##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For Quarterly Period Ended:
March 31, 2004
    
    Commission File
Number
1-13640
 SOUTHFIRST BANCSHARES, INC. 
 (Exact name of registrant as specified in its charter)
 Delaware
    
    63-1121255(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)126 North Norton Avenue, Sylacauga, Alabama
    
    35150(Address of principal executive offices)
    
    (Zip Code)Registrants telephone number, including area code:
    
    256-245-4365Not applicable(Former name, former address and former fiscal year, if changed since last report)
 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. x Yes              o No Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12(b)-2 of the Exchange Act). o Yes              x No Indicate the number of shares outstanding of each of the registrants
classes of common stock, as of the latest practicable date: Common Stock, par value $.01 per share
    
    709,083 sharesOutstanding at May 3, 2003Class
 Transitional Small Business Disclosure Format o Yes x No




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##### Table of Contents



SOUTHFIRST BANCSHARES, INC.
FORM 10-QSB
For the Quarterly Period Ended March 31, 2004 TABLE OF CONTENTS PART I  FINANCIAL INFORMATIONItem 1: Financial Statements (Unaudited)
    
    
    1Consolidated Statements of Financial Condition at March 31, 2004 (Unaudited) and September 30, 2003
    
    
    1Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended March 31, 2004 and 2003
    
    
    2Consolidated Statements of Changes in Stockholders Equity (Unaudited) for the Six Months Ended March 31, 2004
    
    
    3Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended March 31, 2004 and 2003
    
    
    4-5Notes to Consolidated Financial Statements (Unaudited)  March 31, 2004 and 2003
    
    
    6-9Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10-14Item 3: Controls and Procedures
    
    
    15PART II  OTHER INFORMATIONItem 1: Legal Proceedings
    
    
    16Item 6: Exhibits and Reports on Form 8-K
    
    
    16SIGNATURES
    
    
    17Exhibit Index
    
    
    18EX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32 SECTION 906 CERTIFICATION OF CEO & CFO




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##### Table of Contents



SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES 
 PART 1: FINANCIAL INFORMATION 
 Consolidated Statements of Financial Condition
March 31, 2004 (Unaudited) and September 30, 2003 March 31,
    
    September 30,2004
    
    2003(Unaudited)AssetsCash and cash equivalents
    
    $
    4,321,343
    
    
    $
    6,049,325Interest-bearing deposits in other financial institutions
    
    
    581,908
    
    
    
    533,003Investment securities available-for-sale, at fair value
    
    
    31,209,788
    
    
    
    32,599,988Loans receivable
    
    
    88,665,194
    
    
    
    85,573,736Less allowance for loan losses
    
    
    (839,763
    )
    
    
    (1,191,033
    )Net loans
    
    
    87,825,431
    
    
    
    84,382,703Loans held for sale at cost (which approximates fair value)
    
    
    1,763,651
    
    
    
    1,107,805Foreclosed assets, net
    
    
    565,525
    
    
    
    77,680Premises and equipment, net
    
    
    4,537,357
    
    
    
    4,298,889Federal Home Loan Bank stock, at cost
    
    
    1,117,000
    
    
    
    1,117,000Goodwill
    
    
    543,706
    
    
    
    543,706Accrued interest receivable
    
    
    644,912
    
    
    
    679,402Other assets
    
    
    3,614,011
    
    
    
    2,264,952Total Assets
    
    $
    136,724,632
    
    
    $
    133,654,453Liabilities And Stockholders EquityLiabilities:Deposits:Non-interest bearing
    
    $
    3,909,125
    
    
    $
    3,657,079Interest bearing
    
    
    94,549,474
    
    
    
    89,900,902Total deposits
    
    
    98,458,599
    
    
    
    93,557,981Advances by borrowers for property taxes and insurance
    
    
    165,209
    
    
    
    213,042Accrued interest payable
    
    
    503,378
    
    
    
    576,676Borrowed funds
    
    
    26,065,561
    
    
    
    27,000,861Accrued expenses and other liabilities
    
    
    434,421
    
    
    
    628,522Total liabilities
    
    
    125,627,168
    
    
    
    121,977,082Stockholders Equity:Common stock, $.01 par value, 2,000,000 shares authorized,
990,284 shares issued and 709,083 shares outstanding at March 31, 2004;
989,868 shares issued and 713,944 shares outstanding at September 30, 2003
    
    
    10,000
    
    
    
    9,996Additional paid-in capital
    
    
    9,843,959
    
    
    
    9,837,058Treasury
stock, at cost (281,201 shares at March 31, 2004;
275,924 shares at September 30, 2003)
    
    
    (3,893,562
    )
    
    
    (3,809,839
    )Deferred compensation on common stock employee benefit plans
    
    
    (171,302
    )
    
    
    (183,179
    )Shares held in trust at cost (9,775 shares at March 31, 2004
and September 30, 2003)
    
    
    (107,161
    )
    
    
    (107,161
    )Retained earnings
    
    
    5,384,264
    
    
    
    6,148,255Accumulated comprehensive other income (loss)
    
    
    31,266
    
    
    
    (217,759
    )Total stockholders equity
    
    
    11,097,464
    
    
    
    11,677,371Total Liabilities and Stockholders Equity
    
    $
    136,724,632
    
    
    $
    133,654,453
 See accompanying notes to consolidated financial statements. 1




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##### Table of Contents



SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES 
 Consolidated Statements of Operations (Unaudited)
for the Three and Six Months Ended March 31, 2004 and 2003 Six Months Ended
    
    Three Months EndedMarch 31,
    
    March 31,2004
    
    2003
    
    2004
    
    2003Interest and dividend income:Interest and fees on loans
    
    $
    2,689,637
    
    
    $
    3,045,461
    
    
    $
    1,350,059
    
    
    $
    1,491,421Interest income on deposits in other
financial institutions
    
    
    19,011
    
    
    
    57,278
    
    
    
    11,556
    
    
    
    27,150Interest and dividend income on
investment securities
    
    
    864,024
    
    
    
    643,691
    
    
    
    424,994
    
    
    
    306,042Total interest and dividend income
    
    
    3,572,672
    
    
    
    3,746,430
    
    
    
    1,786,609
    
    
    
    1,824,613Interest expense:Interest on deposits
    
    
    872,194
    
    
    
    1,389,052
    
    
    
    441,536
    
    
    
    644,367Interest on borrowed funds
    
    
    535,932
    
    
    
    505,697
    
    
    
    266,938
    
    
    
    249,072Total interest expense
    
    
    1,408,126
    
    
    
    1,894,749
    
    
    
    708,474
    
    
    
    893,439Net interest income
    
    
    2,164,546
    
    
    
    1,851,681
    
    
    
    1,078,135
    
    
    
    931,174Provision for loan losses
    
    
    1,235,690
    
    
    
    88,963
    
    
    
    1,235,690
    
    
    
    13,963Net interest income (loss) after
provision for loan losses
    
    
    928,856
    
    
    
    1,762,718
    
    
    
    (157,555
    )
    
    
    917,211Other income:Service charges and other fees
    
    
    264,175
    
    
    
    256,354
    
    
    
    133,591
    
    
    
    121,914Employee benefit trust and consulting fees
    
    
    709,662
    
    
    
    540,215
    
    
    
    380,649
    
    
    
    254,624Gain on sale of loans
    
    
    293,605
    
    
    
    543,118
    
    
    
    156,736
    
    
    
    247,582Gain (loss) on sale of foreclosed assets
    
    
    (1,535
    )
    
    
    (16,895
    )
    
    
    
    
    
    
    (15,000
    )Gain (loss) on sale of equipment
    
    
    927
    
    
    
    11,165
    
    
    
    
    
    
    
    Gain (loss) on sale of investment
securities available-for-sale
    
    
    157,931
    
    
    
    233,738
    
    
    
    157,931
    
    
    
    102,094Other
    
    
    171,909
    
    
    
    174,139
    
    
    
    80,203
    
    
    
    117,925Total other income
    
    
    1,596,674
    
    
    
    1,741,834
    
    
    
    909,110
    
    
    
    829,139Other expenses:Compensation and benefits
    
    
    2,127,464
    
    
    
    2,081,917
    
    
    
    1,112,000
    
    
    
    1,048,940Net occupancy expense
    
    
    192,525
    
    
    
    200,515
    
    
    
    102,732
    
    
    
    108,279Furniture and fixtures
    
    
    226,733
    
    
    
    230,617
    
    
    
    115,437
    
    
    
    111,385Data processing
    
    
    170,287
    
    
    
    143,785
    
    
    
    112,911
    
    
    
    67,939Office supplies and expense
    
    
    213,174
    
    
    
    214,873
    
    
    
    111,427
    
    
    
    110,840Deposit insurance premiums
    
    
    49,693
    
    
    
    54,865
    
    
    
    25,299
    
    
    
    27,310Legal
    
    
    77,500
    
    
    
    60,000
    
    
    
    43,750
    
    
    
    30,000Other
    
    
    357,085
    
    
    
    315,393
    
    
    
    184,078
    
    
    
    180,971Total other expenses
    
    
    3,414,461
    
    
    
    3,301,965
    
    
    
    1,807,634
    
    
    
    1,685,664Income (loss) before income taxes
    
    
    (888,931
    )
    
    
    202,587
    
    
    
    (1,056,079
    )
    
    
    60,686Income tax expense (benefit)
    
    
    (337,685
    )
    
    
    77,112
    
    
    
    (401,262
    )
    
    
    22,705Net income (loss)
    
    $
    (551,246
    )
    
    $
    125,475
    
    
    $
    (654,817
    )
    
    $
    37,981Earnings (loss) per share:Basic
    
    
    (0.78
    )
    
    
    0.16
    
    
    
    (0.92
    )
    
    
    0.05Diluted
    
    
    (0.75
    )
    
    
    0.16
    
    
    
    (0.88
    )
    
    
    0.05Cash dividends declared
    
    
    0.30
    
    
    
    0.30
    
    
    
    0.15
    
    
    
    0.15Weighted average shares outstanding:Basic
    
    
    709,161
    
    
    
    772,897
    
    
    
    709,088
    
    
    
    745,280Diluted
    
    
    739,823
    
    
    
    787,529
    
    
    
    740,059
    
    
    
    765,954
 See accompanying notes to consolidated financial statements. 2




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##### Table of Contents



SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES 
 Consolidated Statements of Changes in Stockholders Equity (Unaudited)
for the Six Months Ended March 31, 2004 DeferredCompensationon Common
    
    
    
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    
    
    
    Stock
    
    Shares
    
    
    
    
    
    Comprehensive
    
    TotalCommon
    
    Paid-in
    
    Treasury
    
    Employee
    
    Held in
    
    Retained
    
    Other Income
    
    StockholdersStock
    
    Capital
    
    Stock
    
    Benefit Plans
    
    Trust
    
    Earnings
    
    (Loss)
    
    EquityBalance at September 30,
2003
    
    $
    9,996
    
    
    $
    9,837,058
    
    
    $
    (3,809,839
    )
    
    $
    (183,179
    )
    
    $
    (107,161
    )
    
    $
    6,148,255
    
    
    $
    (217,759
    )
    
    $
    11,677,371Comprehensive income:Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (551,246
    )
    
    
    
    
    
    
    (551,246
    )Change in net unrealized
gain on available-for-sale
securities, net of reclassi-
fication adjustments and
income taxes of $152,628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249,025
    
    
    
    249,025Total comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (302,221
    )Vesting of deferred
compensation shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,877Acquisition of Treasury
stock
    
    
    
    
    
    
    
    
    
    
    (83,723
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,723
    )Stock options exercised
    
    
    4
    
    
    
    6,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,905Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (212,745
    )
    
    
    
    
    
    
    (212,745
    )Balance at March 31, 2004
    
    $
    10,000
    
    
    $
    9,843,959
    
    
    $
    (3,893,562
    )
    
    $
    (171,302
    )
    
    $
    (107,161
    )
    
    $
    5,384,264
    
    
    $
    31,266
    
    
    $
    11,097,464
 See accompanying notes to consolidated financial statements. 3




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##### Table of Contents



SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES 
 Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended March 31, 2004 and 2003 2004
    
    2003Operating activities:Net income (loss)
    
    $
    (551,246
    )
    
    $
    125,475Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    1,235,690
    
    
    
    88,963Depreciation and amortization
    
    
    157,986
    
    
    
    175,811Gain on sale of securities
    
    
    (157,931
    )
    
    
    (233,738
    )Gain on sale of loans
    
    
    (293,605
    )
    
    
    (543,118
    )Increase (decrease) in deferred loan origination fees
    
    
    6,661
    
    
    
    5,257Net amortization of premium/discount on investment
securities available-for-sale
    
    
    4,415
    
    
    
    4,140(Gain) loss on sale of other property owned
    
    
    (927
    )
    
    
    (11,165
    )(Gain) loss on sale of foreclosed assets
    
    
    1,535
    
    
    
    16,895Loans originated for sale
    
    
    (12,862,387
    )
    
    
    (28,264,470
    )Proceeds from sale of loans
    
    
    12,500,146
    
    
    
    25,397,285(Increase) decrease in accrued interest receivable
    
    
    34,490
    
    
    
    133,268(Increase) decrease in other assets
    
    
    (1,349,059
    )
    
    
    195,755Deferred compensation expense
    
    
    11,877
    
    
    
    47,877Increase (decrease) in accrued interest payable
    
    
    (73,298
    )
    
    
    (82,812
    )Increase (decrease) in accrued expenses and other liabilities
    
    
    (346,729
    )
    
    
    (188,111
    )Net cash used in operating activities
    
    
    (1,682,382
    )
    
    
    (3,132,688
    )Investing activities:Net change in interest-bearing deposits in other financial institutions
    
    
    (48,905
    )
    
    
    (5,411
    )Proceeds from calls and maturities of investment securities available-for-sale
    
    
    1,997,450
    
    
    
    9,966,362Purchase of investment securities available-for-sale
    
    
    (3,600,000
    )
    
    
    (7,311,145
    )Proceeds from sale of investment securities available-for-sale
    
    
    3,547,919
    
    
    
    3,409,574Proceeds from sale of Federal Home Loan Bank stock
    
    
    
    
    
    
    862,800Net (increase) decrease in loans
    
    
    (4,675,423
    )
    
    
    2,126,101Purchase of premises and equipment
    
    
    (405,903
    )
    
    
    (119,209
    )Proceeds from sale of foreclosed assets
    
    
    37,282
    
    
    
    27,250Proceeds from sale of other assets
    
    
    10,376
    
    
    
    193,118Transfer from loans of real estate owned property
    
    
    (500,000
    )
    
    
    (780,699
    )Transfer from loans of other repossessed assets
    
    
    (36,318
    )
    
    
    (3,180
    )Net cash provided (used) by investing activities
    
    
    (3,673,522
    )
    
    
    8,365,561
 (Continued) See accompanying notes to consolidated financial statements. 4




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##### Table of Contents



SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended March 31, 2004 and 2003 2004
    
    2003Financing activities:Increase (decrease) in deposits
    
    $
    4,900,618
    
    
    $
    4,664,572Proceeds from borrowed funds
    
    
    33,101,389
    
    
    
    1,419,000Repayment of borrowed funds
    
    
    (34,036,689
    )
    
    
    (6,018,750
    )Cash dividends paid
    
    
    (212,745
    )
    
    
    (237,951
    )Acquisition of treasury stock
    
    
    (83,723
    )
    
    
    (1,195,712
    )Proceeds from exercise of stock options
    
    
    6,905
    
    
    
    Decrease in advances by borrowers for property taxes and insurance
    
    
    (47,833
    )
    
    
    (55,287
    )Net cash provided (used) by financing activities
    
    
    3,627,922
    
    
    
    (1,424,128
    )Increase (decrease) in cash and cash equivalents
    
    
    (1,727,982
    )
    
    
    3,808,745Cash and cash equivalents at beginning of period
    
    
    6,049,325
    
    
    
    8,122,898Cash and cash equivalents at end of period
    
    $
    4,321,343
    
    
    $
    11,931,643Supplemental information on cash payments:Interest paid
    
    $
    1,334,828
    
    
    $
    1,977,561Income taxes paid
    
    $
    50,191
    
    
    $
    101,112Supplemental information on non-cash transactions:Change in net unrealized gain on investment securities available-for-sale
    
    $
    249,025
    
    
    $
    (180,100
    )Real estate obtained through foreclosure
    
    $
    500,000
    
    
    $
    780,699
 See accompanying notes to consolidated financial statements. 5




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##### Table of Contents



SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES 
 Notes to Consolidated Financial Statements (Unaudited)
March 31, 2004 and 2003  (1)
    
    Basis of PresentationThe accounting and reporting policies of SouthFirst Bancshares, Inc.
(SouthFirst) conform with accounting principles generally accepted in the
United States and with general financial services industry practices.Information filed on this Form 10-QSB as of and for the quarter ended March
31, 2004, was derived from the financial records of SouthFirst and its
wholly-owned subsidiaries, First Federal of the South (First Federal), and
SouthFirst Financial Services, Inc. (SouthFirst Financial) and First
Federals wholly owned subsidiaries, Pension & Benefit Trust Company
(Pension & Benefit), a Montgomery, Alabama-based employee benefits
consulting firm, and SouthFirst Mortgage, Inc. (SouthFirst Mortgage), a
Birmingham, Alabama based residential construction loan and mortgage loan
origination office. Collectively, SouthFirst Bancshares, Inc. and its
subsidiaries are referred to herein as the Company and as SouthFirst.The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-QSB and, therefore,
do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations and cash flows in
conformity with accounting principles generally accepted in the United
States. For a summary of significant accounting policies that have been
consistently followed, see Note 1 to the consolidated financial statements
included under Item 7 on Form 10-KSB. It is managements opinion that all
adjustments, consisting of only normal and recurring items necessary for a
fair presentation, have been included. The results contained in these
statements are not necessarily indicative of the results which may be
expected for the entire year.(2)
    
    Stock-Based Compensation PlansDuring 1995, the Company adopted a Stock Option and Incentive Plan for
directors and key employees of the Company. The exercise price cannot be
less than the market price on the grant date and number of shares available
for options cannot exceed 83,000. Stock appreciation rights may also be
granted under the plan. During 1998, the Company adopted the 1998 Stock
Option & Incentive Plan for directors and key employees of the Company.
Under the 1998 plan, options to acquire 63,361 shares had been granted. The
term of the options range from seven to ten years and they vest equally over
periods from three to five years.Following is a summary of the status of the 1995 and 1998 plans: 1995 Plan
    
    1998 PlanWeighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageNumber
    
    Exercise
    
    Number
    
    Exerciseof Shares
    
    Price
    
    of Shares
    
    PriceOutstanding at September 30, 2003
    
    
    73,700
    
    
    $
    12.40
    
    
    
    61,971
    
    
    $
    13.36Exercised
    
    
    
    
    
    
    
    
    
    
    (416
    )
    
    
    10.22Forfeited
    
    
    
    
    
    
    
    
    
    
    (1,256
    )
    
    
    13.55Outstanding at March 31, 2004
    
    
    73,700
    
    
    $
    12.40
    
    
    
    60,299
    
    
    $
    13.38
 6




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##### Table of Contents



Information pertaining to options outstanding at March 31, 2004 is as
follows: Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageContractual
    
    Exercise
    
    Number
    
    ExerciseExercise Price
    
    Number Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Price$9.75
    
    
    20,905
    
    
    3.59 years
    
    
    
    
    
    
    20,905$9.92
    
    
    9,000
    
    
    7.67 years
    
    
    
    
    
    
    3,600$12.10
    
    
    43,760
    
    
    8.54 years
    
    
    
    
    
    
    8,752$14.00
    
    
    29,880
    
    
    1.43 years
    
    
    
    
    
    
    29,880$15.75
    
    
    30,454
    
    
    3.82 years
    
    
    
    
    
    
    30,454Outstanding at
March 31, 2004
    
    
    133,999
    
    
    5.05 years
    
    $
    12.84
    
    
    
    93,591
    
    
    $
    13.29
  The Company accounts for these plans under the recognition and measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to Employees,
and related Interpretations. No stock-based employee compensation cost is
reflected in net income, as all options granted under these plans had an
exercise price equal to the market value of the underlying common stock on
the date of grant. The following table illustrates the effect on net income
and earnings per share if the Company had applied the fair value recognition
provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation. Six Months Ended
    
    Three Months EndedMarch 31,
    
    March 31,2004
    
    2003
    
    2004
    
    2003Net income (loss), as reported
    
    $
    (551,246
    )
    
    $
    125,475
    
    
    $
    (654,817
    )
    
    $
    37,981Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects
    
    
    (1,445
    )
    
    
    (12,918
    )
    
    
    (644
    )
    
    
    (6,459
    )Pro forma net income (loss)
    
    $
    (552,691
    )
    
    $
    112,557
    
    
    $
    (655,461
    )
    
    $
    31,522Earnings (loss) per share:Basic  as reported
    
    $
    (.78
    )
    
    $
    .16
    
    
    $
    (.92
    )
    
    $
    .05Basic  pro forma
    
    
    (.78
    )
    
    
    .15
    
    
    
    (.92
    )
    
    
    .04Diluted  as reported
    
    
    (.75
    )
    
    
    .16
    
    
    
    (.88
    )
    
    
    .05Diluted  pro forma
    
    
    (.75
    )
    
    
    .14
    
    
    
    (.89
    )
    
    
    .04
  Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to October 1, 1995, the resulting pro forma
compensation costs may not be representative of that to be expected in
future years.  The weighted average fair value of options granted during the six months
ended March 31, 2004 and 2003 was $0 and $12.10, respectively. The fair
value of each grant is estimated on the date of grant using the Black-Sholes
option pricing model with the following assumptions used for grants in 2002:
expected dividend yield of 4.96%; expected option life of 10 years;
expected volatility of 7.21%; and a risk-free interest rate of 4.03%. 7




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##### Table of Contents



(3)
    
    Business Segment Information  The Company organizes its business units into two reportable segments:
traditional banking activities and employee benefits consulting and trust
activities. The banking segment provides a full range of banking services
within its primary market areas of central Alabama. The employee benefits
trust company operates primarily in the state of Alabama. The Companys
reportable business segments are strategic business units that offer
different products and services. Each segment is managed separately,
because each unit is subject to different marketing and regulatory
environments.  The accounting policies used by each reportable segment are the same as
those discussed in Note 1 to the Consolidated Financial Statements included
under Item 13 of the Annual Report on Form 10-KSB. The following table
presents financial information for each reportable segment: Six Months Ended March 31, 2004
    
    Six Months Ended March 31, 2003Employee
    
    
    
    
    
    
    
    
    
    EmployeeBanking
    
    Benefits
    
    
    
    
    
    Banking
    
    BenefitsActivities
    
    Activities
    
    Total
    
    Activities
    
    Activities
    
    TotalInterest and dividend
income
    
    $
    3,561,361
    
    
    $
    11,311
    
    
    $
    3,572,672
    
    
    $
    3,735,085
    
    
    $
    11,345
    
    
    $
    3,746,430Interest expenses
    
    
    1,408,126
    
    
    
    
    
    
    
    1,408,126
    
    
    
    1,894,749
    
    
    
    
    
    
    
    1,894,749Net interest income
    
    
    2,153,235
    
    
    
    11,311
    
    
    
    2,164,546
    
    
    
    1,840,336
    
    
    
    11,345
    
    
    
    1,851,681Provision for loan losses
    
    
    1,235,690
    
    
    
    
    
    
    
    1,235,690
    
    
    
    88,963
    
    
    
    
    
    
    
    88,963Net interest income after
provision for loan losses
    
    
    917,545
    
    
    
    11,311
    
    
    
    928,856
    
    
    
    1,751,373
    
    
    
    11,345
    
    
    
    1,762,718Other income
    
    
    877,386
    
    
    
    719,288
    
    
    
    1,596,674
    
    
    
    1,195,619
    
    
    
    546,215
    
    
    
    1,741,834Other expenses
    
    
    2,777,174
    
    
    
    637,287
    
    
    
    3,414,461
    
    
    
    2,750,021
    
    
    
    551,944
    
    
    
    3,301,965Income (loss) before
income taxes
    
    
    (982,243
    )
    
    
    93,312
    
    
    
    (888,931
    )
    
    
    196,971
    

    
    
    5,616
    
    
    
    202,587Income taxes
    
    
    (373,226
    )
    
    
    35,541
    
    
    
    (337,685
    )
    
    
    74,848
    
    
    
    2,264
    
    
    
    77,112Net income (loss)
    
    $
    (609,017
    )
    
    $
    57,771
    
    
    $
    (551,246
    )
    
    $
    122,123
    
    
    $
    3,352
    
    
    $
    125,475
 Three Months Ended March 31, 2004
    
    Three Months Ended March 31, 2003Employee
    
    
    
    
    
    
    
    
    
    EmployeeBanking
    
    Benefits
    
    
    
    
    
    Banking
    
    BenefitsActivities
    
    Consulting
    
    Total
    
    Activities
    
    Consulting
    
    TotalInterest and dividend
income
    
    $
    1,780,398
    
    
    $
    6,211
    
    
    $
    1,786,609
    
    
    $
    1,818,966
    
    
    $
    5,647
    
    
    $
    1,824,613Interest expenses
    
    
    708,474
    
    
    
    
    
    
    
    708,474
    
    
    
    893,439
    
    
    
    
    
    
    
    893,439Net interest income
    
    
    1,071,924
    
    
    
    6,211
    
    
    
    1,078,135
    
    
    
    925,527
    
    
    
    5,647
    
    
    
    931,174Provision for loan losses
    
    
    1,235,690
    
    
    
    
    
    
    
    1,235,690
    
    
    
    13,963
    
    
    
    
    
    
    
    13,963Net interest income after
provision for loan losses
    
    
    (163,766
    )
    
    
    6,211
    
    
    
    (157,555
    )
    
    
    911,564
    
    
    
    5,647
    
    
    
    917,211Other income
    
    
    521,835
    
    
    
    387,275
    
    
    
    909,110
    
    
    
    571,515
    
    
    
    257,624
    
    
    
    829,139Other expenses
    
    
    1,489,482
    
    
    
    318,152
    
    
    
    1,807,634
    
    
    
    1,408,943
    
    
    
    276,721
    
    
    
    1,685,664Income (loss) before
income taxes
    
    
    (1,131,413
    )
    
    
    75,334
    
    
    
    (1,056,079
    )
    
    
    74,136
    
    
    
    (13,450
    )
    
    
    60,686Income taxes
    
    
    (429,911
    )
    
    
    28,649
    
    
    
    (401,262
    )
    
    
    27,810
    
    
    
    (5,105
    )
    
    
    22,705Net income (loss)
    
    $
    (701,502
    )
    
    $
    46,685
    
    
    $
    (654,817
    )
    
    $
    46,326
    
    
    $
    (8,345
    )
    
    $
    37,981
 8




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##### Table of Contents



There have been no differences from the last annual report in the basis of
measuring segment profit or loss. There have been no material changes in the
amount of assets for any operating segment since the last annual report.  (4)
    
    Subsequent Event  On April 28, 2004, the Company declared a regular $0.15 per share cash
dividend on the Companys outstanding stock, payable on May 17, 2004, to
stockholders of record as of May 11, 2004. 9




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##### Table of Contents



Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations REVIEW OF RESULTS OF OPERATIONS Overview Net income for the three months ended March 31, 2004 decreased $692,798, and
decreased for the six months ended March 31, 2004 by $676,721 compared to the
same periods in fiscal 2003. Net interest income, after the provision for loan
losses for the three months ended March 31, 2004 decreased $1,074,766, and
decreased $833,862 for the six month period ended March 31, 2004 compared to
the same period in fiscal 2003. This decrease is primarily attributable to an
additional provision for loan losses of $1,235,690, the reasons for which are
discussed below under the heading Provision for Loan Losses. Non-interest
income increased $79,971, or 9.6%, for the three month period ended March 31,
2004, and decreased $145,160, or 8.3%, for the six month period ended March 31,
2004, when compared to the same periods in fiscal 2003. Non-interest expense
increased $121,970, or 7.2%, for the three month period ended March 31, 2004
and increased $112,496, or 3.4%, for the six month period ended March 31, 2004,
compared to the same periods in fiscal 2003. Primary earnings (loss) per common share, based on weighted-average shares
outstanding was $(.92) and $.05 for the three months ended March 31, 2004 and
2003, respectively, and $(.78) and $.16 for the six months ended March 31, 2004
and 2003, respectively. Those items significantly affecting net earnings are discussed in detail below. Net Interest Income Net interest income is the difference between the interest and fees earned on
loans, securities, and other interest-bearing assets (interest income) and the
interest paid on deposits and borrowed funds (interest expense). Net interest
income is directly related to the interest rate spread, which is the difference
between the interest rates on interest-earning assets and interest-bearing
liabilities. As of March 31, 2004, the interest rate spread increased 37 basis points as
rates earned on interest-earning assets decreased 27 basis points to 5.85%,
while the cost of funds decreased 64 basis points to 2.34% compared to the same
three-month period ending March 31, 2003. The decrease in rates paid and the
decrease in rates received during this three-month interval reflects the
downward trend in the re-pricing of higher yielding certificates of deposit, as
well as a downward trend of the overall interest rate environment. While the
cost of funds has been steadily decreasing over the past several months,
interest rates on consumer loans, construction loans and mortgages have also
decreased. The average balance of interest-earning assets increased $2.9
million, or 2.4%, from $119.3 million to $122.1 million, while the average
balance of interest-bearing liabilities increased $1.3 million, or 1.0%, from
$119.8 million to $121.1 million. The combined effect of the increases in
average balances and the changes in rates discussed above resulted in an
increase in the interest rate spread from 3.14% to 3.51%, and an increase in
net interest income of approximately $147,000, or 15.8%, and $312,865, or
16.9%, for the three and six months ended March 31, 2004, respectively,
compared to the same period in fiscal 2003. Provision for Loan Losses Provision for loan losses reflects an increase in the amount of $1,146,727, or
1,289.0%, for the six month period ended March 31, 2004, when compared to the
same period in fiscal 2003. This increase is primarily the result of the

write-down of an acquisition and development loan, which was foreclosed on in
January 2004. At the date of foreclosure, this loan had a disbursed balance of
approximately $1,948,000, with previously recognized allowances of
approximately $525,000. At the time of foreclosure, the fair value of the
property was estimated to be $500,000. The adjustment to fair value, along
with related 10




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expenses, resulted in a loss of approximately $1,035,000 for the three month
period ended March 31, 2004. At March 31, 2004, the allowance for loan losses
to total average loans outstanding was 0.93% compared to 1.00% for the same
period ended March 31, 2003. The current year to date provision also includes an additional $200,000 general
loan loss provision recorded to increase the balance in the allowance for loan
losses to an appropriate level, based on continuing reviews of asset quality. Other Income Total other income for the six months ended March 31, 2004 decreased
approximately $145,000 to $1,597,000, compared to $1,742,000 for the six months
ended March 31, 2003. A portion of the decrease in total non-interest income
was attributable to a decrease of approximately $250,000 in gain on sale of
loans and a decrease of approximately $76,000 in gains on sale of investment
securities available-for-sale. These decreases in other income are partially
offset by an increase in fee income generated from employee benefit trust and
consulting of approximately $169,000, and an increase in service charges and
other fees of approximately $8,000 when compared to the same period ended March
31, 2003. For the three months ended March 31, 2004, total non-interest income increased
by approximately $80,000 to $909,000, compared to $829,000 for the same period
in fiscal 2003. This increase was primarily the result of an increase from the
sale of investment securities available-for-sale of approximately $56,000, an
increase in fee income generated from employee benefit trust and consulting of
approximately $126,000, and an increase in service charges and other fees of
approximately $12,000 and a decrease in the loss of foreclosed real estate of
$15,000 when compared to the same period in fiscal 2003. These increases in
other income are partially offset by a decrease in the gain on sale of loans of
approximately $91,000 and a decrease in other income of approximately $38,000. Other Expense Total other expense for the six months ended March 31, 2004 increased by
approximately $112,000 to $3,414,000 as compared to $3,302,000 for the six
months ended March 31, 2003. The changes in other non-interest expense is
attributable to an increase in compensation and benefits of approximately
$46,000, an increase in data processing expenses of approximately $27,000, an
increase in legal expenses of approximately $18,000 and an increase in other
expenses by approximately $42,000. Net occupancy expenses, furniture and
fixtures expense and deposit insurance premiums decreased $8,000, $4,000 and
$5,000, respectively, as compared to the same period in fiscal 2003. For the three months ended March 31, 2004, total non-interest expense increased
approximately $122,000 to $1,808,000 from $1,686,000 for the three months ended
March 31, 2003. This increase resulted primarily from an increase in
compensation and benefits of approximately $63,000, an increase in data
processing of approximately $45,000, an increase in legal expenses of
approximately $14,000, and an increase in furniture and fixtures and other
expenses of approximately $4,000. Occupancy expenses and deposit insurance
premiums decreased approximately $8,000 when compared to the same period in
fiscal 2003. Income Taxes The Companys effective tax rate for the three-month periods ended March 31,
2004 and 2003 was 38.0% and 38.1%, respectively, compared to the federal
statutory rate of 34.0%. SouthFirsts effective tax rate was higher then the
statutory rate due primarily to state income taxes. Income tax expense
decreased approximately $415,000 to ($337,685) for the six months ended March
31, 2004, as compared to $77,112 for the six months ended March 31, 2003, due
to the decrease in pre-tax earnings. 11




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##### Table of Contents



REVIEW OF FINANCIAL CONDITION Overview Management continuously monitors the financial condition of SouthFirst in order
to protect depositors, increase retained earnings, and protect current and
future earnings. Return on average stockholders equity is one way of assessing the return
SouthFirst has generated for its stockholders. The table below sets forth the
return on average stockholders equity and other performance ratios of
SouthFirst for the periods indicated. At or for the threemonths endedMarch 31,2004
    
    2003Return on assets
    
    
    (1.90
    )%
    
    
    0.11
    %Return on equity
    
    
    (22.79
    )%
    
    
    1.19
    %Equity to asset ratio
    
    
    8.35
    %
    
    
    9.22
    %Interest rate spread
    
    
    3.51
    %
    
    
    3.14
    %Net interest margin
    
    
    3.53
    %
    
    
    3.12
    %Total risk based capital
    
    
    15.16
    %
    
    
    16.23
    %Non-performing loans to loans
    
    
    0.53
    %
    
    
    .33
    %Allowance for loan losses to loans
    
    
    0.93
    %
    
    
    1.00
    %Allowance for loan losses to average non-performing loans
    
    
    175.02
    %
    
    
    300.95
    %Ratio of net charge offs to average loans outstanding
    
    
    1.76
    %
    
    
    0.01
    %Book value per common share outstanding
    
    $
    15.65
    
    
    $
    17.18
 Significant factors affecting SouthFirsts financial condition during the three
months ended March 31, 2004 are detailed below: Assets Total assets increased approximately $3,070,000, or 2.3%, from $133,654,000 at
September 30, 2003 to $136,725,000 at March 31, 2004. Net loans increased
approximately $3,443,000, or 4.1%, which occurred primarily in business and
residential construction loans. Cash and amounts due from banks decreased
approximately $1,700,000, which was used primarily for the purpose of funding
new loans. Other significant changes occurring in assets during the period was
increases in loans held for sale, premises and equipment, foreclosed real
estate and other assets of approximately $656,000, $238,000, $500,000 and
$1,349,000, respectively, while investment securities available-for-sale
decreased approximately $1,390,000 for the period. Liabilities Total liabilities increased approximately $3,650,000, or 3.0%, from
$121,977,000 at September 30, 2003 to $125,627,000 at March 31, 2004. Deposits
increased approximately $4,901,000, or 5.2%, during the period, which
represents an increase in certificates of deposit of approximately $4,288,000
and an increase in checking and other savings accounts of approximately
$613,000. Borrowed funds decreased approximately $935,000, which represents a
decrease of approximately $1,320,000 in short-term reverse repurchase
agreements with Morgan Keegan and an increase in the balance of an existing
line of credit with First Commercial Bank of $385,000. Loan Quality Key to long-term earnings growth is maintenance of a high-quality loan
portfolio. SouthFirsts directive 12




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##### Table of Contents



in this regard is carried out through its policies and procedures for review of
loans. The goal and result of these policies and procedures is to provide a
sound basis for new credit extensions and an early recognition of problem
assets to allow the greatest flexibility in their timely disposition. At March 31, 2004, the allowance for loan losses was $839,763, compared to
$1,191,033 at September 30, 2003, which represents a decrease of approximately
$351,000. Non-performing loans at March 31, 2004 were approximately $480,000
as compared to approximately $2,299,000 at September 30, 2003. At March 31,
2004 and September 30, 2003, the allowance for loan losses represented 0.93%
and 1.39% of average loan balances, respectively. The allowance for loan
losses is based upon managements continuing evaluation of the collectibility
of the loan portfolio under current economic conditions and includes analysis
of underlying collateral value and other factors, which could affect
collectibility. Management considers the allowance for loan losses to be
adequate based upon the evaluations of the averages of specific loans, internal
loan rating systems and guidelines provided by the banking regulatory
authorities governing First Federal. Liquidity and Funding Sources The Asset and Liability Committee of First Federals board of directors
monitors and manages the liquidity needs of the Company to ensure that there is
sufficient cash flow to satisfy demand for credit and deposit withdrawals, to
fund operations and to meet other Company obligations and commitments on a
timely and cost effective basis. Under current regulations, First Federal is
required to maintain sufficient liquidity to assure its safe and sound
operation. The requirement to maintain a specific minimum amount of liquid
assets, established by previous regulation, has been eliminated. Presently,
there is no specific standard or guideline regarding the application of the
current regulatory requirement. Under the previous regulation, First Federal was required to maintain an
average daily balance of liquid assets, in each calendar quarter, of not less
than 4% of (i) the amount of its liquidity base at the end of the preceding
calendar quarter, or (ii) the average daily balance of its liquidity base
during the preceding quarter. For purposes of this computation, liquid assets
included specified short-term assets (e.g., cash, certain time deposits,
certain bankers acceptances and short-term U.S. Government, state or federal
agency obligations), and long-term assets (e.g., U.S. Government obligations of
more than one and less than five years and state agency obligations maturing in
two years or less). As of March 31, 2004, First Federals average daily balance of liquid assets
was approximately 27.0% of its December 31, 2003 liquidity base, far exceeding
the 4% requirement set by the previous regulation. These liquid assets
included approximately $7,311,000 in cash and cash equivalents, and
approximately $18,020,000 in other qualifying assets. In addition, as of March
31, 2004, the fair market value of the companys investment securities
portfolio, which is held for sale, was $31,210,000. Due to market value
adjustments on the portfolio since this reporting date however, as of May 13,
2004, the market value of the portfolio has declined by approximately
$1,230,000, or 4%, of its March 31, 2004 value. Furthermore, since the March
31, 2004 reporting date, $5,000,000 of the Companys investment portfolio was
sold on May 13, 2004 at an after tax loss of approximately $49,000. The
Company uses its investment securities portfolio to manage liquidity and
interest rate risk, whereby liquidity is available through those securities
that are not pledged. Further, cash flows from operations, resulting primarily
from net income adjusted for certain items such as interest expense and
provision for loan loss, are an additional source of liquidity for the Company. With respect to current funding sources, deposits provide a significant portion
of the Companys cash flow needs and continue to provide a relatively stable,
low cost source of funds. As of March 31, 2004, the amount of deposits was
$98,459,000, which represents an increase of $4,901,000 from the amount of
deposits at September 30, 2003. Other sources of funding used by the Company include commercial lines of credit
and advances from the 13




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##### Table of Contents



Federal Home Loan Bank of Atlanta (the FHLBA). At March 31, 2004, the
Company had outstanding balances with the FHLBA of $22,340,000. As of March
31, 2004, the Company also had a line of credit, based on prime, with First
Commercial Bank in the amount of $2,500,000, which presently is scheduled to
mature on June 1, 2004, and of which there is an outstanding balance at March
31, 2004 for approximately $2,303,000. First Federal also has short-term borrowings through reverse repurchase
agreements with Morgan Keegan & Company. As of March 31, 2004, the balance
outstanding on these was approximately $1,423,000. Management believes that the Companys significant liquidity and existing
funding sources are more than adequate to ensure sufficient cash flow to
satisfy demand for credit and any deposit withdrawals, to fund operations and,
otherwise, to meet other Company obligations and commitments on a timely and
cost-effective basis. Capital Adequacy and Resources Management is committed to maintaining First Federals capital at a level that
would be sufficient to protect depositors, provide for reasonable growth and
comply fully with all regulatory requirements. Managements strategy to meet
this commitment is to retain sufficient earnings while providing a reasonable
return on equity. The Office of Thrift Supervision has issued guidelines identifying minimum
regulatory tangible capital equal to 1.50% of adjusted total assets, a
minimum of 4.0% core capital ratio, and a minimum risk-based capital of 8.0% of
risk-weighted assets. First Federal has satisfied its capital requirements
primarily through the retention of earnings. As of March 31, 2004, First Federal has satisfied all regulatory capital
requirements. First Federals compliance with the current standards is as
follows: Percent ofAmount
    
    Asset BaseTangible capital
    
    $
    12,830,000
    
    
    
    9.40
    %Core capital
    
    
    12,830,000
    
    
    
    9.40
    %Tier-based capital
    
    
    13,319,000
    
    
    
    15.16
    %
 Acquisitions As previously disclosed in Form 8-K filed on January 9, 2004, First Federal of
the Souths wholly-owned subsidiary, SouthFirst Mortgage, Inc., acquired all of
the assets and work in progress of Walton Mortgage, Inc., for $100,000 in cash
pursuant to an asset purchase agreement. In addition to being based in
Chelsea, Alabama, a rapidly growing area on the outskirts of Birmingham, Walton
Mortgage has mortgage loan originators who generate mortgage loans in other
locations within Alabama, including Huntsville, Montgomery, Cullman and
Alexander City. These lending areas will complement the mortgage banking
activities of SouthFirst Mortgage located in Birmingham. 14




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##### Table of Contents



Item 3: Controls and Procedures Within 90 days prior to the filing date of this quarterly report, pursuant to
Rule 13a-15 of the Securities Exchange Act of 1934 (the Exchange Act), the
Companys Chief Executive Officer and Controller (principal financial officer)
evaluated the effectiveness of the design and operation of the Companys
disclosure controls and procedures (as defined in Rule 13a-14(c) of the
Exchange Act). Based on their evaluation, the Chief Executive Officer and
Controller have concluded that the Companys disclosure controls and procedures
are effective in timely alerting them to material information, relating to the
Company and the Companys consolidated subsidiaries, required to be included in
periodic reports, including this quarterly report, filed by the Company with
the SEC. There have not been any significant changes in the Companys internal controls,
or in other factors that could significantly affect these controls, subsequent
to the date of the Chief Executive Officers and Controllers evaluation. 15




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SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES 
 PART II. OTHER INFORMATION 
 Item 1: Legal Proceedings In the normal course of business, SouthFirst and First Federal from time to
time are involved in legal proceedings. Management believes that there are no
pending or threatened legal proceedings which, upon resolution, are expected to
have a material effect upon SouthFirsts or First Federals financial
condition. 
 Item 6: Exhibits and Reports on Form 8-K  (a)
    
    Exhibits. The Following Exhibits are filed with this report. Exhibit Number
    
    Description31.1
    
    
    Certificate of the Chief Executive Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, dated May 14, 2004.31.2
    
    
    Certificate of the equivalent of the Chief Financial
Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated
May 14, 2004.32
    
    
    Certificate of the Chief Executive Officer and the
equivalent of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, dated May 14, 2004.
  The certificate listed as Exhibit 32 is being furnished pursuant to the
final rule issued by the Securities and Exchange Commission in Release No.
33-8238 to accompany this quarterly report and shall not be deemed filed
for the purposes of Section 18 of the Securities and Exchange Act of 1934
(the Exchange Act), or otherwise subject to the liability of such section
or Section 11 of the Securities Act of 1933 (the Securities Act), nor
shall such certificates be deemed incorporated by reference in any filing
under the Securities Act or the Exchange Act, regardless of the general
incorporation language of such filings, except as shall be expressly set
forth by specific reference in such filing.  (b)
    
    Reports on Form 8-K.  On January 9, 2004, SouthFirst filed Form 8-K announcing the acquisition of
the assets of Walton Mortgage pursuant to an asset purchase agreement. 16




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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. SOUTHFIRST BANCSHARES, INC.Date: May 14, 2004
    
    By:
    
    /s/ Joe K. McArthurJoe K. McArthurChief Executive Officer(principal executive officer)Date: May 14, 2004
    
    By:
    
    /s/ Janice BrowningJanice BrowningController, Treasurer(principal accounting officer)
 17




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##### Table of Contents



Exhibit Index Exhibit Number
    
    Description of Exhibit31.1
    
    
    Certificate of the Chief Executive Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, dated May 14, 2004.31.2
    
    
    Certificate of the Chief Financial Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, dated May 14, 2004.32
    
    
    Certificate of the Chief Executive Officer and the Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated
May 14, 2004.
 18