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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 December 31, 1998
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: (256) 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 December 31, 1998, 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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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
1
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THE SOUTHERN BANC COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 5,000 $ 6,422
SECURITIES AVAILABLE FOR SALE 21,258 22,239
SECURITIES HELD TO MATURITY,
fair values of $33,824 and $34,811,
respectively 33,038 34,077
LOANS RECEIVABLE, net 42,466 41,153
PREMISES AND EQUIPMENT, net 247 251
ACCRUED INTEREST AND DIVIDENDS RECEIVABLE 695 723
PREPAID EXPENSES AND OTHER ASSETS 311 222
-------- --------
TOTAL ASSETS $103,015 $105,087
======== ========
DEPOSITS $ 84,188 $ 85,926
OTHER LIABILITIES 706 591
-------- --------
TOTAL LIABILITIES 84,894 86,517
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,
1,454,750 shares issued and 1,173,113
shares outstanding, 3,500,000 authorized. 15 15
Treasury stock at cost, 281,637 shares (3,756) (3,000)
Additional paid-in capital 13,701 13,677
Unearned compensation (1,420) (1,602)
Retained earnings 9,502 9,433
Unrealized gain on securities available
for sale, net 79 47
-------- --------
TOTAL STOCKHOLDERS' EQUITY $ 18,121 $ 18,570
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $103,015 $105,087
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
2
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THE SOUTHERN BANC COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- ---------------------
1998 1997 1998 1997
----------------------- ---------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 801 $ 773 $ 1,594 $ 1,513
Interest and dividends on securities
available for sale 309 320 660 612
Interest and dividends on securities held
to maturity 577 718 1,192 1,487
Other interest income 88 63 171 132
------- ------- ------- -------
Total interest income 1,775 1,874 3,617 3,744
INTEREST EXPENSE:
Interest on deposits 1,078 1,146 2,224 2,300
------- ------- ------- -------
Net interest income 697 728 1,393 1,444
Provision for loan losses 27 0 27 0
Net interest income after provision
for loan losses ------- ------- ------- -------
670 728 1,366 1,444
------- ------- ------- -------
NON-INTEREST INCOME:
Fees & other non-interest income 77 20 108 41
------- ------- ------- -------
NON-INTEREST EXPENSE:
Salaries and employee benefits 438 406 756 760
Office building and equipment expenses 60 65 123 131
Deposit insurance expense 13 14 26 28
Other operating expense 97 101 191 180
------- ------- ------- -------
Total non-interest expense 608 586 1,096 1,099
------- ------- ------- -------
Income before income taxes 139 162 378 386
PROVISION FOR INCOME TAXES 47 59 129 139
------- ------- ------- -------
Net income $ 92 $ 103 $ 249 $ 247
======= ======= ======= =======
EARNING PER SHARE - BASIC $ 0.09 $ 0.10 $ 0.24 $ 0.23
EARNING PER SHARE - DILUTED $ 0.09 $ 0.09 $ 0.23 $ 0.22
DIVIDENDS DECLARED PER SHARE $0.0875 $0.0875 $0.1750 $0.1750
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
3<PAGE>
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THE SOUTHERN BANC COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended
December 31, 1998 and 1997
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 249 $ 247
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 17 24
Amortization (accretion), net 22 65
Amortization of unearned compensation 237 180
Provision for loan losses 27 0
Change in assets and liabilities:
(Increase) decrease in accrued interest &
dividends receivable 28 28
(Increase) decrease in other assets (89) (44)
Increase (decrease) in other liabilities 128 66
-------- -------
Total adjustments 370 319
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Net cash provided by (used in) operating
activities 619 566
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (10,559) (5,237)
Proceeds from maturities and principal payments on
securities available for sale 11,560 2,759
Purchases of securities held to maturity (5,780) (3,500)
Proceeds from maturities and principal payments on
securities held to maturity 6,829 6,369
Net loan (originations) repayments (1,340) (3,012)
Capital expenditures (13) (26)
-------- -------
Net cash provided by (used in) investing
activities 697 (2,647)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net (1,738) (792)
Increase (decrease) in advance payments by
borrowers for taxes and insurance (33) 33
Dividends paid (180) (180)
Contributions to plan trusts (31) (34)
Proceeds from exercise of stock options 0 35
Purchase of treasury stock (756) 0
-------- -------
Net cash provided by financing activities (2,738) (938)
-------- -------
Net increase (decrease) in cash and cash equivalents (1,422) (3,019)
CASH AND CASH EQUIVALENTS, beginning of period 6,422 5,807
-------- -------
CASH AND CASH EQUIVALENTS, end of period $ 5,000 $ 2,788
======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 71 $ 75
======== =======
Interest $ 2,224 $ 2,300
======== =======
Non-cash transactions:
Change in unrealized net gain on securities
available for sale, net $ 32 $ 127
======== =======
</TABLE>
4<PAGE>
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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 December 31, 1998 and June 30, 1998, and for
the three and six month periods ended December 31, 1998 and
1997, include the accounts of the Company, the Association, and
the Company'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 and
six month periods ended December 31, 1998 and 1997. 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, 1998. The accounting policies followed by the Company
are set forth in the summary of significant accounting policies
in the Company's June 30, 1998 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.
5
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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 43,503
issued and outstanding shares at December 31, 1998.
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 27,223 issued and outstanding shares at December 31,
1998.
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
Basic earnings per share were computed by dividing net income by
the weighted average number of shares of common stock
outstanding during the three and six month periods ended
December 31, 1998 and 1997. Common stock outstanding consists
of issued shares less treasury stock, unallocated ESOP shares,
and shares owned by the MRP and Stock Option plan trusts.
Diluted earnings per share for the three and six month periods
ended December 31, 1998 and 1997, were computed by dividing net
income by the weighted average number of shares of common stock
and the dilutive effects of the shares awarded under the MRP and
the Stock Option plans, based on the treasury stock method using
an average fair market value of the stock during the respective
periods.
The following table represents the earnings per share
calculations for the three and six months ended December 31,
1998 and 1997, accompanied by the effect of this accounting
change on previously reported earnings per share:
6<PAGE>
<TABLE>
<CAPTION>
Per Share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
For the Three Months Ended:
--------------------------
December 31, 1998
Net income $ 92,000
--------
Basic earnings per share:
Income available to common shareholders 92,000 1,036,631 $ 0.09
Dilutive Securities:
Management recognition plan shares 24,449
Stock option plan shares 9,483
-------- ---------
Dilutive earnings per share:
Income available to common shareholders
plus assumed conversions $ 92,000 1,070,563 $ 0.09
-------- --------- --------
</TABLE>
7<PAGE>
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<TABLE>
<CAPTION>
Per Share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
December 31, 1997
Net income $103,000
--------
Basic earnings per share:
Income available to common shareholders 103,000 1,055,896 $ 0.10
--------
Dilutive Securities:
Management recognition plan shares 32,590
Stock option plan shares 37,432
-------- ---------
Dilutive earnings per share:
Income available to common shareholders
plus assumed conversions $103,000 1,125,918 $ 0.09
-------- --------- --------
For the Six Months Ended:
------------------------
December 31, 1998
Net income $249,000
--------
Basic earnings per share:
Income available to common shareholders 249,000 1,057,417 $ 0.24
--------
Dilutive Securities:
Management recognition plan shares 24,449
Stock option plan shares 16,823
-------- ---------
Dilutive earnings per share:
Income available to common shareholders
plus assumed conversions $249,000 1,098,689 $ 0.23
-------- --------- --------
December 31, 1997
Net income $247,000
--------
Basic earnings per share:
Income available to common shareholders 247,000 1,054,858 $ 0.23
--------
Dilutive Securities:
Management recognition plan shares 32,590
Stock option plan shares 33,891
-------- ---------
Dilutive earnings per share:
Income available to common shareholders
plus assumed conversions $247,000 1,121,429 $ 0.22
-------- --------- --------
</TABLE>
5. COMPREHENSIVE INCOME
The Company adopted SFAS No. 130 July 1, 1998. SFAS No. 130
established standards for reporting and display of comprehensive
income and its components.
The Company has classified certain securities as available for
sale in accordance with Financial Accounting Standards Board
Statement No. 115. For the six month period ended December 31,
1998 the net unrealized gain on these securities increased by
$32,000. For the six month period ended December 31, 1997 the
net unrealized gain on these securities increased by $77,000.
Pursuant to Statement No.115, any unrealized gain or loss
activity of available for sale securities is to be recorded as
an adjustment to a separate component of shareholders' equity,
net of income tax effect. Accordingly, for the six month
periods ended December 31, 1998 and 1997, the Company recognized
a corresponding adjustment in the net unrealized gain component
of equity.
8<PAGE>
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Since comprehensive income is a measure of all changes in equity
of an enterprise that result from transactions and other
economic events of the period, this change in unrealized gain
serves to increase or decrease comprehensive income. The
following table represents comprehensive income for the six
month periods ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Six Months
Ended
December 31,
---------------
1998 1997
------ ------
<S> <C> <C>
Net income $249 $247
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities 32 77
---- ----
Comprehensive income $281 $324
==== ====
</TABLE>
6. PENDING ACCOUNTING PRONOUNCEMENTS
The AICPA has issued Statements of Position 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for
Internal Use". This statement requires capitalization of
external direct costs of materials and services; payroll and
payroll-related costs for employees directly associated; and
interests cost during development of computer software for
internal use (planning and preliminary costs should be
expensed). Also, capitalized costs of computer software
developed or obtained for internal use should be amortized on a
straight-line basis unless another systematic and rational basis
is more representative of the software's use.
This statement is effective for financial statements for fiscal
years beginning after December 15, 1998 (prospectively) and is
not expected to have a material effect on the consolidated
financial statements.
9<PAGE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Financial Condition at December 31 and June 30,
1998.
Total assets decreased approximately $2.1 million or 1.97% from
$105.1 million at June 30, 1998 to $103.0 million at December
31, 1998. During the period ended December 31, 1998, net loans
increased approximately $1.3 million or 3.19%, securities
available for sale decreased approximately $1.0 million or 4.41%
and securities held to maturity decreased approximately $1.0
million or 3.05%. The decrease in securities available for sale
and held to maturity was primarily attributable to principal
payments received during the period ended December 31, 1998.
Cash and cash equivalents decreased approximately $1.4 million
or 22.14% from $6.4 million to $5.0 million at December 31,
1998. The decrease in cash and cash equivalents was primarily
attributable to the purchase of investment securities and loan
originations.
Accrued interest and dividends receivable decreased
approximately $28,000 or 3.87% from $723,000 at June 30, 1998 to
$695,000 at December 31, 1998. Prepaid expenses and other
assets increased approximately $89,000 or 40.09% from $222,000
at June 30, 1998 to $311,000 at December 31, 1998.
Total deposits decreased approximately $1.7 million or 2.02%
from $85.9 million at June 30, 1998 to $84.2 million at December
31, 1998. Other liabilities during the period ended December
31, 1998 increased approximately $115,000 or 19.46% from
$591,000 at June 30, 1998 to $706,000 at December 31, 1998.
This increase was primarily attributable to an increase in
accrued federal and state income taxes.
Total equity decreased approximately $449,000 or 2.42% from
$18.6 million at June 30, 1998 to $18.1 million at December 31,
1998. 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 and treasury stock purchases. Treasury
stock at December 31, 1998 was $3.8 million.
Comparison of Results of Operations for the Three and Six Months
Ended December 31, 1998 and 1997.
The Company reported net income for the three and six month
periods ended December 31, 1998 of $92,000 and $249,000,
respectively. Net income for the three month period decreased
approximately $11,000 or 10.68% from $103,000 at December 31,
1997 to $92,000 at December 31, 1998. For the six month period,
net income increased approximately $2,000 or 0.81% from $247,000
at December 31, 1997 to $249,000 at December 31, 1998.
Net Interest Income. Net interest income for the three and
six months ended December 31, 1998 and 1997 decreased $31,000 or
4.26% and $51,000 or 3.53%, respectively. Total interest income
decreased approximately $99,000 or 5.28% and $127,000 or 3.39%
for the three and six months ended December 31, 1998 and 1997,
respectively.
Provision for Loan Losses. For the six months ended December
31, 1998, provision for loan losses increased approximately
$27,000. This increase is primarily attributed to volume
increases in consumer and mortgage loans. 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 $57,000 or 285.00% from $20,000 to $77,000 for the
three month period ended December 31, 1998 compared to the three
month period ended December 31, 1997. For the six month period
ended December 31, 1998 non-interest income increased
approximately $67,000 or 163.41% from $41,000 to $108,000. The
increase in non-interest income for the three and six months
ended December 31, 1998 was primarily attributable to an
increase in prepayment penalties and mortgage loan origination
fees. During the six month period ended December 31, 1998, the
Association recorded gains on the sale of securities of
approximately $33,000.
10<PAGE>
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Non-interest Expense. Non-interest expense increased
approximately $22,000 or 3.75% for the three month period ended
December 31, 1998 from $586,000 to $608,000. For the six month
period ended December 31, 1998, non-interest expense decreased
approximately $3,000 or 0.27%. Salaries and employee benefits
increased approximately $32,000 or 7.88% for the three month
period ended December 31, 1998 compared with the three month
period ended December 31, 1997. This increase was primarily
attributable to salary and benefit expenses related to the
establishment of certain employee benefit plans, subsequent to
the conversion. For the six month period ended December 31,
1998, salaries and benefits decreased approximately $4,000 or
0.53% compared with the six month period ended December 31,
1997. Other operating expenses decreased by $4,000 or 3.96% and
increased by $11,000 or 6.11% for the three and six month
periods ended December 31, 1998 and 1997, respectively. This
increase was primarily attributable to an increase in
advertising expense associated with the promotion of loans and a
new checking account program.
Provision for Income Taxes. For the three month period ended
December 31, 1998, provision for income tax expense decreased
approximately $12,000 or 20.34%. For the six month period ended
December 31, 1998, provision for income tax expense decreased
approximately $10,000 or 7.19%. For the three month period
ended December 31, 1998, income before income taxes decreased
approximately $23,000 or 14.20% as compared to the three month
period ended December 31, 1997. For the six month period ended
December 31, 1998, income before income taxes decreased
approximately $8,000 or 2.07% compared to the six month period
ended December 31, 1997.
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 4.0%. The Association's average
liquidity ratio well exceeded the required maximums at and
during the three and six month periods ended December 31, 1998.
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 December 31, 1998, the Association
exceeded all minimum regulatory capital requirements.
Recent Events. On February 4, 1999 the Goodyear Tire & Rubber
Company announced it will slash approximately 1,320 jobs as it
halts tire production at the Gadsden, Alabama factory. The
layoffs are expected by year end. However, according to the
news release, the plant will continue to mix rubber for other
Goodyear plants. Estimates range from 180 to 230 workers that
will be retained to run the rubber mixing operations.
Possible Year 2000 Computer Program Problems
A great deal of information has been disseminated about the
global computer crash that may occur in the year 2000. Many
computer programs that can only distinguish the final two digits
of the year entered (a common programming practice in earlier
years) are expected to read entries for the year 2000 as the
year 1900. All of the significant data processing of the
Association that could be affected by this problem is provided
by a third party service bureau. The service bureau of the
Association has advised the Association that it expects to
resolve this potential problem before the year 2000. However,
if the service bureau is unable to resolve this potential
problem in time, the Association would likely experience
significant data processing delays, mistakes or failures. These
delays, mistakes or failures could have a material adverse
impact on the financial condition and results of operation
of the Association.
Risks to the Company if its computer systems are not year 2000
compliant include the inability to process customer deposits or
checks drawn on the Association, inaccurate interest accruals
and maturity dates of loans and time deposits, and the inability
to update accounts for daily transactions. Other risks to the
Company exist if certain of its vendors',
11<PAGE>
<PAGE>
suppliers' and customers' computer systems are not Year 2000
compliant. These risks include the inability of the Association
to communicate with its third party service bureau if phone
systems are not working, the interruption of business in the
event of power outages, the inability of loan customers to
comply with repayment terms if their businesses are interrupted,
the inability to make payment for checks drawn on the
Association, receive payment for checks deposited by the
Association's customers, or invest excess funds if the Federal
Home Loan Bank or correspondent banks are not Year 2000
compliant. The Company's most important mission critical system
is the software and hardware responsible for maintaining and
processing general ledger, deposits, and loan accounts. The
Company's Year 2000 Compliance and Contingency Plans are
structured in accordance with the OTS and the FFIEC guidelines.
Remediation and testing efforts relating to the Year 2000 were
completed before December 31, 1998. The Company is in the
process of contacting its key vendors, suppliers and customers
to determine their Year 2000 compliance. The Company estimates
that the cost of testing and updating its systems for Year 2000
compliance will not be material.
12<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 December 31, 1998, 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 and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On November 12, 1998, the Registrant held its Annual
Meeting of Stockholders for the purpose of electing one
director, whose term expires in 1999, and three directors, whose
term will expire in 2001. All matters were approved. The
results of the voting at the Annual Meeting were as follows:
Proposal I - Election of Directors
NOMINEE TERM VOTES VOTES
EXPIRES FOR WITHHELD
- ---------------- -------- ------- ---------
Gates Little 1999 1,070,260 903
Grady Gillam 2001 1,070,260 903
W. Roscoe Johnson, III 2001 1,070,260 903
Rex G. Keeling, Jr. 2001 1,070,260 903
Item 5. Other Information
On January 26, 1999, The Southern Banc Company, Inc.
announced a dividend in the amount of $.0875 per share
on or about March 15, 1999 to stockholders of record at
the close of business on February 19, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
During the three months ended December 31,
1998, the Company filed a Current Report
on Form 8-K dated October 16, 1998 and a
Current Report on Form 8-K/A dated
October 16, 1998 to announce the adoption
of a stock repurchase program.
13
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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: February 16, 1999 By: /s/ James B. Little, Jr.
----------------------------
James B. Little, Jr.
(Principal Executive and
Financial Officer)
<PAGE>
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