's primary lending area is currently experiencing a lack of growth
and increased competition. Due to the lack of economic growth, many competitor
banks have offered low rates to the Company's loan customers that the Company
was unwilling to match due to the low interest yield commitment over the long
term. The same holds true for deposits as competitor banks are offering
aggressive rates that are higher than the interest cost to the Company of
borrowing from the FHLB. Therefore, management has decided to retain loans or
originate and retain new loans that have a satisfactory long term yield, and to
offer competitive rates for deposits while maintaining an acceptable interest
spread. Year to date average interest bearing assets increased from $165.8
million at June 30, 1999 to $166.4 million at June 30, 2000 while average
interest bearing liabilities have increased from $155.0 million at June 30, 1999
to $158.7 million at June 30, 2000, primarily as a result of the additional debt
incurred in association with the Company's Stock Repurchase Program. The
interest spread between the average yield on the average interest bearing assets
and the average cost on average interest bearing liabilities has decreased from
3.77% in the first six months of 1999 to 3.73% in the first six months of 2000
due to the higher interest rates paid on debt incurred in connection with the
Company's Stock Repurchase Program.
Cash and cash equivalents
As disclosed in the Company's "Consolidated Statements of Cash Flows," net cash
provided by operating activities increased from $871,000 in the first six months
of 1999 to $1.1 million in the first six months of 2000 due to a decrease in
other liabilites in 1999. Cash from investing activities increased from a use
of cash of $3.3 million in the first six months of 1999 to a source of cash of
$1.7 million in the first six months of 2000, as there was no new significant
investments in securities during the first six months of 2000. Cash used in
financing activities increased from a use of $1.9 million in the first six
months 1999 to a use of $2.4 million in the first six months of 2000. The
primary use in the first six months of 2000 was the reduction in FHLB advances
of $3.4 million.
Investments and mortgage-backed securities
The Company's investments in investment securities and mortgage-backed
securities remained steady during the first six months of 2000. Investment
securities available for sale decreased from $4.41 million at December 31, 1999
to $4.38 million at June 30, 2000. The corporate investments are fixed rate
guaranteed or senior notes with a S&P A rating. The average balance for
investment securities for the six months ended June 30, 2000 was $4.4 million as
compared to $4.0 million for the comparable period in 1999 and the average yield
was 6.49% in 2000 as compared to 4.82% in 1999.
Mortgage-backed securities decreased from $3.5 million at December 31, 1999 to
$3.4 million at June 30, 2000. The average balance for mortgage-backed
securities for the six months ended June 30, 2000, increased $822,000 from the
comparable period in 1999.
Loans
The principle investing activity of the Company is the origination of
residential mortgage loans, commercial business and real estate loans, multi-
family mortgage loans and consumer loans in its primary lending area of
Lauderdale and Colbert Counties, and surrounding counties located in Northwest
Alabama. The average balance of loans increased $3.0 million from $152.9 million
in the first six months of 1999 to $155.9 million in the first six months of
2000.
8
<PAGE>
The loan portfolio composition is changing as the result of management's
continued efforts to expand and diversify the Company's loan portfolio into
higher yielding commercial mortgage loans, commercial business loans, and
consumer loans. These types of loans are inherently riskier than residential
mortgage loans. A comparison of the Bank's loan portfolio analysis at December
31, 1999 and June 30, 2000 follows:
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
------------------- -------------
Amount Percent Amount Percent
--------- -------- ------------- --------
(in thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
Residential $ 64,057 41.1% $ 63,536 41.7%
Commercial 34,259 22.0 33,955 22.3
-------- ----- -------- -----
Total mortgage loans 98,316 63.1 97,491 64.0
Commercial business loans 36,332 23.3 34,474 22.6
Consumer loans 23,317 15.0 23,006 15.1
-------- ----- -------- -----
157,965 101.4 154,971 101.7
Total loans
Less:
Undisbursed loans 675 .4 1106 .6
Unamortized loan fees 72 .1 63 .1
Allowance for possible losses 1400 .9 1500 1.0
-------- ----- -------- -----
Net loans receivable $155,818 100.0% $152,302 100.0%
======== ===== ======== =====
</TABLE>
The Company's loan portfolio above continues to reflect the market served by the
Bank's primary lending area. Mortgage loans decreased in volume and percentage
of the portfolio as the Company has not been inclined to invest in low yielding
loans for the long term.
At June 30, 2000, the Company had no significant commitments to originate fixed-
rate loans. At June 30, 2000, the Company had commitments to originate variable
rate loans, including unused commercial business lines of credit, and standby
letters of credit as follows (in thousands):
<TABLE>
<S> <C>
Commitments to extend credit $ 1,246
Unused lines of credit $10,015
Standby letters of credit $ 10
</TABLE>
Non performing Assets
Non performing assets of $5.6 million as of June 30, 2000, increased from $3.2
million at December 31, 1999. Non performing assets at June 30, 2000, include
$1.4 million of real estate owned and other foreclosed assets, and $4.2 million
of loans on nonaccrual or 90 days delinquent. Non performing loans include $2.9
million of commercial business and real estate loans, $198,000 of consumer
loans, and $1.1 million of residential mortgages.
The following table sets forth non performing assets as of December 31, 1999 and
June 30, 2000 (dollars in thousands).
December 31, June 30,
1999 1999
------------ --------
Loans accounted for on
a nonaccrual basis $ 683 $ 1,477
Accruing loans which are contractually
past due 90 days or more 1,567 2,731
------- -------
Total of nonaccrual and
90 days past due loans 2,250 4,208
Foreclosed real estate and other assets 918 1,406
------- -------
Total non performing assets $ 3,168 $ 5,614
Loans classified as nonaccrual increased $794,000 in the first six months of
2000. The increase in loans accounted for as nonaccrual was primarily commercial
business loans related to affiliated borrowers of the bank of which $203,000 of
the increase related to possibly fraudulent loans. See "Comparison of Operating
Results for the three months ended June 30, 1999 and 2000 - Provision for Loan
Losses" for further information regarding these possibly fraudulent loans. Loans
accruing that are contractually past due 90 days or more increased $1.1 million
from $1.6 million at December 31, 1999 to $2.7 million at June 30, 2000. The
increase in loans past due 90 days and still accruing is primarily commercial
real estate loans to three borrowers of the bank, of which $425,000 was
subsequently brought current by the borrower. The increase of $488,000 in
foreclosed real estate and other assets for the first six months of 2000 is
primarily due to three separate foreclosed single family residences totaling
$478,000.
Deposits, FHLB advances and other notes payable
Deposit balances increased $3.3 million from $126.9 million at December 31, 1999
to $130.2 million at June 30, 2000. The increase was primarily in certificates
of deposits. As a result of an increase in deposits and rising interest rates,
interest paid on deposits increased $179,000 from $2.7 million in the first six
months of 1999 to $2.8 million in the first six months of 2000, and the interest
rate paid on the average balance of deposits increased from 4.36% in the first
six months of 1999 to 4.62% in
9
<PAGE>
the first six months of 2000. Interest paid on FHLB advances increased $196,000
from $882,000 in the first six months of 1999 to $1.1 million in the first six
months of 2000, while the effective rate paid on the average outstanding balance
of FHLB advances increased from 5.44% in the first six months of 1999 to 5.88%
in the first six months of 2000.
At June 30, 2000, savings certificates amounted to $92.2 million, or 70.8%, of
the Company's total deposits, including $76.3 million that were scheduled to
mature by June 30, 2001. Management of the Company believes it has adequate
resources to fund all loan commitments with savings deposits, FHLB of Atlanta
advances, and with proceeds from the sale of mortgage loans. In addition, it can
adjust the offering rates of savings certificates to retain deposits in changing
interest rate environments.
The Company decreased its borrowings from the FHLB in the six months ended June
30, 2000 by $3.4 million, from $33.7 million at December 31, 1999 to $30.3
million at June 30, 2000. At June 30, 2000, the Company had unused credit
availability with the FHLB of up to $9.7 million limited by the availability of
qualifying first mortgage loans for collateral.
Stockholders' equity
At June 30, 2000 aggregate stockholders' equity decreased $845,000 to $13.1
million from $13.9 million at December 31, 1999. The reduction in stockholder's
equity is primarily attributable to the $313,000 loss incurred in the second
quarter of 2000 due to the large provision for loan losses related to the
fraudulent loan write-off of approximately $925,000. In addition, during the
first six months of 2000, the Company acquired 53,745 shares at a cost of
$630,000 or at an average price per share of $11.72 under the Company's Stock
Repurchase Program. The current program will continue until October 2000, at
which time the Company will decide whether to terminate or continue the program.
The Bank is required to maintain specific amounts of capital pursuant to FDIC
requirements and the Company is required to maintain specific amounts of capital
pursuant to the regulations of the Federal Reserve Board. As summarized below,
Bancshares and the Bank are in compliance with all such requirements at June 30,
2000:
<TABLE>
<CAPTION>
Percentage of
adjusted total
First Southern Bancshares, Inc. Amount assets
<S> <C> <C>
(Dollars in thousands)
Primary capital ratios:
GAAP capital $13,124
Adjustments:
Mortgage servicing rights (4)
Net unrealized loss on securities available for sale 70
--------------
Tier 1 capital 13,190 7.34%
Minimum Tier 1 (leverage) requirement 7,192 4.00%
-------------- --------------
Excess $ 5,998 3.34%
============== ==============
Risk-based capital ratios:
Core (Tier 1) Capital 13,190 9.34%
Minimum core capital 5,651 4.00%
-------------- --------------
Excess $ 7,539 5.34%
============== ==============
Risk-based capital $14,690 10.40%
Minimum risk-based capital requirement 11,301 8.00%
-------------- --------------
Excess $ 3,389 2.40%
============== ==============
</TABLE>
Under the FDICIA prompt corrective action provisions applicable to banks, the
most recent notification from the FDIC categorized the Bank as well capitalized.
To be categorized as well capitalized, the Bank must maintain a total risk-based
capital ratio as set forth in the following table and not be subject to a
capital order. There are no conditions or events since that notification that
management believes have changed the Bank's risk-based capital category.
10
<PAGE>
Percentage of
adjusted total
Amount assets
First Southern Bank: (Dollars in thousands)
Total capital (to risk-weighted assets) $15,033 10.65%
To be well capitalized under the FDICIA
prompt corrective action provisions 14,120 10.00%
-------- -------
Excess $ 913 0.65%
======== =======
Tier 1 capital (to risk-weighted $13,533 9.58%
assets)
To be well capitalized under the FDICIA
prompt corrective action provisions 8,472 6.00%
-------- -------
Excess $ 5,061 3.58%
======== =======
Tier 1 capital (to average assets) $13,533 7.53%
To be well capitalized under the FDICIA
prompt corrective action provisions 8,988 5.00%
-------- -------
Excess $ 4,545 2.53%
======== =======
Liquidity
The Bank 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
Bank'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 that 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) based upon average daily deposits of the
Bank. At June 30, 2000, the Bank's qualifying reserves of $1.9 million
significantly exceeded the required reserve of $265,000.
Additionally, Bancshares requires cash for various operating needs including
dividends to shareholders and the general corporate expenses. The primary
source of liquidity for the parent holding company is dividends from the Bank.
At June 30, 2000, the Bank could have paid additional dividends for Bancshares
of $913,000 while continuing to meet the capital requirements for "well-
capitalized" banks. Bancshares does not anticipate any liquidity requirements
in the near future that it will not be able to meet.
COMPARISON OF OPERATING RESULTS FOR THE
THREE MONTHS ENDED JUNE 30, 1999 AND 2000
General
Consolidated net income for the quarter ended June 30, 2000, decreased from
$323,000 in the comparable quarter in 1999 to a net loss of $313,000. Basic
earnings per share for the second quarter of 2000 was $(.25) as compared to
$0.20 for the comparable period in 1999, and diluted earnings per share for the
second quarter of 2000 was $(.23) as compared to $0.20 for the comparable period
in 1999. The loss in the second quarter of 2000 is attributable to the $925,000
charge-off for apparent fraudulent loans involving a loan officer and certain
commercial loan customers.
11
<PAGE>
In June of 2000, the Company recorded losses of approximately $925,000 related
to apparent fraudulent loans involving a loan officer and commercial loan
customers. The Bank has fidelity bond insurance which may cover a part or all
of the related losses involved in this apparent conspiracy. The amount of the
recovery, if any, is unestimatable, and therefore, no such recovery is reflected
in the accompanying financial statements.
Net Interest Income
The second quarter net interest income after provision for loan losses was
$525,000, which was $1.0 million less than the $1.6 million reported for the
comparable period in 1999, as a result of the increase in the provision for loan
losses as discussed above.
Interest Income
Interest income for the second quarter of 2000 was $3.6 million compared with
$3.5 million for the second quarter of 1999, representing an increase of
$168,000 or 4.8%. The increase was primarily attributable to an increase of
$1.1 million in average interest earning assets in the second quarter of 2000 to
$166.5 million over those in the second quarter of 1999 of $165.4 million as a
result of an increase in loans. Also contributing to the increase in interest
income was an increase in the average yield on interest-earning assets from
8.38% for the second quarter of 1999 to 8.74% for 2000, as a result of higher
market interest rates. The yield on the average balance of loans increased from
8.64% in the second quarter of 1999 to 8.84% in the second quarter of 2000. The
annual yield is expected to continue to increase in 2000 as the effect of such
rate increases impacts commercial loans related to the prime interest rate and
adjustable mortgages.
Interest on loans receivable increased $209,000 to $3.4 million during the
second quarter of 2000 as compared to $3.2 million in the second quarter of
1999. The increase was primarily attributable to an increase in average net
loans of $6.0 million in the second quarter of 2000 ($156.0 million) from the
comparable period in 1999 ($150.0 million). Additionally, the average yield on
total loans increased as previously mentioned.
Interest on mortgage-related securities increased by $26,000 from $33,000 during
the second quarter of 1999 to $59,000 in 2000 as a result of the average balance
of mortgage-related securities increasing by $1.7 million during the second
quarter of 2000 ($3.5 million) as compared to the second quarter of 1999 ($1.8
million). The average yields from such securities decreased from 7.11% in the
second quarter of 1999 to 6.77% in the second quarter of 2000 as a result of
lower yielding mortgage-related securities in the portfolio.
Income from the investment securities portfolio increased by $12,000 from
$59,000 during the second quarter of 1999 to $71,000 in the second quarter of
2000 as the result of the average balance of investment securities increasing by
$700,000 during the second quarter of 2000 ($4.4 million) as compared to the
second quarter of 1999 ($3.7 million). The effect of this increase in the
average balance was aided by an increase in the average yield on investment
securities from 6.39% in the second quarter of 1999 to 6.50% in the second
quarter of 2000 as a result of the changes in the investment securities
portfolio.
Other interest income is comprised of earnings on the overnight account and time
deposits at the FHLB of Atlanta, FHLB stock dividends, and earnings on money
market funds. The $79,000 decrease in other interest income in 2000 to $57,000
when compared to the second quarter of 1999 other interest income of $136,000 is
due primarily to the decreased interest earnings on the FHLB overnight account
and on money market funds due to a decrease in average invested balances from
$8.3 million in the second quarter of 1999 to $800,000 in the second quarter of
2000. These funds were used to fund the increase in loans and investment
securities, as discussed earlier. FHLB dividends were $31,000 during the second
quarter of 1999 as compared to $35,000 in the second quarter of 2000 due to
increase in average FHLB stock from $1.6 million at June 30, 1999 to $1.8
million at June 30, 2000.
Interest Expense
Interest expense in the second quarter of 2000 was $2.0 million compared with
$1.8 million the second quarter of 1999, representing an increase of $225,000 or
12.8%.
Interest on deposits the second quarter of 2000 was $1.4 million compared with
$1.3 million the second quarter of 1999, representing an increase of $127,000 or
9.7%. The increase is due to a $1.4 million increase in average deposits in the
second quarter of 2000 ($122.5 million) as compared to the second quarter of
1999 ($121.1 million). The second quarter of 2000
12
<PAGE>
average interest cost on deposits increased to 4.71% as compared to 4.35% in the
second quarter of 1999 as higher interest rates were offered on certificates of
deposits due primarily to the increase in market rates for certificates of
deposits.
Other interest expense primarily relates to FHLB of Atlanta borrowings and
increased by $98,000 to $541,000 in the second quarter of 2000 when compared to
the second quarter of 1999 total of $443,000 due to an increase in average
borrowings of $2.2 million during the second quarter of 2000 ($33.5 million)
from the second quarter of 1999 average levels of $31.3 million. The increase
was also caused by a higher average balance of other borrowings of $2.4 million
in the second quarter of 2000, as compared to $70,000 in the second quarter of
1999. These additional borrowings were primarily used in the Company's Stock
Repurchase Plan.
Provision for Loan Losses.
The provision for loan losses is the cost of providing an allowance for
anticipated future losses on loans. The amount depends upon many factors
including loan growth, net charge-offs, changes in the composition of the loan
portfolio, delinquencies, management's assessment of loan portfolio quality, the
value of collateral and general economic factors. The loan portfolio is
changing as of the result of management's continued effort to expand and
diversify into commercial mortgage loans, commercial business loans, and
consumer loans. These types of loans are inherently riskier than residential
mortgage loans.
The economic outlook for the Bank's primary lending area is guardedly optimistic
as the local economy is assisted by the improvement in the overall economy.
However, there is very little growth in the Bank's primary lending area and
there is aggressive competition for existing loan and deposit customers. A
slowdown in the economy could further impact asset growth and have a negative
impact on real estate lending as well as the level of net charge-offs and
delinquencies. Since such a slowdown in the economy could have an adverse
effect on property values and for commercial development projects, cause an
increase in vacancy rates, the possibilities exist for write-downs, charge-offs
and transfer of currently performing loans to a nonaccrual status in the real
estate and commercial loan categories.
Loan reviews procedures, including such techniques as loan grading and
monitoring of financial information, are utilized by the Company in order to
identify early potential problem loans in order for management to take steps to
lessen any potential losses. Reports are prepared and used in conjunction with
identification and monitoring of such loans on a monthly basis. Management's
involvement continues throughout the process and includes participation in the
work-out process and recovery activity. These procedures are monitored by the
loan and audit committees whose work is supplemented periodically by regulatory
agencies. A determination of a potential loss will result in a charge to the
provision for loan losses, thereby increasing the allowance for loan losses.
Management monitors the entire loan portfolio in an attempt to identify problem
loans so that risks in the portfolio can be timely identified and an appropriate
allowance or charge-off recognized. Management's periodic evaluation of the
adequacy of the allowance is based on the Company's past loan loss experience,
known and inherent risks in the portfolio, adverse situations that may effect
the borrower's ability to repay the estimated value of any underlying
collateral, and current economic conditions.
The provision for loan losses was $1.1 million for the second quarter of 2000 as
compared to $148,000 for the comparable period in 1999. The increase in the
provision was due to loan charge offs of approximately $925,000 incurred in the
second quarter of 2000 for possible fraudulent loans to a commercial customer of
the Bank as well as loans to several persons affiliated with the customer. The
Bank is coordinating with the Federal Bureau of Investigation, Federal Deposit
Insurance Corporation and the Superintendent of Banks of the State of Alabama
regarding these transactions and the ongoing investigation. The potential for
recovery is unknown and cannot be estimated. These provisions were made based on
management's analysis of the various factors that effect the loan portfolio and
management's desire to maintain the allowance at a level considered adequate to
provide for losses. No additional allowances had been specified at June 30,
2000, for the impaired loans.
When determining the adequacy of the allowance for loan losses, management
considers changes in the size and character of the loan portfolio, changes in
non performing and past due loans, historical loan loss experience, the existing
risk of individual loans, concentrations of loans to specific borrowers or
industries and existing and prospective economic conditions. The allowance for
loan losses at June 30, 2000 is $1.5 million, or 1.0% of net loans, and 26.7% of
non performing assets, which represents an increase of $100,000 from $1.4
million at December 31, 1999.
In the opinion of management at June 30, 2000, the allowance for loan losses was
adequate at that date. There can be no assurance that the Company will not be
required to increase the allowance in the future.
13
<PAGE>
Non-interest Income.
Non interest income for the second quarter decreased from $216,000 in 1999 to
$184,000 in 2000 due primarily to a decrease in gains on loans sold of $32,000
to $28,000 in the second quarter of 2000 from $60,000 in the second quarter of
2000.
Non-interest Expense.
The second quarter non interest expenses for 1999 and 2000 were constant at $1.2
million.
Income Taxes
Income taxes decreased by $403,000 in 2000, as a result of the decrease in
income before income taxes. Income tax expense in the second quarter of 2000
was ($196,000) as compared to $207,000 in 1999, or approximately 40% of income
before income taxes representing expected federal and state tax rates.
COMPARISON OF OPERATING RESULTS FOR THE
SIX MONTHS ENDED JUNE 30, 1999 AND 2000
General
Consolidated net income for the six months ended June 30, 2000, decreased
$685,000 to ($38,000) from $647,000 for the comparable six months in 1999.
Basic earnings per share for the six months ended June 30, 2000, was $(.03) as
compared to $0.39 for the comparable period in 1999, and diluted earnings per
share for the six months ended June 30, 2000 was $(.03) as compared to $0.39 for
the comparable period in 1999.
Net Interest Income
For the six months ended June 30, 2000, net interest income after provision for
loan losses was $2.0 million, or 33% less than the $3.0 million reported for the
comparable period in 1999, as a result of the increase in the provision for loan
losses.
Interest Income
Interest income for the six months ended June 30, 2000 was $7.2 million compared
with $6.9 million for the six months ended June 30, 1999, representing an
increase of $300,000 or 4.3%. The increase was primarily attributable to the
yeild on average interest earning assets increasing from 8.33% in the six months
ended June 30, 1999 to 8.66% in the six months ended June 30, 2000 as a result
of rising market interest rates. The yield on the average balance of loans
increased from 8.48% in the six months ended June 30, 1999 to 8.77% in the six
months ended June 30, 2000. The annual yield is expected to continue to increase
in 2000 as the effect of such rate increases impacts commercial loans related to
the prime interest rate and adjustable mortgages.
Interest on loans receivable increased $356,000 to $6.8 million during the six
months ended June 30, 2000 as compared to $6.4 million in the six months ended
June 30, 1999. The increase was primarily attributable to an increase in average
net loans of $3.0 million in the six months ended June 30, 2000 ($155.9 million)
from the comparable period in 1999 ($152.9 million). Additionally, the average
yield on total loans increased as previously mentioned.
Interest on mortgage-related securities increased by $69,000 from $49,000 during
the six months ended June 30, 1999 to $118,000 in 2000 as a result of the
average balance of such securities increasing from $2.7 million in the six
months ended June 30, 1999 to $3.5 million in the six months ended June 30,
2000.
14
<PAGE>
Income from the investment securities portfolio increased by $45,000 from
$97,000 during the six months ended June 30, 1999 to $142,000 in the six months
ended June 30, 2000 as the result of the average yeild of investment securities
increasing from 4.82% during the six months ended June 30, 1999 to 6.49% for the
six months ended June 30, 1999, as a result of the changes in the investment
securities portfolio.
Other interest income is comprised of earnings on the overnight account and time
deposits at the FHLB of Atlanta, FHLB stock dividends, and earnings on money
market funds. The $174,000 decrease in other interest income in 2000 to $110,000
when compared to the six months ended June 30, 1999 other interest income of
$284,000 is due primarily to the decreased average invested balance on the FHLB
overnight and on money market funds from $4.6 million at June 30, 1999 to
$900,000 for the six months ended June 30, 2000. FHLB dividends were $66,000
during the six months ended June 30, 1999 as compared to $68,000 in the six
months ended June 30, 2000 due to increase in average FHLB stock from $1.7
million at June 30, 1999 to $1.8 million at June 30, 2000.
Interest Expense
Interest expense in the six months ended June 30, 2000 was $3.9 million compared
with $3.5 million in the six months ended June 30, 1999, representing an
increase of $400,000 or 10.6%.
Interest on deposits in the six months ended June 30, 2000 was $2.8 million
compared with $2.7 million in the six months ended June 30, 1999, representing
an increase of $179,000 or 6.7%. The increase is due to a $700,000 increase in
average deposits in the six months ended June 30, 2000 ($122.6 million) as
compared to the six months ended June 30, 1999 ($121.9 million). The six months
ended June 30, 2000 average interest cost on deposits increased to 4.62% as
compared to 4.36% in the six months ended June 30, 1999 as higher interest rates
were offered on certificates of deposits due primarily to the increase in market
interest rates offered on certificates of deposits.
Other interest expense primarily relates to FHLB of Atlanta borrowings and
increased by $200,000 to $1.1 million in the six months ended June 30, 2000 when
compared to the six months ended June 30, 1999 total of $882,000 due to an
increase in average borrowings of $3.1 million during the six months ended June
30, 2000 of $36.1 million from the six months ended June 30, 1999 average levels
of $33.0 million. The increase was also caused by an increased interest costs on
borrowed funds from 5.34% in the six months ended June 30, 1999 to 5.97% in the
six months ended June 30, 2000 as a consequence of the adjustable rate nature of
the majority of the FHLB of Atlanta borrowings and higher market interest rates.
Provision for Loan Losses.
For the six months ended June 30, 2000, the provision for loan losses was $1.3
million as compared to $343,000 in the six months ended June 30, 1999. The
increase in the provision was due to loan charge offs of approximately $925,000
incurred in the second quarter of 2000 for possible fraudulent loans to a
commercial customer of the Bank as well as loans to several persons affiliated
with the customer. The Bank is coordinating with the Federal Bureau of
Investigation, Federal Deposit Insurance Corporation and the Superintendent of
Banks of the State of Alabama regarding these transactions and the ongoing
investigation. The potential for recovery is unknown and cannot be estimated.
No additional allowances had been specified at June 30, 2000, for the impaired
loans. The allowance for loan losses at June 30, 2000 is $1.5 million, or 1.0%
of net loans, and 26.7% of non performing assets, which represents an increase
of $100,000 from $1.4 million at December 31, 1999.
In the opinion of management at June 30, 2000, the allowance for loan losses was
adequate at that date. There can be no assurance that the Company will not be
required to increase the allowance in the future.
Non-interest Income.
Non interest income for the six months ended June 30, 2000 of $369,000 decreased
from $465,000 for the comparable period in 1999. The decrease in non-interest
income was primarily attributable to a decrease of $91,000 on proceeds from the
sale of loans in the first six months of 2000.
Non-interest Expense.
For the six months ended June 30, 2000, and the first six months of 1999 non-
interest expenses were constant at $2.4 million.
15
<PAGE>
Income Taxes
Income taxes decreased by $447,000 in 2000, as a result of the decrease in
income before income taxes. Income tax expense in the six months ended June 30,
2000 and 1999 was ($27,000) and $420,000, respectively, or approximately 40% of
income before income taxes representing expected federal and state tax rates.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Neither Bancshares 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 AND USE OF PROCEEDS
Not applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders ("Meeting") was held on April 19,
2000. The results of the vote on the matters presented at the Meeting were as
follows:
1. The following individuals were elected as directors for the term expiring
in 2003:
Votes For Votes Withheld
--------- --------------
James A. Bishop 1,096,859 4,440
Milka S. Duke 1,096,809 4,490
J. Acker Rogers 1,096,909 4,390
The directors whose term continued at the Annual Meeting are:
Charles L. Frederick, Jr. Gary Gamble*
Thomas N. Ward Steve Mckinney
S. Gregory Beadle
* Resigned effective July 13/th./, 2000.
2. The ratification of Marmann, McCrary & Associates, P.C. as the Company's
independent auditors was approved by the stockholders by the following
vote.
For 1,099,674; Against 1,600; Abstain 25
ITEM 5 - OTHER INFORMATION
Not applicable.
17
<PAGE>
ITEM 6 - EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibits
(3a) Certificate of Incorporation of the Company*
(3a)(i) Certificate of Amendment of Certificate of Incorporation****
(3b) Bylaws of the Company*
(3b)(i) Amendment to Bylaws dated September 10, 1998*****
(10a) 1996 Stock Option Plan of the Company**
(10b) 1996 Management Recognition and Development Plan of the Company**
(10c) Employment Agreement with Charles L. Frederick, Jr.***
(10d) Employment Agreement with Thomas N. Ward***
(27) Financial Data Schedule
_____________________
* Incorporated by reference to the Company's Registration Statement
on Form S-1, as amended.
** Incorporated by reference to the Company's Proxy Statement for the
1997 Annual Meeting of Stockholders.
*** Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995.
**** Incorporated by reference to the Company's Quarterly Report on Form
10-QSB for the period ended March 31, 1997.
***** Incorporated by reference to the Company's Quarterly Report on Form
10-QSB for the period ended September 30, 1998.
(b) Report on Form 8-K
On June 13, 2000, the Company filed a form 8-K to report that First
Southern Bank was pursuing an investigation of possible fraudulent loans to
a commercial customer as well as loans to several persons affiliated with
the customer which required a one time charge off against the Company's
loan loss reserve.
18
<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 August 11, 2000 /s/ Charles L. Frederick, Jr.
------------------- -----------------------------------------
Mr. Charles L. Frederick, Jr.
President and Chief Executive Officer
Date August 11, 2000 /s/ Ms. Glenda Young
------------------- ------------------------------------------
Ms. Glenda Young
Senior Vice President and Chief Accounting
Officer
19
