<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 September 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 November 6, 2000.
ii
<PAGE>
FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
FORM 10-QSB
September 30, 2000
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
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 17
SIGNATURES 18
</TABLE>
iii
<PAGE>
FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - UNAUDITED (In thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,906 $ 6,286
Investment securities available for sale, at market 4,408 4,432
Mortgage-backed securities, held to maturity, at cost 3,527 3,400
Loans held for sale, at cost, which approximates market 80 316
Loans receivable, net 155,738 146,747
Foreclosed real estate and other assets 918 1,265
Premises and equipment, net 3,663 3,495
Federal Home Loan Bank stock, at cost 1,685 1,866
Accrued interest receivable 1,855 1,823
Deferred income taxes 592 437
Other assets 426 1,681
----------------- -----------------
TOTAL ASSETS $ 178,798 $ 171,748
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $ 126,870 $ 129,542
Advances from Federal Home Loan Bank 33,665 28,551
Other notes payable 2,000 650
Securities sold under agreement to repurchase 1,487 -
Income taxes currently payable 183 -
Other liabilities 624 793
----------------- -----------------
Total liabilities 164,829 159,536
----------------- -----------------
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 12,479
Unearned employee compensation - ESOP (112) (49)
Unearned employee compensation - MRDP (290) (119)
Net unrealized gain (loss) on securities available for sale (104) (82)
Treasury stock, at cost (10,827) (11,467)
----------------- -----------------
Total stockholders' equity 13,969 12,212
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 178,798 $ 171,748
================= =================
</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 Nine months ended
September 30, September 30,
1999 2000 1999 2000
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 3,226 $ 3,386 $ 9,708 $ 10,224
Mortgage-backed securities 61 58 110 176
Investment securities 87 71 184 213
Other 97 55 381 165
-------------- -------------- -------------- -------------
Total interest income 3,471 3,570 10,383 10,778
INTEREST EXPENSE:
Deposits 1,288 1,535 3,944 4,370
Federal Home Loan Bank advances and other 446 482 1,328 1,560
-------------- -------------- -------------- -------------
Total interest expense 1,734 2,017 5,272 5,930
-------------- -------------- -------------- -------------
NET INTEREST INCOME 1,737 1,553 5,111 4,848
PROVISION FOR LOAN LOSSES 49 1,867 392 3,152
-------------- -------------- -------------- -------------
NET INTEREST INCOME (LOSS) AFTER
PROVISION FOR LOAN LOSSES 1,688 (314) 4,719 1,696
-------------- -------------- -------------- -------------
NON INTEREST INCOME:
Loan fees and service charges 195 158 503 455
Net gains on sale of loans 29 26 169 73
Gains(losses) on real estate owned (81) (6) (79) (1)
Other 13 8 28 28
-------------- -------------- -------------- -------------
Total non interest income 156 186 621 555
-------------- -------------- -------------- -------------
NON INTEREST EXPENSES:
Compensation and employee benefits 697 678 2,141 2,118
Building and occupancy expense 185 169 478 525
Data processing expense 123 109 337 319
Advertising 54 42 134 110
Insurance expense 41 28 133 87
Other 208 284 514 595
-------------- -------------- -------------- -------------
Total non interest expenses 1,308 1,310 3,737 3,754
-------------- -------------- -------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES 536 (1,438) 1,603 (1,503)
INCOME TAX EXPENSE (BENEFIT) 211 (572) 631 (599)
-------------- -------------- -------------- -------------
NET INCOME (LOSS) $ 325 $ (866) $ 972 $ (904)
============== ============== ============== =============
BASIC EARNINGS (LOSS) PER SHARE $ 0.20 (0.69) $ 0.59 $ (0.72)
============== ============== ============== =============
DILUTED EARNINGS (LOSS) PER SHARE $ 0.20 $ (0.69) $ 0.59 $ (0.71)
============== ============== ============== =============
DIVIDENDS PER SHARE
Regular cash dividends $ 0.125 $ 0.125 $ 0.375 $ 0.375
-------------- -------------- -------------- -------------
Total dividends per share $ 0.125 $ 0.125 $ 0.375 $ 0.375
============== ============== ============== =============
</TABLE>
See accompanying selected notes to consolidated financial statements.
2
<PAGE>
FIRST SOUTHERN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED (Dollars in
thousands)
<TABLE>
<CAPTION>
Accumulated
Retained Unearned other Total
Common stock Additional earnings employee compre- stock-
Issued In treasury paid-in Substantially compensation hensive holders'
Shares Amount Shares Amount capital restricted ESOP MRDP income equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1998 2,076,969 $ 21 (408,262) $ (6,056) $ 11,414 $ 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 - - 936 11 (1) - - - - 10
Acquisition of treasury stock - - (356,272) (4,782) - - - - - (4,782)
ESOP shares committed
for release - - - - 12 - 60 - - 72
Amortization of MRDP
unearned compensation - - - - - - - 260 - 260
---------- ----- ---------- ---------- --------- --------- -------- -------- ------- ---------
Net for the period - - (355,336) (4,771) 11 516 60 260 (115) (4,039)
---------- ----- ---------- ---------- --------- --------- -------- -------- ------- ---------
Balances at December 31, 1999 2,076,969 $ 21 (763,598) $ (10,827) $ 11,425 $ 13,856 $ (112) $(290) $ (104) $ 13,969
Net income (loss) for the nine months
ended September 30, 2000 - - - - - (904) - - - (904)
Change in net unrealized gain
(loss) on securities available
for sale, net of reclassification
adjustments and tax effects - - - - - - - - 22 22
---------
Total comprehensive income - - - - - - - - (882)
---------
Cash dividends - - - - - (473) - - - (473)
Options exercised - - - - - - - - - -
Acquisition of treasury stock - - (54,360) (640) - - - - - (640)
ESOP shares committed
for release - - - - 4 - 63 - - 67
Amortization of MRDP
unearned compensation - - - - - - - 171 - 171
---------- ----- ---------- ---------- --------- --------- -------- -------- ------- ---------
Net for the period - - (54,360) (640) 4 (1,377) 63 171 22 (1,757)
---------- ----- ---------- ---------- --------- --------- -------- -------- ------- ---------
Balances at September 30, 2000 2,076,969 $ 21 $(817,958) $ (11,467) $ 11,429 $ 12,479 $ (49) $(119) $ (82) $12,212
========== ===== ========== ========== ========== ======== ======== ======== ======= =========
</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>
Nine months ended September 30,
1999 2000
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 972 $ (904)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 248 165
Provision for loan losses 392 3,152
Provision for deferred income taxes (benefit) (56) 155
Amortization/accretion of premiums/discounts on investment
and mortgage-backed securities 3 (1)
Amortization of deferred loan fees (65) (22)
Fair market value of ESOP shares
committed for release and charged to
employee compensation 54 67
Amortization of unearned compensation - MRDP 200 171
(Gains) losses on real estate owned (79) (1)
(Increase) decrease in:
Loans held for sale 659 (236)
Accrued interest receivable 1 32
Other assets (88) (1,254)
Increase (decrease) in:
Income taxes currently payable (195) (183)
Other liabilities (484) 170
------------- --------------
Net cash provided by operating activities 1,562 1,311
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in:
Total loans 3,112 5,861
Proceeds from maturity of:
Mortgage-backed securities - 49
Investment securities - 6
Real estate owned (170) (346)
Acquisition of:
Mortgage-backed securities (2,637) 79
Investment securities (3,529) (8)
Federal Home Loan Bank stock 283 (181)
Premises and equipment (122) 3
------------- --------------
Net cash provided by (used in) investing activities (3,063) 5,463
------------- --------------
</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>
Nine months ended September 30,
1999 2000
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts (4,492) 2,672
Cash dividends paid (565) (473)
Proceeds from (reduction in) FHLB advances 1,387 (5,114)
Proceeds from (reduction in) other borrowings - (1,350)
Proceeds from (reduction in) securities sold under agreement to repurchase - (1,489)
Acquisition of treasury stock, net (339) (640)
----------------- -----------------
Net cash provided by (used in) financing activities (4,009) (6,394)
----------------- -----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,510) 380
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 13,188 5,906
CASH AND CASH EQUIVALENTS -
----------------- -----------------
END OF PERIOD $ 7,678 $ 6,286
================= =================
SUPPLEMENTAL INFORMATION FOR CASH FLOW:
Noncash transactions:
Increase (decrease) in net unrealized loss on securities
available for sale $ (91) $ (22)
Loans foreclosed and transferred to real estate owned $ 1,141 $ 611
Cash paid during the period for:
Interest $ 5,285 $ 6,004
Income taxes $ 776 $ 730
</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 September 30, 2000 and for
the quarter and nine 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 September 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 September 30, 1999 and
2000 interim financial statements. The results of operations for the quarter
and nine months ended September 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>
Nine months ended September 30,
-------------------------------------
1999 2000
----------------- -----------------
<S> <C> <C>
Common shares outstanding 2,076,969 2,076,969
Treasury shares (428,674) (810,271)
Unreleased ESOP shares (15,046) (7,676)
Options - uncontingent 4,154 -
----------------- -----------------
Basic EPS 1,637,403 1,259,022
Options - contingent 5,662 -
Unreleased ESOP shares 15,046 7,676
----------------- -----------------
Diluted EPS 1,658,111 1,266,698
================= =================
</TABLE>
NOTE 3 - SUBSEQUENT EVENT
On October 12, 2000, the Company's Board of Directors declared a cash dividend
of $.125 per share, payable October 30, 2000 to stockholders of record as of
October 21, 2000.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
At September 30, 2000, the Company had $1.3 million of outstanding net loan
commitments, $10.8 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 former loan officer and commercial loan
customers. The Bank has fidelity bond insurance which may cover a part or all
of the related losses. The amount of the recovery, if any, is unestimatable,
and therefore, no such recovery is reflected in the accompanying financial
statements.
6
<PAGE>
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. At September 30,
2000, the allowance for loan losses was $1.5 million and represented 1.03% of
total net loans and 34.2% of non performing loans.
In the opinion of management at September 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 nine months ended September 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.
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. 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 remained constant at $164.8 million in the first
nine months of 1999 and 2000, while year to date average interest bearing
liabilities have increased $5.2 million from $151.6 million at September 30,
1999 to $156.8 million at September 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 average interest
bearing assets and the average cost on average interest bearing liabilities has
decreased from 3.76% in the first nine months of 1999 to 3.68% in the first nine
months of 2000 due to the higher interest rates paid on debt incurred in
connection with the Company's Stock Repurchase Program.
7
<PAGE>
Cash and cash equivalents
As disclosed in the Company's "Consolidated Statements of Cash Flows," net cash
provided by operating activities decreased from $1.6 million in the first nine
months of 1999 to $1.3 million in the first nine months of 2000 due to the net
loss resulting from loan charge-offs in the first nine months of 2000. Cash from
investing activities increased from a use of cash of $3.1 million in the first
nine months of 1999 to a source of cash of $5.5 million in the first nine
months of 2000 due to the decrease in total loans in the first nine months of
2000. Cash from financing activities increased from a use of $4.0 million in
the first nine months 1999 to a use of $6.4 million in the first nine months of
2000. The primary use in the first nine months of 2000 was the reduction in
FHLB advances of $5.1 million.
Investments and mortgage-backed securities
The Company's investments in investment securities and mortgage-backed
securities remained steady during the first nine months of 2000. Investment
securities available for sale increased from $4.41 million at December 31, 1999
to $4.43 million at September 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 nine months ended September 30, 2000 was $4.4
million as compared to $3.7 million for the comparable period in 1999 and the
average yield was 6.48% in 2000 as compared to 6.61% in 1999.
Mortgage-backed securities decreased from $3.5 million at December 31, 1999 to
$3.4 million at September 30, 2000. The average balance for mortgage-backed
securities for the nine months ended September 30, 2000 was $3.5 million as
compared to $2.1 million for the same period in 1999.
Loans
The principal 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 $4.3 million from $150.1 million
in the first nine months of 1999 to $154.4 million in the first nine months of
2000.
Changes in the loan portfolio are a result of management's prior strategy and
current changes in its primary lending area economy. The company had been
expanding and diversifying its 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 and as a result,
the Company has experienced a significantly larger provision for loan losses in
the third quarter and nine months ended September 30, 2000, as described below
under "Non performing Assets" and "Provision for Loan Losses". In addition, the
demand for residential mortgage loans has decreased due to rising mortgage
interest rates over the prior year and the lack of growth in the population and
economy in the Company's primary lending area. These factors, along with write
offs and increased allowance for possible loan losses, have resulted in
management's curtailment of commercial business loans and consumer loans, and an
overall reduction in loans receivable of 5.6% or $8.8 million since December 31,
1999. A comparison of the Bank's loan portfolio analysis at December 31, 1999
and September 30, 2000 follows:
<TABLE>
<CAPTION>
December 31, 1999 September 30, 2000
------------------- ------------------
Amount Percent Amount Percent
--------- -------- --------- --------
<S> <C> <C> <C> <C>
(in thousands)
Mortgage loans:
Residential $ 64,057 41.1 % $ 62,929 42.8 %
Commercial 34,259 22.0 32,874 22.3
-------- ----- -------- -----
Total mortgage loans 98,316 63.1 95,803 65.1
Commercial business loans 36,332 23.3 31,869 21.7
Consumer loans 23,317 15.0 22,234 15.1
-------- ----- -------- -----
Total Loans 157,965 101.4 149,906 101.9
Less:
Undisbursed loans 675 .4 1,292 .8
Unamortized loan fees 72 .1 44 .1
Allowance for possible losses 1400 .9 1507 1.0
-------- ----- -------- -----
Net loans receivable $155,818 100.0 % $147,063 100.0 %
======== ===== ======== =====
</TABLE>
At September 30, 2000, the Company had no significant commitments to originate
fixed-rate loans. At September 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>
<CAPTION>
<S> <C>
Commitments to extend credit $ 1,342
Unused lines of credit $10,780
Standby letters of credit $ 10
</TABLE>
8
<PAGE>
Non performing Assets
As previously discussed, the Company's efforts in diversifying its portfolio
with increases in higher yielding commercial business and consumer loans has
resulted in larger write offs and provision for loan losses. This is also the
primary factor in the increase in non performing assets, at September 30, 2000.
The increases in non performing assets are attributed to the current economy in
the primary lending area.
Non performing assets of $5.8 million as of September 30, 2000, increased from
$3.2 million at December 31, 1999. Non performing assets at September 30, 2000,
include $1.4 million of real estate owned and other foreclosed assets, and $4.4
million of loans on nonaccrual or 90 days delinquent. Non performing loans
include $2.9 million of commercial business and real estate loans, $100,000 of
consumer loans, and $1.4 million of residential mortgages. Loans classified as
nonaccrual increased $541,000 in the first nine months of 2000. The increase in
loans accounted for as nonaccrual was primarily commercial business loans. Loans
accruing that are contractually past due 90 days or more increased from $1.6
million at December 31, 1999 to $3.2 million at September 30, 2000. The increase
in loans past due 90 days and still accruing is primarily construction and land
development loans, of which $800,000 was subsequently brought current by the
borrower.
The following table sets forth non performing assets as of December 31, 1999 and
September 30, 2000 (dollars in thousands).
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
---------------- -----------------
<S> <C> <C>
Loans accounted for on
a nonaccrual basis $ 683 $ 1,224
Accruing loans which are contractually
past due 90 days or more 1,567 3,180
---------------- -----------------
Total of nonaccrual and
90 days past due loans $ 2,250 $ 4,404
Foreclosed real estate and other assets 918 1,358
---------------- -----------------
Total non performing assets $ 3,168 $ 5,762
================ =================
</TABLE>
The increase of $ 440,000 in foreclosed real estate and other assets for the
first nine months of 2000 is primarily due to three separate foreclosed single
family residences totaling $478,000.
Included in non performing assets are $1.6 million of impaired loans at
September 30, 2000. The average investment in impaired loans for the nine
months ended September 30, 2000 is approximately $1.0 million, exclusive of
write offs or writedowns to fair value.
Deposits, FHLB advances and other notes payable
Deposit balances increased $2.6 million from $126.9 million at December 31, 1999
to $129.5 million at September 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 $426,000 from $3.9 million
in the first nine months of 1999 to $4.4 million in the first nine months of
2000, and the interest rate paid on the average balance of deposits increased
from 4.37% in the first nine months of 1999 to 4.76% in the first nine months of
2000. Interest paid on FHLB advances and other notes payable increased $232,000
from $1.3 million in the first nine months of 1999 to $1.6 million in the first
nine months of 2000, while the effective rate paid on the average outstanding
balance of FHLB advances and other notes payable increased from 5.65% in the
first nine months of 1999 to 6.02% in the first nine months of 2000.
At September 30, 2000, certificates of deposit amounted to $92.1 million, or
71.1%, of the Company's total deposits, including $74.5 million that were
scheduled to mature by September 30, 2001. Management of the Company believes
it has adequate
9
<PAGE>
resources to fund all loan commitments with savings deposits and FHLB of Atlanta
advances. In addition, it can adjust the offering rates of certificates of
deposits to retain deposits in changing interest rate environments.
The Company decreased its borrowings from the FHLB in the nine months ended
September 30, 2000 by $5.1 million, from $33.7 million at December 31, 1999 to
$28.6 million at September 30, 2000. At September 30, 2000, the Company had
unused credit availability with the FHLB of up to $11.4 million limited by the
availability of qualifying first mortgage loans for collateral.
Stockholders' equity
At September 30, 2000 aggregate stockholders' equity decreased $1.8 million to
$12.2 million from $14.0 million at December 31, 1999. The reduction in
stockholder's equity is primarily attributable to the $904,000 loss incurred in
the first nine months of 2000 due to the provision for loan losses related to
the write-offs of approximately $925,000 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 and the write-off of
approximately $1.7 million incurred for known and estimated losses on non
performing and impaired loans, primarily in commercial and consumer loans in the
third quarter of 2000.
Also contributing to the decrease in stockholder's equity during the first nine
months of 2000 is the Company's acquisition of 54,360 shares at a cost of
$640,000 or at an average price of $11.77 per share under the Company's Stock
Repurchase 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
September 30, 2000:
<TABLE>
<CAPTION>
Percentage of
adjusted total
Amount assets
First Southern Bancshares, Inc: (Dollars in thousands)
<S> <C> <C>
Primary capital ratios:
GAAP capital $ 12,212
Adjustments:
Mortgage servicing rights (4)
Net unrealized loss on securities available for sale 82
--------------
Tier 1 capital 12,290 7.04%
Minimum Tier 1 (leverage) requirement 6,986 4.00%
-------------- ------------
Excess $ 5,304 3.04%
============== ============
Risk-based capital ratios:
Core (Tier 1) Capital 12,290 8.88%
Minimum core capital 5,536 4.00%
-------------- ------------
Excess $ 6,754 4.88%
============== ============
Risk-based capital $ 13,797 9.97%
Minimum risk-based capital requirement 11,074 8.00%
-------------- ------------
Excess $ 2,723 1.97%
============== ============
</TABLE>
10
<PAGE>
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.
<TABLE>
<CAPTION>
Percentage of
adjusted total
Amount assets
First Southern Bank: (Dollars in thousands)
<S> <C> <C>
Total capital (to risk-weighted assets) $ 14,320 10.35%
To be well capitalized under the FDICIA
prompt corrective action provisions 13,832 10.00%
-------------- ------------
Excess $ 488 0.35%
============== ============
Tier 1 capital (to risk-weighted assets) $ 12,813 9.26%
To be well capitalized under the FDICIA
prompt corrective action provisions 8,299 6.00%
-------------- ------------
Excess $ 4,514 3.26%
============== ============
Tier 1 capital (to average assets) $ 12,813 7.34%
To be well capitalized under the FDICIA
prompt corrective action provisions 8,730 5.00%
-------------- ------------
Excess $ 4,083 2.34%
============== ============
</TABLE>
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 September 30, 2000, the Bank's qualifying reserves of $1.8 million
significantly exceeded the required reserve of $251,000.
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 September 30, 2000, the Bank could have paid additional dividends for
Bancshares of $488,000 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 SEPTEMBER 30, 1999 AND 2000
General
Consolidated net income for the quarter ended September 30, 2000, decreased from
$325,000 in the comparable quarter in 1999 to a net loss of $866,000. Basic
earnings (loss) per share for the third quarter of 2000 was $(.69) as compared
to $0.20 for the comparable period in 1999, and diluted earnings (loss) per
share for the third quarter of 2000 was $(.69) as compared to $0.20 for the
comparable period in 1999. The loss in the third quarter of 2000 is
attributable to an increase in the provision for loan losses due to write-offs
of approximately $1.7 million incurred for known and estimated losses on non
performing and impaired loans.
11
<PAGE>
Net Interest Income
The third quarter net interest income (loss) after provision for loan losses was
$(314,000), or $2.0 million less than the $1.7 million reported for the
comparable quarter of 1999, as a result of the increase in the provision for
loan losses as discussed above.
Interest Income
Interest income for the third quarter of 2000 was $3.6 million compared with
$3.5 million for the third quarter of 1999, representing an increase of $ 99,000
or 2.9%. The increase was primarily attributable to an increase in the average
yield on interest-earning assets from 8.51% for the third quarter of 1999 to
8.83% for 2000, as a result of higher market interest rates. The yield on the
average balance of loans increased from 8.72% in the third quarter of 1999 to
8.95% in the third 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 rate mortgage loans.
Interest on loans receivable increased $160,000 to $3.4 million during the third
quarter of 2000 as compared to $3.2 million in the third quarter of 1999. The
increase was primarily attributable to an increase in average net loans of $3.4
million in the third quarter of 2000 ($148.0 million) from the comparable period
in 1999 ($151.4 million). Additionally, the average yield on total loans
increased as previously mentioned.
Interest on mortgage-related securities decreased slightly from $61,000 during
the third quarter of 1999 to $58,000 in 2000 as a result of the average balance
of mortgage-related securities decreasing by $186,000 during the third quarter
of 2000 ($3.4 million) as compared to the third quarter of 1999 ($3.6 million).
The average yields from such securities decreased from 6.81% in the third
quarter of 1999 to 6.75% in the third quarter of 2000.
Income from the investment securities portfolio decreased by $16,000 from
$87,000 during the third quarter of 1999 to $71,000 in the third quarter of 2000
as the result of the average balance of investment securities decreasing by $1.1
million during the third quarter of 2000 ($4.4 million) as compared to the
third quarter of 1999 ($5.5 million). The effect of this decrease in the
average balance was partially offset by an increase in the average yield on
investment securities from 6.37% in the third quarter of 1999 to 6.45% in the
third quarter of 2000.
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 $42,000 decrease in other interest income in 2000 to $55,000
when compared to the third quarter of 1999 other interest income of $97,000 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
$4.3 million in the third quarter of 1999 to $550,000 in the third quarter of
2000. FHLB dividends were $30,000 during the third quarter of 1999 as compared
to $36,000 in the third quarter of 2000 due to increase in average FHLB stock
from $1.6 million at September 30, 1999 to $1.9 million at September 30, 2000.
Interest Expense
Interest expense in the third quarter of 2000 was $2.0 million compared with
$1.7 million the third quarter of 1999, representing an increase of $283,000 or
16.3%.
Interest on deposits the third quarter of 2000 was $1.5 million compared with
$1.3 million the third quarter of 1999, representing an increase of $247,000 or
19.2%. The increase is due to a $3.3 million increase in average deposits in
the third quarter of 2000 ($121.6 million) as compared to the third quarter of
1999 ($118.3 million). Also contributing to the increase in interest expense,
is the increase in the average interest cost on deposits from 4.35% in third
quarter of 1999 to 5.05% in the third quarter of 2000 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 $36,000 to $482,000 in the third quarter of 2000 when compared to
the third quarter of 1999 total of $446,000 due to an increase in the average
interest cost on borrowings from 5.70% in the third quarter of 1999 to 6.01% in
the third quarter of 2000. The increase was also caused by an increase in
average other borrowings of $2.1 million in the third quarter of 2000 from the
third quarter of 1999. These additional borrowings were primarily used to fund
the Company's Stock Repurchase Plan.
12
<PAGE>
Provision for Loan Losses
The provision for loan losses was $1.9 million for the third quarter of 2000 as
compared to $49,000 for the comparable period in 1999. The increase in the
provision was due to loan charge offs of approximately $1.7 million incurred for
known and estimated losses on non performing and impaired loans, primarily in
commercial and consumer loans. 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. See " Comparison of Operating Results for the Nine Months Ended
September 30, 1999 and 2000 - Provision for Loan Losses" for further
discussion.
Non-interest Income
Non interest income for the third quarter increased from $156,000 in 1999 to
$186,000 in 2000 due primarily to a decrease in losses on real estate owned of
$75,000 to $6,000 in the third quarter of 2000 from $81,000 in third quarter of
1999.
Non-interest Expense.
The third quarter non interest expenses for 1999 and 2000 were constant at $1.3
million.
Income Taxes
Income taxes decreased by $783,000 in 2000, as a result of the decrease in
income before income taxes. Income tax benefits in the third quarter of 2000 was
$572,000 as compared to an expense of $211,000 in 1999, or approximately 40% of
income before income taxes representing expected federal and state tax rates.
COMPARISON OF OPERATING RESULTS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
General
Consolidated net income (loss) for the nine months ended September 30, 2000,
decreased $1.9 million to ($904,000) from $972,000 for the comparable nine
months in 1999. Basic earnings (loss) per share for the nine months ended
September 30, 2000, was $(.72) as compared to $0.59 for the comparable period in
1999, and diluted earnings (loss) per share for the nine months ended September
30, 2000 was $(.71) as compared to $0.59 for the comparable period in 1999. The
loss for the nine months ended September 30, 2000 is primarily attributable to
to the $925,000 charge-off of fraudulent loans in the second quarter and the
charge-offs of commercial business and consumer loans in the third quarter of
2000.
Net Interest Income
For the nine months ended September 30, 2000, net interest income after
provision for loan losses was $1.7 million, or 64% less than the $4.7 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 nine months ended September 30, 2000 was $10.8 million
compared with $10.4 million for the nine months ended September 30, 1999,
representing an increase of $395,000 or 3.8%. The increase was primarily
attributable to the yeild on average interest earning assets increasing from
8.40% in the nine months ended September 30, 1999 to 8.72% in the nine months
ended September 30, 2000 as a result of rising market interest rates. The yield
on the average balance of loans increased from 8.62% in the nine months ended
September 30, 1999 to 8.83% in the nine months ended September 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 rate mortgage loans.
13
<PAGE>
Interest on loans receivable increased $516,000 to $10.2 million during the nine
months ended September 30, 2000 as compared to $9.7 million in the nine months
ended September 30, 1999. The increase was primarily attributable to an
increase in average net loans of $4.3 million in the nine months ended September
30, 2000 ($154.4 million) from the comparable period in 1999 ($150.1 million).
Additionally, the average yield on total loans increased as previously
mentioned.
Interest on mortgage-related securities increased by $66,000 from $110,000
during the nine months ended September 30, 1999 to $176,000 for the comparable
period of 2000 as a result of the average balance of such securities increasing
from $2.1 million in the nine months ended September 30, 1999 to $3.5 million in
the nine months ended September 30, 2000.
Income from the investment securities portfolio increased by $29,000 from
$184,000 during the nine months ended September 30, 1999 to $213,000 in the nine
months ended September 30, 2000 as the result of the average balance of
investment securities increasing $700,000 from $3.7 million during the nine
months ended September 30, 1999 to $4.4 million for the nine months ended
September 30, 2000.
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 $216,000 decrease in other interest income in 2000 to
$165,000 when compared to the nine months ended September 30, 1999 other
interest income of $381,000 is due primarily to the decreased average invested
balance on the FHLB overnight and on money market funds from $7.2 million at
September 30, 1999 to $762,000 for the nine months ended September 30, 2000.
FHLB dividends were $96,000 during the nine months ended September 30, 1999 as
compared to $104,000 in the nine months ended September 30, 2000 due to increase
in average FHLB stock from $1.7 million at September 30, 1999 to $1.8 million at
September 30, 2000.
Interest Expense
Interest expense in the nine months ended September 30, 2000 was $5.9 million
compared with $5.3 million in the nine months ended September 30, 1999,
representing an increase of $658,000 or 12.5%.
Interest on deposits in the nine months ended September 30, 2000 was $4.4
million compared with $3.9 million in the nine months ended September 30, 1999,
representing an increase of $426,000 or 10.8%. The increase is due to a $2.1
million increase in average deposits in the nine months ended September 30, 2000
($122.3 million) as compared to the nine months ended September 30, 1999 ($120.2
million). The nine months ended September 30, 2000 average interest cost on
deposits increased to 4.76% as compared to 4.37% in the nine months ended
September 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
borrowings from other banks. Other interest expense increased by $232,000 to
$1.6 million in the nine months ended September 30, 2000 when compared to the
nine months ended September 30, 1999 total of $1.3 million due to an increase
in average borrowings of $3.1 million during the nine months ended September
30, 2000 of $34.5 million from the nine months ended September 30, 1999 average
levels of $31.4 million. The increase was also caused by an increased interest
costs on borrowed funds from 5.65% in the nine months ended September 30, 1999
to 6.02% in the nine months ended September 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
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 has
changed 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 and the Company has experienced significantly larger write-offs
and provision for loan losses in the quarter and nine months ended September 30,
2000 than in prior periods.
14
<PAGE>
An analysis of the allowance for loan losses for the nine months ended September
30, 1999 and 2000 follows (in thousands):
<TABLE>
<CAPTION>
Allowance for Loan Losses
-------------------------
Nine months ended
September 30,
1999 2000
------- ------
<S> <C> <C>
Activity:
Balance - beginning of period $1,441 $1,400
Add:
Provision for loan losses 392 3,152
Recoveries 118 71
Less:
Charge - offs 651 3,116
------- ------
Balance - end of period $1,300 $1,507
======= ======
Allocation:
General $1,081 $1,093
Impaired - 357
Unallocated 219 57
------- ------
$1,300 $1,507
======= ======
</TABLE>
The provision for loan losses was $3.2 million for the nine months ended
September 30, 2000 as compared to $392,000 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 regulatory authorities
regarding these transactions and the ongoing investigation. The potential for
recovery is unknown and cannot be estimated.
The increase in the provision for loan losses is also due to loan charge offs in
the third quarter of approximately $1.7 million incurred for known and estimated
losses on non performing and impaired loans, primarily in commercial and
consumer loans. At September 30, 2000, the allowance for loan losses was $1.5
million and represented 1.03% of total net loans and 34.2% of non performing
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 national 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 national 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.
15
<PAGE>
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. At September 30,
2000, the allowance for loan losses was $1.5 million and represented 1.03% of
total net loans and 34.2% of non performing loans.
In the opinion of management at September 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 nine months ended September 30, 2000 of $555,000
decreased from $621,000 for the comparable period in 1999. The decrease in non-
interest income was primarily attributable to a decrease of $96,000 on proceeds
from the sale of loans in the first nine months of 2000.
Non-interest Expense.
Non-interest expenses were steady at $3.8 million for the nine months ended
September 30, 2000 as compared to $3.7 million for the comparable period of
1999.
Income Taxes
Income taxes decreased by $1.2 million in 2000, as a result of the decrease in
income before income taxes. Income tax benefit in the nine months ended
September 30, 2000 was $599,000 as compared to an expense of $631,000 in the
nine months ended September 30, 1999, 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
Not applicable.
ITEM 5 - OTHER INFORMATION
Not applicable.
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 July 18, 2000, the Company filed a Form 8-K to report that on July 14, 2000,
Gary A. Gamble submitted his resignation from the Board of Directors of First
Southern Bancshares, Inc. and the Board of Directors of the Company's wholly
owned subsidiary, First Southern Bank, effective July 13, 2000. Also reported
was that the Company and the Bank each intended to reduce the size of the
respective Board of Directors to eliminate the vacancy created by his
resignation.
17
<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 13, 2000 /s/ Charles L. Frederick, Jr.
--------------------- -------------------------------------
Mr. Charles L. Frederick, Jr.
President and Chief Executive Officer
Date November 13, 2000 /s/ Ms. Glenda Young
--------------------- -------------------------------------
Ms. Glenda Young
Senior Vice President and Chief
18
