-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N1fKxWmG+W3Y6AEzwa3arsczjBCzUw3Glttg/EIaIsvCc3Qvw1j4DsRlDJJskxkh aNaLLxbwptkeXyXXxix1gA== 0000904280-99-000096.txt : 19990217 0000904280-99-000096.hdr.sgml : 19990217 ACCESSION NUMBER: 0000904280-99-000096 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN BANC CO INC CENTRAL INDEX KEY: 0000946453 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 631146351 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-13964 FILM NUMBER: 99540295 BUSINESS ADDRESS: STREET 1: 221 S. 6TH STREET CITY: GADSDEN STATE: AL ZIP: 35901-4102 BUSINESS PHONE: 2055433860 MAIL ADDRESS: STREET 1: 221 S 6TH STREET CITY: GADSDEN STATE: AL ZIP: 35901-4102 10QSB 1 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 --- --- PART I. FINANCIAL INFORMATION Item 1. Financial Statements 1 THE SOUTHERN BANC COMPANY, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollar Amounts in Thousands)
December 31, June 30, 1998 1998 ------------ ------------ (Unaudited) 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 ======== ========
The accompanying notes are an integral part of these condensed consolidated statements. 2 THE SOUTHERN BANC COMPANY, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollar Amounts in Thousands)
Three Months Ended Six Months Ended December 31, December 31, ----------------------- --------------------- 1998 1997 1998 1997 ----------------------- --------------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) 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
The accompanying notes are an integral part of these condensed consolidated statements. 3 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)
1998 1997 ----------- ----------- (Unaudited) (Unaudited) 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 -------- ------- Net cash provided by (used in) operating activities 619 566 -------- ------- 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 ======== =======
4 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 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
Per Share Income Shares Amount ------ ------ --------- 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 -------- --------- --------
7
Per Share Income Shares Amount ------ ------ --------- 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 -------- --------- --------
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 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:
Six Months Ended December 31, --------------- 1998 1997 ------ ------ Net income $249 $247 Other comprehensive income (loss), net of tax: Unrealized gain (loss) on securities 32 77 ---- ---- Comprehensive income $281 $324 ==== ====
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 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 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 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 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 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) EX-27.1 2 - ARTICLE 9 FIN. DATA SCHEDULE FOR 2ND QTR 10-Q
9 1,000 6-MOS JUN-30-1999 DEC-31-1998 230 4,769 0 0 21,258 33,038 33,824 42,569 103 103,015 84,188 0 706 0 15 0 0 18,106 103,015 1,594 1,852 171 3,617 2,224 0 1,393 27 0 1,096 378 378 0 0 249 0.24 0.23 2.77 0 0 0 0 76 0 0 103 0 0 103
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