<PAGE>
<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File Number: 1-13964
The Southern Banc Company, Inc.
_________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Delaware 63-1146351
- ----------------------- -------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
221 S. 6th Street, Gadsden, Alabama 35901-4102
- --------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (205) 543-3860
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act 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 ninety days:
Yes X No
--- ----
As of September 30, 1997, there were 1,230,313 shares of
the registrant's Common Stock, par value $0.01 per share, issued
and outstanding.
Transitional small business disclosure format (check
one): Yes_ No X
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
<PAGE>
THE SOUTHERN BANC COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 4,970 $ 5,807
SECURITIES AVAILABLE FOR SALE 19,725 17,621
SECURITIES HELD TO MATURITY,
fair values of $42,275 and $44,250,
respectively 41,580 44,157
LOANS RECEIVABLE, net 38,070 36,181
PREMISES AND EQUIPMENT, net 270 267
ACCRUED INTEREST AND DIVIDENDS RECEIVABLE 769 747
PREPAID EXPENSES AND OTHER ASSETS 780 654
-------- --------
TOTAL ASSETS $106,164 $105,434
-------- --------
DEPOSITS $ 87,102 $ 86,759
OTHER LIABILITIES 930 743
-------- --------
TOTAL LIABILITIES 88,032 87,502
======== ========
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share,
500,000 shares authorized; shares issued
and outstanding -- none 0 0
Common stock, par $.01 per share,
1,382,013 shares issued and 1,230,313 shares
outstanding, 3,500,000 authorized. 15 15
Treasury stock at cost, 224,437 shares (3,000) (3,000)
Additional paid-in capital 13,661 13,643
Unearned compensation (1,850) (1,917)
Retained earnings 9,308 9,253
Unrealized gain on securities available
for sale, net (2) (62)
-------- --------
TOTAL STOCKHOLDERS' EQUITY $ 18,132 $ 17,932
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $106,164 $105,434
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
<PAGE>
<PAGE>
THE SOUTHERN BANC COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------
1997 1996
------- -------
(Unaudited) (Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 740 $ 675
Interest and dividends on securities available
for sale 292 230
Interest and dividends on securities held to
maturity 769 936
Other interest income 69 83
---------- ----------
Total interest income 1,870 1,924
INTEREST EXPENSE:
Interest on deposits 1,154 1,157
---------- ----------
Net interest income 716 767
Provision for loan losses 0 0
---------- ----------
Net interest income after provision
for loan losses 716 767
---------- ----------
NON-INTEREST INCOME:
Fees & other non-interest income 21 16
---------- ----------
NON-INTEREST EXPENSE:
Salaries and employee benefits 354 339
Office building and equipment expenses 66 74
Deposit insurance expense 14 644
Other operating expense 79 74
---------- ----------
Total non-interest expense 513 1,131
---------- ----------
Income (loss) before income taxes 224 (348)
PROVISION (BENEFIT) FOR INCOME TAXES 80 (134)
---------- ----------
Net income (loss) $ 144 $ (214)
========== ==========
EARNING (LOSS) PER SHARE $ 0.13 $ (0.17)
AVERAGE NUMBER OF SHARES OUTSTANDING 1,042,612 1,239,905
DIVIDENDS DECLARED PER SHARE $ 0.0875 $ 0.2625
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
<PAGE>
<PAGE>
THE SOUTHERN BANC COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended
September 30, 1997 and 1996
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
1997 1996
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 144 $ (214)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 12 11
Amortization (accretion), net 34 12
Amortization of unearned compensation 84 62
Provision for loan losses 0 0
Change in assets and liabilities:
(Increase) decrease in other assets (148) 1,077
Increase (decrease) in other liabilities 142 208
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Total adjustments 124 1,370
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Net cash provided by (used in) operating
activities 268 1,156
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (3,788) (2,450)
Proceeds from maturities and principal payments on
securities available for sale 1,746 837
Purchases of securities held to maturity 0 (750)
Proceeds from maturities and principal payments on
securities held to maturity 2,577 1,550
Net loan (originations) repayments (1,889) 104
Capital expenditures (15) (16)
------- -------
Net cash provided by (used in) investing
activities (1,369) 25
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net 343 1,116
Increase (decrease) in advance payments by
borrowers for taxes and insurance 9 8
Dividends paid (89) (307)
Contributions to plan trusts (17) (10)
Proceeds from exercise of stock options 18 0
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Net cash provided by financing activities 264 807
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Net increase (decrease) in cash and cash equivalents (837) 1,988
CASH AND CASH EQUIVALENTS, beginning of period 5,807 4,535
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 4,970 $ 6,523
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 0 $ 0
======= =======
Interest $ 1,154 $ 1,165
======= =======
Non-cash transactions:
Change in unrealized net gain on securities
available for sale, net $ 60 $ (12)
======= =======
</TABLE>
<PAGE>
THE SOUTHERN BANC COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The Southern Banc Company, Inc. (the "Company") was incorporated
in the State of Delaware in May 1995, for the purposes of
becoming a holding company to own all of the outstanding capital
stock of First Federal Savings & Loan Association of Gadsden
(the "Association") upon the Association's conversion from a
federally chartered mutual savings association to a federally
chartered stock association (the "Conversion"). The accounting
for the conversion is in a manner similar to that utilized in a
pooling of interest.
The accompanying unaudited condensed consolidated financial
statements as of September 30, 1997 and June 30, 1997, and for
the three month period ended September 30, 1997 and 1996,
include the accounts of the Company, the Association, and the
Association's wholly owned subsidiary, First Service Corporation
of Gadsden. All significant intercompany transactions and
accounts have been eliminated in consolidation.
The condensed consolidated financial statements were prepared by
the Company without an audit, but in the opinion of management,
reflect all adjustments necessary for the fair presentation of
financial position and results of operations for the three
months ended September 30, 1997 and 1996. Results of operations
for the current interim period are not necessarily indicative of
results expected for the entire fiscal year.
While certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities
and Exchange Commission, management believes that the
disclosures herein are adequate to make the information
presented not misleading. These condensed consolidated
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in
the Company's annual report on Form 10-KSB for the year ended
June 30, 1997. The accounting policies followed by the Company
are set forth in the summary of significant accounting policies
in the Company's June 30, 1997 consolidated financial
statements.
2. STOCK CONVERSION
On October 5, 1995, the Conversion of the Association from a
Federally chartered mutual institution to a Federally chartered
stock savings association through amendment of its charter and
issuance of common stock to the Company was completed. Related
thereto, the Company sold 1,454,750 shares of common stock, par
value $.01 per share, at an initial price of $10 per share in
subscription and community offerings. Costs associated with the
Conversion were approximately $880,000, including underwriting
fees. The conversion costs were deducted from the gross
proceeds of the sale of the common stock.
3. RETIREMENT AND SAVINGS PLANS
Employee Stock Ownership Plan
In connection with the Conversion, the Association established
an employee stock ownership plan (the "ESOP") for eligible
employees. The ESOP purchased 116,380 shares of the Company's
common stock with the proceeds of a $1,163,800 note payable from
the Association and secured by the Common Stock owned
by the ESOP. Unearned compensation for the ESOP was charged to
stockholders' equity and is reduced ratably in connection with
principal payments under the terms of the plan. Unearned
compensation is amortized into compensation expense based on
employee services rendered in relation to shares which are
committed to be released.
<PAGE>
Management Recognition Plan
During fiscal 1996, the Association established a management
recognition plan (the "MRP") which purchased 58,190 shares of
the Company's common stock on the open market subsequent to the
Conversion. The MRP provides for awards of common stock to
directors and officers of the Association. A trust was formed
for the purpose of purchasing shares of stock in the open market
for future awards of stock options under the MRP Plan. The
aggregate fair market value of the shares purchased by the MRP
is considered unearned compensation at the time of purchase and
compensation is earned ratably over the stipulated vesting
period. Unearned compensation related to the MRP is shown as a
reduction to shareholders' equity in the accompanying
consolidated statements of condition. The Plan held 56,008
issued and outstanding shares at September 30, 1997.
Stock Option and Incentive Plan
The Company has a stockholder approved Option and Incentive Plan
(the "Option Plan"). The Option Plan provides for the grant of
incentive stock options (ISO's) to employees and non-incentive
stock options (non-ISO's) to non-employee directors. The
exercise price is based on the market price of the common stock
on the date of grant. A trust was formed for the purpose of
purchasing shares of stock in the open market for issuance upon
future exercises of stock options under the Option Plan. The
Plan held 34,690 issued and outstanding shares at September 30,
1997.
Simplified Employee Pension Plan
The Company established a Simplified Employee Pension Plan
("SEP") for all employees who have completed one year of
service, pursuant to Section 408(k) of the Internal Revenue Code
of 1986. The Company makes a discretionary contribution to the
SEP on an annual basis.
4. EARNINGS PER SHARE
Earnings per share have been computed based on the weighted
average number of shares of common stock outstanding during the
three month period ended September 30, 1997. Common stock
outstanding is comprised of issued shares less treasury stock,
unallocated ESOP shares, and shares owned by the MRP and Stock
option trusts.
Fully diluted earnings per share is computed based on the
weighted average number of shares of common stock and common
stock equivalents outstanding during the three month period
ended September 30, 1997. Common stock equivalents include
shares awarded under the MRP and stock option plans, based on
the average price of the common stock during the period.
Earnings per share for the three month period ended September
30, 1996, is presented on a retroactive basis, as if the
1,454,750 shares had been outstanding during the entire period.
5. FDIC ASSESSMENT
The Association's deposits are insured by the Savings
Association Insurance Fund("SAIF"), which is administered by the
Federal Deposit Insurance Corporation ("FDIC"). Congress
recently passed legislation requiring a one-time special
assessment of 65.7 basis points to be applied against SAIF-
assessable deposits as of March 31, 1995. The Association
recognized an expense at September 30, 1996 in the amount of
$591,000 to record the one-time special assessment.
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<PAGE>
6. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, FASB issued SFAS No. 128, "Earnings per
Share". This Statement establishes standards for computing and
presenting earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. This
Statement simplifies the standards for computing earnings per
share previously found in APB Opinion No. 15, "Earnings per
Share", and makes them comparable to international EPS
standards. It replaces the presentation of primary EPS with a
presentation of basic EPS and requires dual presentation of
basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a
reconciliation denominator of the diluted EPS computation.
This Statement is effective for financial statements issued for
periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. This Statement
requires restatement of all prior-period EPS data presented.
The Company will adopt the Statement at fiscal year-end 1998.
Assuming the adoption of SFAS No. 128 and the Conversion of the
Company had been consummated at July 1, 1995, the earnings per
share amounts, on a pro forma basis, would have been as follows:
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
September 30, 1996 September 30, 1997
------------------ ------------------
<S> <C> <C>
Basic and Diluted earnings
per share ($ .17) $ .13
</TABLE>
In June 1997, FASB issued SFAS No. 130, "Reporting of
Comprehensive Income." This statement established standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of
financial statements. This statement also requires that all
items that are required to be recognized under accounting
standards as components of comprehensive income be reported in
financial statement that is displayed with the same prominence
as other financial statements.
This Statement is effective for fiscal years beginning after
December 15, 1997. Earlier application is permitted.
Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
In June 1997, FASB issued SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information". This
Statement establishes standards for the way that public business
enterprises report information about operating segments in
annual financial statements and requires that those enterprises
report selected information about operating segments in interim
financial reports issued to stockholders. This Statement also
establishes standards for related disclosures about products and
services, geographic areas, and major customers. This Statement
requires the reporting of financial and descriptive information
about an enterprise's reportable operating segments.
This Statement is effective for financial statements for periods
beginning after December 15, 1997. In the initial year of
application comparative information for earlier years is to be
restated.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Financial Condition at September 30 and June 30,
1997.
Total assets increased approximately $730,000 or 0.69% from
$105.4 million at June 30, 1997 to $106.2 million at September
30, 1997. During the period ended September 30, 1997, net loans
increased approximately $1.9 million or 5.22%, securities
available for sale increased approximately $2.1 million or
11.94% and securities held to maturity decreased approximately
$2.6 million or 5.84%. The decrease in securities held to
maturity was primarily attributable to maturities and principal
payments received during the period ended September 30, 1997.
Cash and cash equivalents decreased approximately $837,000 or
14.41% from $5.8 million to $5.0 million at September 30, 1997.
The decrease in cash was primarily attributable to the purchase
of investment securities and loan origination's.
Accrued interest and dividends receivable increased
approximately $22,000 or 2.95% from $747,000 at June 30, 1997 to
$769,000 at September 30, 1997. Prepaid expenses and other
assets increased approximately $126,000 or 19.27% from $654,000
at June 30, 1997 to $780,000 at September 30, 1997. This
increase was primarily attributable to an increase in prepaid
federal income taxes.
Total deposits increased approximately $343,000 or 0.40% from
$86.8 million at June 30, 1997 to $87.1 million at September 30,
1997. Other liabilities during the period ended September 30,
1997 increased approximately $187,000 or 25.17% from $743,000 to
$930,000. This increase was primarily attributable to an
increase in accrued federal income taxes.
Total equity increased approximately $200,000 or 1.12% from
$17.9 million at June 30, 1997 to $18.1 million at September 30,
1997. This change was primarily attributable to an increase in
retained earnings, additional paid-in capital, and amortization
of unearned compensation, offset in part by the payment of
common stock dividends. Treasury stock at September 30, 1997
was $3.0 million.
Comparison of Results of Operations for the Three Months Ended
September 30, 1997 and 1996.
The Company reported net income for the three months ended
September 30, 1997 of $144,000 compared with a net loss of
$214,000 for the three months ended September 30, 1996. This
increase was primarily attributable to a reduction deposit
insurance expense, offset in part by an increase in income tax
expense.
Net Interest Income. Net interest income for the three months
ended September 30, 1997 was $716,000 as compared to $767,000
for the three months ended September 30, 1996. Total interest
income decreased approximately $54,000 or 2.81% for the three
months ended September 30, 1996 and 1997, respectively.
This decrease was primarily attributable to the maturity of
securities during the three month period. Total
interest expense decreased approximately $3,000 or 0.26% for the
three months ended September 30, 1997 compared with the three
months ended September 30, 1996.
Provision for Loan Losses. No provision for loan losses was
deemed necessary in either of the three month periods ended
September 30, 1997 or 1996. The allowance for loan losses is
based on management's evaluation of possible loan losses
inherent in the Association's loan portfolio. Management
considers, among other factors, past loss experience, current
economic conditions, volume, growth and composition of the loan
portfolio, and other relevant factors.
Non-interest Income. Non-interest income increased
approximately $5,000 or 31.25% from $16,000 to $21,000 for the
three month period ended September 30, 1997 compared to the
three month period ended September 30, 1996.
<PAGE>
Non-interest Expense. Non-interest expense decreased
approximately $618,000 or 54.64% for the three month period
ended September 30, 1997 from $1.1 million at September 30, 1996
to $513,000 at September 30, 1997. This decrease was primarily
attributable to the reduction in deposit insurance expense
related to the recognition of the one-time special assessment by
the FDIC in the amount of $591,000 during the three month period
ended September 30, 1996. For the three month period ended
September 30, 1997, salaries and employee benefits increased
approximately $15,000 or 4.42% compared with the three month
period ended September 30, 1996. Other operating expenses
increased approximately $5,000 or 6.76% for the three month
periods ended September 30, 1997 as compared to the three month
period ended September 30, 1996. This increase was primarily
attributable to operating expenses relating to the operation of
the holding company and professional fees associated with
back-office operational improvements.
Provision for Income Taxes. For the three month period ended
September 30, 1997, provision for income tax expense increased
$214,000 or 159.70% as compared to the three month period ended
September 30, 1996. This increase was primarily attributable to
reduction in deposit insurance expense related to the
recognition of the one-time special assessment by the FDIC in
the amount of $591,000 during the three month period ended
September 30, 1996. As a result, income before income taxes
increased $572,000 for the three month period ended September
30, 1997 as compared to the three month period ended September
30, 1996.
Liquidity and Capital Resources. As a holding company, the
Company conducts its business through its subsidiary, the
Association. The Association is required to maintain minimum
levels of liquid assets as defined by regulations of the Office
of Thrift Supervision. This requirement, which varies from time
to time depending upon economic conditions and deposit flows, is
based upon a percentage of deposits and short-term borrowings.
The required ratio currently is 5.0%. The Association's average
liquidity ratio well exceeded the required maximums at and
during the three month period ended September 30, 1997. The
Association adjusts its liquidity levels in order to meet
funding needs of deposit outflows, repayment of borrowings and
loan commitments. The Association also adjusts liquidity as
appropriate to meet its asset and liability management
objectives.
The Association's primary sources of funds are deposits, payment
of loans and mortgage-backed securities, maturities of
investment securities and other investments. While scheduled
principal repayments on loans and mortgage-backed securities are
a relatively predictable source of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates,
economic conditions, and competition. The Association invests
in short-term interest-earning assets which provide liquidity to
meet lending requirements.
The Association is required to maintain certain levels of
regulatory capital. At September 30, 1997, the Association
exceeded all minimum regulatory capital requirements.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company and any subsidiaries may
be a party to various legal proceedings incident to
its or their business. At September 30, 1997, there
were no legal proceedings to which the Company or any
subsidiary was a party, or to which any of their
property was subject, which were expected by management
to result in a material loss.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On October 16, 1997, The Southern Banc Company, Inc.
announced a dividend in the amount of $.0875 per share
on or about December 15, 1997 to stockholders of record
at the close of business on November 21, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE SOUTHERN BANC COMPANY
Date: November 7, 1997 By: /s/ James B. Little, Jr.
-----------------------------------
James B. Little, Jr.
(Principal Executive and Financial
Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 234
<INT-BEARING-DEPOSITS> 4,736
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19,725
<INVESTMENTS-CARRYING> 41,580
<INVESTMENTS-MARKET> 42,275
<LOANS> 38,146
<ALLOWANCE> 76
<TOTAL-ASSETS> 106,164
<DEPOSITS> 87,102
<SHORT-TERM> 0
<LIABILITIES-OTHER> 930
<LONG-TERM> 0
<COMMON> 15
0
0
<OTHER-SE> 18,117
<TOTAL-LIABILITIES-AND-EQUITY> 106,164
<INTEREST-LOAN> 740
<INTEREST-INVEST> 1,061
<INTEREST-OTHER> 69
<INTEREST-TOTAL> 1,870
<INTEREST-DEPOSIT> 1,154
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 716
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 513
<INCOME-PRETAX> 224
<INCOME-PRE-EXTRAORDINARY> 224
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<CHANGES> 0
<NET-INCOME> 144
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
<YIELD-ACTUAL> 7.53
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
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<ALLOWANCE-FOREIGN> 0
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</TABLE>
