FORM 10-QSB/A

Amendment No. 1

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, 2005

Commission File Number: 33-93218

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  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  x

As of December 31, 2005, there were 836,016 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

Purpose of Amendment No. 1

This amendment on Form 10-QSB/A amends the Quarterly Report on Form 10-QSB previously filed by the Company on February 14, 2006 for the fiscal quarter ended December 31, 2005. The purpose of this amendment is solely to correct inadvertent incorrect disclosures of the dividend payable date in Note 7 of Notes to Unaudited Condensed Consolidated Financial Statements and Item 5 of Part II, which previously was reported to be March 22, 2006. The correct date is March 20, 2006. This Form 10-QSB/A does not reflect events occurring after the date of filing of the original Form 10-QSB, or amend or update the other disclosures therein.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE SOUTHERN BANC COMPANY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollar Amounts in Thousands)

	December 31, 2005			June 30, 2005
ASSETS
CASH AND CASH EQUIVALENTS	$	4,823		$	4,107
SECURITIES AVAILABLE FOR SALE, at fair value		57,012			59,403
SECURITIES HELD TO MATURITY, at amortized cost, fair value of $3,149 and $3,779, respectively		3,068			3,660
FEDERAL HOME LOAN BANK (FHLB) STOCK		509			509
LOANS RECEIVABLE, net of allowance for loan losses of $145 and $135, respectively		35,446			35,531
PREMISES AND EQUIPMENT, net		1,108			608
ACCRUED INTEREST AND DIVIDENDS RECEIVABLE		465			441
PREPAID EXPENSES AND OTHER ASSETS		478			552
TOTAL ASSETS	$	102,908		$	104,811
LIABILITIES
DEPOSITS	$	80,958		$	81,736
FHLB ADVANCES		5,667			6,083
OTHER LIABILITIES		222			289
TOTAL LIABILITIES		86,847			88,108
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $.01 per share 500,000 shares authorized, shares issued and outstanding— none		0			0
Common stock, par value $.01 per share, 3,500,000 authorized, 1,454,750 shares issued		15			15
Additional paid-in capital		14,007			13,998
Shares held in trust, at cost, 39,800 and 49,355 shares, respectively		(757	)		(868	)
Retained earnings		11,732			11,696
Treasury stock, at cost, 618,734 and 595,090 shares, respectively		(8,320	)		(7,923	)
Accumulated other comprehensive loss, net		(616	)		(215	)
TOTAL STOCKHOLDERS’ EQUITY		16,061			16,703
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	102,908		$	104,811

The accompanying notes are an integral part of these condensed consolidated statements.

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THE SOUTHERN BANC COMPANY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollar Amounts in Thousands, except per share data)

	Three Months Ended December 31,				Six Months Ended December 31,
	2005		2004		2005		2004
INTEREST INCOME:
Interest and fees on loans	$	503	$	516	$	999	$	1,036
Interest and dividends on securities available for sale		642		645		1,280		1,299
Interest and dividends on securities held to maturity		49		70		96		141
Other interest income		26		12		54		22
Total interest income		1,220		1,243		2,429		2,498
INTEREST EXPENSE:
Interest on deposits		580		478		1,110		933
Interest on borrowings		67		75		138		154
Total interest expense		647		553		1,248		1,087
Net interest income before provision for loan losses		573		690		1,181		1,411
Provision for loan losses		0		5		15		5
Net interest income after provision for loan losses		573		685		1,166		1,406
NON-INTEREST INCOME:
Fees and other non-interest income		94		42		163		81
Gain on sale of securities		0		33		66		33
Total non-interest income		94		75		229		114
NON-INTEREST EXPENSE:
Salaries and employee benefits		350		342		645		647
Office building and equipment expenses		59		39		113		80
Other operating expense		182		194		373		380
Total non-interest expense		591		575		1,131		1,107
Income before income taxes		76		185		264		413
PROVISION FOR INCOME TAXES		25		72		96		161
Net Income	$	51	$	113	$	168	$	252
EARNINGS PER SHARE:
Basic	$	0.06	$	0.14	$	0.21	$	0.30
Diluted	$	0.06	$	0.13	$	0.21	$	0.29
DIVIDENDS DECLARED PER SHARE	$	0.0875	$	0.0875	$	0.1750	$	0.1750
AVERAGE SHARES OUTSTANDING:
Basic		789,624		823,273		797,259		838,767
Diluted		802,419		845,150		811,970		860,639

The accompanying notes are an integral part of these condensed consolidated statements.

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THE SOUTHERN BANC COMPANY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar Amounts in Thousands)

	For The Six Months Ended December 31,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	168		$	252
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		47			19
Amortization		25			40
Amortization of unearned compensation		0			77
Provision for loan losses		15			5
Net (gain) loss on sale of secondary market loans		(9	)		5
Gain on sale of securities		(66	)		(33	)
Proceeds from sale of secondary market loans		1,701			551
Loans originated for secondary market		(1,692	)		(556	)
Change in assets and liabilities:
Increase in accrued interest & dividends receivable		(24	)		(10	)
Increase in other assets		(4	)		(86	)
(Decrease) increase in other liabilities		(219	)		33
Net cash (used in) provided by operating activities		(58	)		297
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale		(6,641	)		(11,263	)
Proceeds from maturities, principal payments, and sales of securities available for sale		8,457			9,910
Proceeds from maturities and principal payments on securities held to maturity		597			846
Proceeds from sale of FHLB stock		0			281
Net loan repayments		70			1,992
Capital expenditures, net		(96	)		(6	)
Net cash provided by investing activities		2,387			1,760
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in deposits, net		(779	)		1,764
Dividends paid		(132	)		(147	)
Proceeds from exercise of stock options		112			320
Purchase of options to fund trust		0			(864	)
Purchase of Treasury Stock		(397	)		0
Decrease in FHLB advances, net		(417	)		(417	)
Net cash (used in) provided by financing activities		(1,613	)		656
Net increase in cash and cash equivalents		716			2,713
CASH AND CASH EQUIVALENTS, beginning of period		4,107			5,734
CASH AND CASH EQUIVALENTS, end of period	$	4,823		$	8,447
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes	$	161		$	50
Interest	$	1,247		$	1,090

The accompanying notes are an integral part of these condensed consolidated statements.

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THE SOUTHERN BANC COMPANY, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements as of December 31, 2005 and June 30, 2005, and for the three and six month periods ended December 31, 2005 and 2004, include the accounts of The Southern Banc Company, Inc. (the “Company”), and its wholly owned subsidiaries: The Southern Bank Company (the “Bank”) and 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 (none of which are other than normal recurring accruals) necessary for the fair presentation of the financial position and the results of operations for the three and six month periods ended December 31, 2005 and 2004. The 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 the financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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, 2005. The accounting policies followed by the Company are set forth in the summary of significant accounting policies in the Company’s June 30, 2005 consolidated financial statements.

2. RETIREMENT AND SAVINGS PLANS

Employee Stock Ownership Plan (“ESOP”)

The Bank has an 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 Bank 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 reduced when compensation expense is recognized based on employee services rendered in relation to shares which are committed to be released. At December 31, 2005, the ESOP had 94,345 shares allocated and no unallocated shares. At June 30, 2005 the ESOP had 98,297 shares allocated and 3,085 shares unallocated. There were no expenses related to the ESOP for the six months period ended December 31, 2005 and $60,000 for the six months period ended December 31, 2004.

Stock Option and Incentive Plan (“Option Plan”)

The Company has a stockholder approved 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 Trust for the benefit of the Option Plan held 49,355 shares at June 30, 2005 and 39,800 shares at December 31, 2005.

Simplified Employee Pension Plan (“SEP”)

The Company established a 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.

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3. 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, 2005 and 2004. Common stock outstanding consists of issued shares less treasury stock, unallocated ESOP shares, and shares owned by the Stock Option plan trusts. Diluted earnings per share for the three and six month periods ended December 31, 2005 and 2004, 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 Stock Option plan, 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 month periods ended December 31, 2005 and 2004:

	Income		Shares	Earnings Per Share
For the Three Months Ended December 31, 2005:
Basic Earnings	$	51,000	789,624	$	0.06
Dilutive Securities:
Stock Option Plan shares			12,795
Dilutive Earnings	$	51,000	802,419	$	0.06
For the Three Months Ended December 31, 2004:
Basic Earnings	$	113,000	823,273	$	0.14
Dilutive Securities:
Stock Option Plan shares			21,877
Dilutive Earnings	$	113,000	845,150	$	0.13

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	Income		Shares	Earnings Per Share
For the Six Months Ended December 31, 2005:
Basic Earnings	$	168,000	797,259	$	0.21
Dilutive Securities:
Incentive Stock Option Plan shares			14,711
Dilutive Earnings	$	168,000	811,970	$	0.21
For the Six Months Ended December 31, 2004:
Basic Earnings	$	252,000	838,767	$	0.30
Dilutive Securities:
Incentive Stock Option Plan shares			21,872
Dilutive Earnings	$	252,000	860,639	$	0.29

4. COMPREHENSIVE INCOME

Comprehensive income is a measure of all non-owner changes in equity of an enterprise that result from transactions and other economic events of the period. This change in unrealized gain or loss serves to increase or decrease comprehensive income. The following table represents comprehensive income for the six month periods ended December 31, 2005 and 2004:

	Six Months Ended December 31,
	2005			2004
Net income	$	168,000		$	252,000
Other comprehensive income, before taxes:
Unrealized holding (losses) gains on securities available for sale		(521,000	)		580,000
Less: Reclassification adjustment for realized gains on investment securities available for sale		66,000			33,000
Total other comprehensive ( loss) income before taxes		(419,000	)		799,000
Total income tax benefit (expense) related to other comprehensive (loss) income		221,000			(214,000	)
Total comprehensive (loss) income	$	(198,000	)	$	585,000

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5. STOCK-BASED COMPENSATION

In accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation”, the Company has elected to continue to record compensation cost under APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and accordingly does not recognize compensation cost due to the fact that all options granted were priced at the fair market value of the underlying stock on the date of grant. Had compensation cost been determined, consistent with SFAS No. 123, the effect on the Company’s net income would not have been material.

6. LITIGATION

From time to time, the Company is a party to various legal proceedings incidental to its business. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such litigation and claims will not be material to the consolidated financial statements.

7. SUBSEQUENT EVENT

On January 19, 2006, The Southern Banc Company, Inc. declared a dividend in the amount of $.0875 per share payable on March 20, 2006 to stockholders of record at the close of business on February 24, 2006.

8. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment. The Statement is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. This Statement supersedes APB Option No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. The Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Statement focuses primarily on accounting for transactions in which an entity obtains employee service in share-based payment transactions. The Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The Statement eliminates the alternative to use APB Opinion 25’s intrinsic value method of accounting that was provided in Statement 123 as originally issued. Under Opinion 25, issuing stock options to employees generally resulted in recognition of no compensation cost. This Statement requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions). The Statement is effective for public entities that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005, and for public entities that file as small business issuers as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. The Company currently accounts for its stock options under APB No. 25, and is currently evaluating the impact the adoption of this statement will have on its statement of condition and results of operations.

PART II. OTHER INFORMATION

Item 5. Other Information

On January 19, 2006, the Company, Inc. declared a dividend in the amount of $.0875 per share payable on March 20, 2006 to stockholders of record at the close of business on February 24, 2006.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	THE SOUTHERN BANC COMPANY
Date: February 17, 2006	By:	/s/ Gates Little
		Gates Little
		President and Chief Executive Officer
		(Principal Executive and Financial Officer)

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