##### 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:
    
    Commission File NumberJune 30, 2004
    
    1-13640
 SOUTHFIRST BANCSHARES, INC. (Exact name of registrant as specified in its charter)
 Delaware
    
    63-1121255(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)126 North Norton Avenue, Sylacauga, Alabama
    
    35150(Address of principal executive offices)
    
    (Zip Code)Registrants telephone number, including area code:
    
    256-245-4365
 Not 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                                         [  ] No Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12(b)-2 of the Exchange Act). [  ] 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
    
    709,033 sharesClass
    
    Outstanding at August 2, 2004
 Transitional Small Business Disclosure Format [  ] Yes [X] No




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SOUTHFIRST BANCSHARES, INC.
FORM 10-QSB
For the Quarterly Period Ended June 30 2004 TABLE OF CONTENTS  
 PART I  FINANCIAL INFORMATIONItem 1: Financial Statements (Unaudited)
    
    
    1Consolidated Statements of Financial Condition at June 30, 2004 (Unaudited)
and September 30, 2003
    
    
    1Consolidated Statements of Operations (Unaudited) for the Three and Nine Months
Ended June 30, 2004 and 2003
    
    
    2Consolidated Statements of Changes in Stockholders Equity (Unaudited) for the
Nine Months Ended June 30, 2004
    
    
    3Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended
June 30, 2004 and 2003
    
    
    4-5Notes to Consolidated Financial Statements (Unaudited)  June 30, 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
    
    
    18CERTIFICATIONS
    
    
    19-21EX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 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
June 30, 2004 (Unaudited) and September 30, 2003 June 30,
    
    September 30,2004
    
    2003(Unaudited)AssetsCash and cash equivalents
    
    $
    7,901,099
    
    
    $
    6,049,325Interest-bearing deposits in other financial institutions
    
    
    637,242
    
    
    
    533,003Securities available-for-sale, at fair value
    
    
    14,231,502
    
    
    
    32,599,988Securities held-to-maturity at amortized cost, fair value of $15,056,165
    
    
    15,046,166
    
    
    
    Loans receivable
    
    
    90,117,275
    
    
    
    85,573,736Less allowance for loan losses
    
    
    (831,664
    )
    
    
    (1,191,033
    )Net loans
    
    
    89,285,611
    
    
    
    84,382,703Loans held for sale at cost (which approximates fair value)
    
    
    803,720
    
    
    
    1,107,805Foreclosed assets, net
    
    
    526,743
    
    
    
    77,680Premises and equipment, net
    
    
    4,658,605
    
    
    
    4,298,889Federal Home Loan Bank stock, at cost
    
    
    1,117,000
    
    
    
    1,117,000Goodwill
    
    
    543,706
    
    
    
    543,706Accrued interest receivable
    
    
    734,119
    
    
    
    679,402Other assets
    
    
    3,293,288
    
    
    
    2,264,952Total Assets
    
    $
    138,778,801
    
    
    $
    133,654,453Liabilities And Stockholders EquityLiabilities:Deposits:Non-interest bearing
    
    $
    3,167,448
    
    
    $
    3,657,079Interest bearing
    
    
    94,882,694
    
    
    
    89,900,902Total deposits
    
    
    98,050,142
    
    
    
    93,557,981Advances by borrowers for property taxes and insurance
    
    
    204,782
    
    
    
    213,042Accrued interest payable
    
    
    493,642
    
    
    
    576,676Borrowed funds
    
    
    29,021,011
    
    
    
    27,000,861Accrued expenses and other liabilities
    
    
    829,701
    
    
    
    628,522Total liabilities
    
    
    128,599,278
    
    
    
    121,977,082Stockholders Equity:Common
stock, $.01 par value, 2,000,000 shares authorized,
990,284 shares issued and 709,033 shares outstanding at June 30, 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 (281,251 shares at June 30, 2004;
275,924 shares at September 30, 2003)
    
    
    (3,894,382
    )
    
    
    (3,809,839
    )Deferred compensation on common stock employee benefit plans
    
    
    (165,364
    )
    
    
    (183,179
    )Shares held in trust at cost (9,775 shares at June 30, 2004
and September 30, 2003)
    
    
    (107,161
    )
    
    
    (107,161
    )Retained earnings
    
    
    5,267,323
    
    
    
    6,148,255Accumulated comprehensive other income (loss)
    
    
    (774,852
    )
    
    
    (217,759
    )Total stockholders equity
    
    
    10,179,523
    
    
    
    11,677,371Total Liabilities and Stockholders Equity
    
    $
    138,778,801
    
    
    $
    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 Nine Months Ended June 30, 2004 and 2003 Nine Months Ended
    
    Three Months EndedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Interest and dividend income:Interest and fees on loans
    
    $
    4,040,405
    
    
    $
    4,496,951
    
    
    $
    1,350,769
    
    
    $
    1,451,490Interest income on deposits in other financial institutions
    
    
    27,184
    
    
    
    77,650
    
    
    
    8,172
    
    
    
    20,372Interest and dividend income on securities available for sale
    
    
    1,129,723
    
    
    
    984,759
    
    
    
    265,699
    
    
    
    341,068Interest income on securities held to maturity
    
    
    131,724
    
    
    
    
    
    
    
    131,724
    
    
    
    Total interest and dividend income
    
    
    5,329,036
    
    
    
    5,559,360
    
    
    
    1,756,364
    
    
    
    1,812,930Interest expense:Interest on deposits
    
    
    1,294,193
    
    
    
    1,999,088
    
    
    
    422,000
    
    
    
    610,036Interest on borrowed funds
    
    
    801,279
    
    
    
    759,978
    
    
    
    265,347
    
    
    
    254,281Total interest expense
    
    
    2,095,472
    
    
    
    2,759,066
    
    
    
    687,347
    
    
    
    864,317Net interest income before provision for loan losses
    
    
    3,233,564
    
    
    
    2,800,294
    
    
    
    1,069,017
    
    
    
    948,613Provision for loan losses
    
    
    1,244,958
    
    
    
    118,451
    
    
    
    9,268
    
    
    
    29,488Net interest income after provision for loan losses
    
    
    1,988,606
    
    
    
    2,681,843
    
    
    
    1,059,749
    
    
    
    919,125Other income:Service charges and other fees
    
    
    412,140
    
    
    
    405,890
    
    
    
    147,965
    
    
    
    149,536Employee benefit trust and consulting fees
    
    
    1,152,793
    
    
    
    866,438
    
    
    
    443,132
    
    
    
    326,225Gain on sale of loans
    
    
    560,333
    
    
    
    872,409
    
    
    
    266,729
    
    
    
    329,291Gain (loss) on sale of foreclosed assets
    
    
    1,868
    
    
    
    5,700
    
    
    
    3,404
    
    
    
    22,595Gain (loss) on sale of equipment
    
    
    927
    
    
    
    13,890
    
    
    
    
    
    
    
    2,725Gain (loss) on sale of investment securities available-for-sale
    
    
    79,024
    
    
    
    236,150
    
    
    
    (78,906
    )
    
    
    2,412Other
    
    
    243,375
    
    
    
    268,981
    
    
    
    71,464
    
    
    
    94,840Total other income
    
    
    2,450,460
    
    
    
    2,669,458
    
    
    
    853,788
    
    
    
    927,624Other expenses:Compensation and benefits
    
    
    3,355,748
    
    
    
    3,138,281
    
    
    
    1,228,274
    
    
    
    1,056,364Net occupancy expense
    
    
    297,077
    
    
    
    295,654
    
    
    
    104,552
    
    
    
    95,139Furniture and fixtures
    
    
    356,319
    
    
    
    340,043
    
    
    
    129,587
    
    
    
    109,426Data processing
    
    
    288,048
    
    
    
    202,165
    
    
    
    117,761
    
    
    
    58,380Office supplies and expense
    
    
    327,857
    
    
    
    328,303
    
    
    
    114,683
    
    
    
    113,430Deposit insurance premiums
    
    
    76,233
    
    
    
    82,028
    
    
    
    26,539
    
    
    
    27,163Legal
    
    
    126,250
    
    
    
    126,350
    
    
    
    48,750
    
    
    
    66,350Other
    
    
    515,252
    
    
    
    510,772
    
    
    
    158,178
    
    
    
    195,378Total other expenses
    
    
    5,342,784
    
    
    
    5,023,596
    
    
    
    1,928,324
    
    
    
    1,721,630Income (loss) before income taxes
    
    
    (903,718
    )
    
    
    327,705
    
    
    
    (14,787
    )
    
    
    125,119Income tax expense (benefit)
    
    
    (342,029
    )
    
    
    124,597
    
    
    
    (4,345
    )
    
    
    47,485Net income (loss)
    
    $
    (561,689
    )
    
    $
    203,108
    
    
    $
    (10,442
    )
    
    $
    77,634Earnings (loss) per share:Basic
    
    
    (0.79
    )
    
    
    0.27
    
    
    
    (0.01
    )
    
    
    0.11Diluted
    
    
    (0.76
    )
    
    
    0.26
    
    
    
    (0.01
    )
    
    
    0.11Cash dividends declared
    
    
    0.45
    
    
    
    0.45
    
    
    
    0.15
    
    
    
    0.15Weighted average shares outstanding:Basic
    
    
    709,131
    
    
    
    752,700
    
    
    
    709,070
    
    
    
    711,819Diluted
    
    
    739,481
    
    
    
    767,263
    
    
    
    739,107
    
    
    
    727,766
 See accompanying notes to consolidated financial statements.

 2 2




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SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders Equity (Unaudited)
for the Nine Months Ended June 30, 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)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (561,689
    )
    
    
    
    
    
    
    (561,689
    )Change in net unrealized
gain on available-for-sale
securities, net of
reclassification adjustments and
income taxes of $341,444
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (557,093
    )
    
    
    (557,093
    )Total comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,118,782
    )Vesting of deferred
compensation shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,815
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,815Acquisition of Treasury stock
    
    
    
    
    
    
    
    
    
    
    (84,543
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,543
    )Stock options exercised
    
    
    4
    
    
    
    6,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,905Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (319,243
    )
    
    
    
    
    
    
    (319,243
    )Balance at June 30, 2004
    
    $
    10,000
    
    
    $
    9,843,959
    
    
    $
    (3,894,382
    )
    
    $
    (165,364
    )
    
    $
    (107,161
    )
    
    $
    5,267,323
    
    
    $
    (774,852
    )
    
    $
    10,179,523
 See accompanying notes to consolidated financial statements. 3




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SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended June 30, 2004 and 2003 2004
    
    2003Operating activities:Net income (loss)
    
    $
    (561,689
    )
    
    $
    203,108Adjustments to reconcile net income to net cash provided by operating activities:Provision for loan losses
    
    
    1,244,958
    
    
    
    118,451Depreciation and amortization
    
    
    265,891
    
    
    
    255,712Gain on sale of securities
    
    
    (79,024
    )
    
    
    (236,150
    )Gain on sale of loans
    
    
    (560,333
    )
    
    
    (872,409
    )Increase (decrease) in deferred loan origination fees
    
    
    (5,032
    )
    
    
    (2,125
    )Net amortization of premium/discount on investment securities
    
    
    (537
    )
    
    
    (9,818
    )(Gain) loss on sale of other property owned
    
    
    (927
    )
    
    
    (13,890
    )(Gain) loss on sale of foreclosed assets
    
    
    (1,868
    )
    
    
    (5,700
    )Loans originated for sale
    
    
    (24,122,621
    )
    
    
    (41,732,909
    )Proceeds from sale of loans
    
    
    24,987,039
    
    
    
    40,846,799(Increase) decrease in accrued interest receivable
    
    
    (54,717
    )
    
    
    124,271(Increase) decrease in other assets
    
    
    (1,028,336
    )
    
    
    23,806Deferred compensation expense
    
    
    17,815
    
    
    
    71,904Increase (decrease) in accrued interest payable
    
    
    (83,034
    )
    
    
    (80,160
    )Increase (decrease) in accrued expenses and other liabilities
    
    
    542,623
    
    
    
    (137,140
    )Net cash used in operating activities
    
    
    560,208
    
    
    
    (1,446,250
    )Investing activities:Net change in interest-bearing deposits in other financial institutions
    
    
    (104,239
    )
    
    
    358,985Proceeds from calls and maturities of investment securities available-for-sale
    
    
    2,468,580
    
    
    
    14,981,500Purchase of investment securities available-for-sale
    
    
    (8,503,846
    )
    
    
    (23,713,384
    )Proceeds from sale of investment securities available-for-sale
    
    
    8,538,610
    
    
    
    6,409,574Proceeds from sale of Federal Home Loan Bank stock
    
    
    
    
    
    
    1,112,800Net (increase) decrease in loans
    
    
    (6,108,153
    )
    
    
    2,780,111Purchase of premises and equipment
    
    
    (635,056
    )
    
    
    (170,631
    )Proceeds from sale of foreclosed assets
    
    
    81,185
    
    
    
    267,386Proceeds from sale of other assets
    
    
    10,376
    
    
    
    452,059Transfer from loans of real estate owned property
    
    
    (508,605
    )
    
    
    (780,364
    )Transfer from loans of other repossessed assets
    
    
    (54,456
    )
    
    
    2,901Net cash provided by investment
activities
    
    
    (4,815,604
    )
    
    
    1,700,937
 (Continued) See accompanying notes to consolidated financial statements. 4




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SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended June 30, 2004 and 2003 2004
    
    2003Financing activities:Increase (decrease) in deposits
    
    $
    4,492,161
    
    
    $
    3,767,115Proceeds from borrowed funds
    
    
    49,168,299
    
    
    
    4,589,000Repayment of borrowed funds
    
    
    (47,148,149
    )
    
    
    (7,988,750
    )Cash dividends paid
    
    
    (319,243
    )
    
    
    (345,752
    )Acquisition of treasury stock
    
    
    (84,543
    )
    
    
    (1,312,530
    )Proceeds from exercise of stock options
    
    
    6,905Decrease in advances by borrowers for property taxes and insurance
    
    
    (8,260
    )
    
    
    (62,589
    )Net cash provided (used) by financing activities
    
    
    6,107,170
    
    
    
    (1,353,506
    )Increase (decrease) in cash and cash equivalents
    
    
    1,851,774
    
    
    
    (1,098,819
    )Cash and cash equivalents at beginning of period
    
    
    6,049,325
    
    
    
    8,122,898Cash and cash equivalents at end of period
    
    $
    7,901,099
    
    
    $
    7,024,079Supplemental information on cash payments:Interest paid
    
    $
    2,178,506
    
    
    $
    2,839,226Income taxes paid
    
    $
    124,917
    
    
    $
    185,375Supplemental information on non-cash transactions:Change in net unrealized gain on investment securities available-for-sale
    
    $
    33,178
    
    
    $
    4,927Real estate obtained through foreclosure
    
    $
    508,605
    
    
    $
    780,364
 See accompanying notes to consolidated financial statements. 5




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SOUTHFIRST BANCSHARES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (1) Basis of Presentation  The 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 June
30, 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 Plans  During 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 PlanNumber
    
    Weighted Average
    
    Number
    
    Weighted Averageof Shares
    
    Exercise Price
    
    of Shares
    
    Exercise PriceOutstanding at September 30, 2003
    
    
    73,700
    
    
    $
    12.40
    
    
    
    61,971
    
    
    $
    13.36Exercised
    
    
    
    
    
    
    
    
    
    
    (416
    )
    
    
    10.22Forfeited
    
    
    
    
    
    
    
    
    
    
    (1,256
    )
    
    
    13.55Outstanding at June 30, 2004
    
    
    73,700
    
    
    $
    12.40
    
    
    
    60,299
    
    
    $
    13.38
 6




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Information pertaining to options outstanding at June 30, 2004 is as follows: Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageNumber
    
    Contractual
    
    Exercise
    
    Number
    
    ExerciseExercise Price
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Price$ 9.75
    
    
    20,905
    
    
    
    3.35 years
    
    
    
    
    
    
    
    20,9059.92
    
    
    9,000
    
    
    
    7.42 years
    
    
    
    
    
    
    
    3,60012.10
    
    
    43,760
    
    
    
    8.29 years
    
    
    
    
    
    
    
    8,75214.00
    
    
    29,880
    
    
    
    1.18 years
    
    
    
    
    
    
    
    29,88015.75
    
    
    30,454
    
    
    
    3.58 years
    
    
    
    
    
    
    
    30,454Outstanding at June 30, 2004
    
    
    133,999
    
    
    
    4.80 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. Nine Months Ended
    
    Three Months EndedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003Net income (loss), as reported
    
    $
    (561,689
    )
    
    $
    203,108
    
    
    $
    (10,442
    )
    
    $
    77,634Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects
    
    
    (2,094
    )
    
    
    (6,104
    )
    
    
    (649
    )
    
    
    (2,035
    )Pro forma net income (loss)
    
    $
    (563,783
    )
    
    $
    197,004
    
    
    $
    (11,091
    )
    
    $
    75,599Earnings (loss) per share:Basic  as reported
    
    $
    (.79
    )
    
    $
    .27
    
    
    $
    (.01
    )
    
    $
    .11Basic  pro forma
    
    
    (.80
    )
    
    
    .26
    
    
    
    (.02
    )
    
    
    .11Diluted  as reported
    
    
    (.76
    )
    
    
    .26
    
    
    
    (.01
    )
    
    
    .11Diluted  pro forma
    
    
    (.76
    )
    
    
    .26
    
    
    
    (.02
    )
    
    
    .10
 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 nine months
ended June 30, 2004 and 2003 was $.00 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 2003:
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: Nine Months Ended June 30, 2004
    
    Nine Months Ended June 30, 2003Employee
    
    
    
    
    
    
    
    
    
    EmployeeBanking
    
    Benefits
    
    
    
    
    
    Banking
    
    BenefitsActivities
    
    Activities
    
    Total
    
    Activities
    
    Activities
    
    TotalInterest and dividend
income
    
    $
    5,311,161
    
    
    $
    17,875
    
    
    $
    5,329,036
    
    
    $
    5,543,858
    
    
    $
    15,502
    
    
    $
    5,559,360Interest expenses
    
    
    2,095,472
    
    
    
    
    
    
    
    2,095,472
    
    
    
    2,759,066
    
    
    
    
    
    
    
    2,759,066Net interest income
    
    
    3,215,689
    
    
    
    17,875
    
    
    
    3,233,564
    
    
    
    2,784,792
    
    
    
    15,502
    
    
    
    2,800,294Provision for loan losses
    
    
    1,244,958
    
    
    
    
    
    
    
    1,244,958
    
    
    
    118,451
    
    
    
    
    
    
    
    118,451Net interest income after
provision for loan losses
    
    
    1,970,731
    
    
    
    17,875
    
    
    
    1,988,606
    
    
    
    2,666,341
    
    
    
    15,502
    
    
    
    2,681,843Other income
    
    
    1,285,041
    
    
    
    1,165,419
    
    
    
    2,450,460
    
    
    
    1,794,020
    
    
    
    875,438
    
    
    
    2,669,458Other expenses
    
    
    4,366,321
    
    
    
    976,463
    
    
    
    5,342,784
    
    
    
    4,212,629
    
    
    
    810,967
    
    
    
    5,023,596Income (loss) before
income taxes
    
    
    (1,110,549
    )
    
    
    206,831
    
    
    
    (903,718
    )
    
    
    247,732
    
    
    
    79,973
    
    
    
    327,705Income taxes
    
    
    (420,789
    )
    
    
    78,760
    
    
    
    (342,029
    )
    
    
    94,199
    
    
    
    30,398
    
    
    
    124,597Net income (loss)
    
    $
    (689,760
    )
    
    $
    128,071
    
    
    $
    (561,689
    )
    
    $
    153,533
    
    
    $
    49,575
    
    
    $
    203,108
 Three Months Ended June 30, 2004
    
    Three Months Ended June 30, 2003Employee
    
    
    
    
    
    
    
    
    
    EmployeeBanking
    
    Benefits
    
    
    
    
    
    Banking
    
    BenefitsActivities
    
    Consulting
    
    Total
    
    Activities
    
    Consulting
    
    TotalInterest and dividend
income
    
    $
    1,749,801
    
    
    $
    6,563
    
    
    $
    1,756,364
    
    
    $
    1,808,773
    
    
    $
    4,157
    
    
    $
    1,812,930Interest expenses
    
    
    687,347
    
    
    
    
    
    
    
    687,347
    
    
    
    864,317
    
    
    
    
    
    
    
    864,317Net interest income
    
    
    1,062,454
    
    
    
    6,563
    
    
    
    1,069,017
    
    
    
    944,456
    
    
    
    4,157
    
    
    
    948,613Provision for loan losses
    
    
    9,268
    
    
    
    
    
    
    
    9,268
    
    
    
    29,488
    
    
    
    
    
    
    
    29,488Net interest income after
provision for loan losses
    
    
    1,053,186
    
    
    
    6,563
    
    
    
    1,059,749
    
    
    
    914,968
    
    
    
    4,157
    
    
    
    919,125Other income
    
    
    407,656
    
    
    
    446,132
    
    
    
    853,788
    
    
    
    598,399
    
    
    
    329,225
    
    
    
    927,624Other expenses
    
    
    1,589,148
    
    
    
    339,176
    
    
    
    1,928,324
    
    
    
    1,462,606
    
    
    
    259,024
    
    
    
    1,721,630Income (loss) before
income taxes
    
    
    (128,306
    )
    
    
    113,519
    
    
    
    (14,787
    )
    
    
    50,761
    
    
    
    74,358
    
    
    
    125,119Income taxes
    
    
    (47,565
    )
    
    
    43,220
    
    
    
    (4,345
    )
    
    
    19,350
    
    
    
    28,135
    
    
    
    47,485Net income (loss)
    
    $
    (80,741
    )
    
    $
    70,299
    
    
    $
    (10,442
    )
    
    $
    31,411
    
    
    $
    46,223
    
    
    $
    77,634
 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 July 28, 2004, the Company declared a regular $0.15 per share cash
dividend on the Companys outstanding stock, payable on August 20, 2004, to
stockholders of record as of August 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 June 30, 2004 decreased $88,076, or
113.4%, and decreased for the nine months ended June 30, 2004 by $764,497, or
376.5%, compared to the same periods in fiscal 2003. Net interest income,
after the provision for loan losses for the three months ended June 30, 2004
increased $140,624, or 15.3%, and decreased $693,237, or 25.8%, for the nine
month period ended June 30, 2004 compared to the same period in fiscal 2003.
This decrease is attributable primarily to a provision for loan losses of
$1,244,958, the reasons for which are discussed below under the heading
Provision for Loan Losses. Non-interest income decreased $73,836, or 8.0%,
for the three month period ended June 30, 2004, and decreased $218,998, or
8.2%, for the nine month period ended June 30, 2004, when compared to the same
periods in fiscal 2003. Non-interest expense increased $206,694, or 12.0%, for
the three month period ended June 30, 2004 and increased $319,188, or 6.4%, for
the nine month period ended June 30, 2004, compared to the same periods in
fiscal 2003. Primary earnings (loss) per common share, based on weighted average shares
outstanding was ($.01) and $.11 for the three months ended June 30, 2004 and
2003, respectively, and ($.79) and $.27 for the nine months ended June 30, 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 June 30, 2004, the interest rate spread increased 46 basis points as
rates earned on interest-earning assets decreased 18 basis points to 5.71%
while the cost of funds decreased 64 basis points to 2.23% compared to the same
three-month period ending June 30, 2003. The decrease in rates paid and the
decrease in rates received during this three-month interval reflects the
downward trend in the repricing 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 remained constant at
approximately $123.0 million while the average balance of interest-bearing
liabilities increased $2.8 million, or 2.3%, from $120.6 million to $123.4
million. The combined effect of the changes in average balances and the
changes in rates discussed above resulted in an increase in the interest rate
spread from 3.02% to 3.48%, and an increase in net interest income of
approximately $120,404, or 12.7%, and $433,270, or 15.5%, for the three and
nine months ended June 30, 2004, respectively, compared to the same periods in
fiscal 2003. Provision for Loan Losses The provision for loan losses reflects an increase in the amount of $1,126,507,
or 951.0%, for the nine month period ending June 30, 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 entered into
foreclosure 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. At June 30, 2004, the allowance for loan losses to total average loans outstanding was 0.90% compared
to 1.00% for the same period ended June 30, 2003. 10




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##### Table of Contents



The year to date provision also includes an additional $200,000 general loan
loss provision recorded to increase the balance in allowance for loan losses to
an appropriate level, based on continuing reviews of asset quality. Other Income Total other income for the nine months ended June 30, 2004, decreased
approximately $219,000 to $2,450,000, compared to $2,669,000 for the nine
months ended June 30, 2003. A portion of the decrease in total non-interest
income was attributable to a decrease of approximately $312,000 in gains on
sales of loans as a result of the decline of the refinancing boom occurring in
2003. Other decreases included $157,000 from the sale of investment securities
available-for-sale, decreases in the gain from the sale of foreclosed real
estate and other assets of approximately $17,000 and a decrease in other income
of approximately $26,000. These decreases in other income are partially offset
by an increase in fee income generated from employee benefit trust and
consulting of approximately $286,000 and an increase in service charges and
other fees of approximately $6,000 when compared to the same period ended June
30, 2003. For the three months ended June 30, 2004, total non-interest income decreased
by approximately $74,000 to $854,000, compared to $927,000 for the same period
in fiscal 2003. This decrease was primarily the result of a decrease of
approximately $63,000 in gains on sales of loans, a decrease of approximately
$81,000 from the sale of investment securities available-for-sale, decreases in
the gain from the sale of foreclosed real estate and other assets of
approximately $22,000 and a decrease in other income of approximately $23,000.
These decreases in non-interest income are partially offset by an increase in
fee income generated from employee benefit trust and consulting of
approximately $117,000. Other Expense Total other expense for the nine months ended June 30, 2004, increased by
approximately $319,000 to $5,343,000, as compared to $5,024,000 for the nine
months ended June 30, 2003. The changes in other non-interest expense are
attributable to an increase in compensation and benefits of approximately
$217,000 and an increase in other occupancy expenses of approximately $18,000.
The increase in compensation and benefit was primarily due to the acquisition
of Walton Mortgage in the prior quarter and certain severance payments made in
connection with the restructuring of SouthFirst Mortgage. Increases also
occurred in data processing expenses of approximately $86,000 as a result of
the companys recent conversion from Kirchman to FiServ Vision in May 2004.
Expenses related to office supplies and expenses, legal and other remained
approximately the same for the periods ending June 30, 2004 and 2003 at
$328,000, $126,000 and $515,000, respectively. Deposit insurance premiums
decreased approximately $6,000 to approximately $76,000 when compared to the
same period ended June 30, 2003. For the three months ended June 30, 2004, total non-interest expense increased
approximately $207,000 to $1,928,000 from $1,722,000 for the three months ended
June 30, 2003. This increase resulted primarily from an increase in
compensation and benefits of approximately $172,000, and an increase in other
occupancy of approximately $30,000. An increase also occurred in data
processing of approximately $59,000 as a result of the computer conversion
discussed above. These increases are partially offset by decreases in legal
and other expenses of approximately $18,000 and $37,000, respectively.
Expenses related to office supplies and deposit insurance premiums remained
constant between the two periods at approximately $114,000 and $27,000,
respectively. 11




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##### Table of Contents



Income Taxes The Companys effective tax rate for the nine month periods ended June 30, 2004
and 2003 was 37.8% and 38.0%, respectively, compared to the federal statutory
rate of 34.0%. SouthFirsts effective tax rate was higher than the statutory
rate due primarily to state income taxes. Income tax expense decreased
approximately $467,000 to ($342,029) for the nine months ended June 30, 2004,
as compared to $124,597 for the nine months ended June 30, 2003, due to the
decrease in pre-tax earnings. 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 endedJune 30,2004
    
    2003Return on assets
    
    
    (0.03
    )%
    
    
    0.22
    %Return on equity
    
    
    (0.40
    )%
    
    
    2.48
    %Equity to asset ratio
    
    
    7.47
    %
    
    
    8.99
    %Interest rate spread
    
    
    3.48
    %
    
    
    3.02
    %Net interest margin
    
    
    3.48
    %
    
    
    3.08
    %Total risk based capital
    
    
    15.32
    %
    
    
    15.90
    %Non-performing loans to loans
    
    
    0.88
    %
    
    
    0.49
    %Allowance for loan losses to loans
    
    
    0.90
    %
    
    
    1.00
    %Allowance for loan losses to average non-performing loans
    
    
    101.43
    %
    
    
    205.20
    %Ratio of net charge offs to average loans outstanding
    
    
    0.02
    %
    
    
    0.03
    %Book value per common share outstanding
    
    $
    14.36
    
    
    $
    17.59
 Significant factors affecting SouthFirsts financial condition during the nine
months ended June 30, 2004 are detailed below: Assets Total assets increased approximately $5,125,000, or 3.8%, from $133,654,000 at
September 30, 2003 to $138,779,000 at June 30, 2004. Net loans increased
approximately $4,903,000, or 5.8%, which occurred primarily in commercial
construction and other types of real estate lending. Cash and amounts due from
banks increased approximately $1,852,000 as a result of new deposit growth
during the period. Investment securities available-for-sale decreased
approximately $18,368,000, of which $16,000,000 was re-classified from
available-for-sale to held-to-maturity due to managements decision to hold
such securities and its ability to do so during a changing interest rate
environment. Other significant changes in assets occurring included an
increase in premises and fixed assets, foreclosed assets and other assets of
approximately $360,000, $449,000, and $1,028,000, respectively. Other assets
increased primarily as a result of deferred taxes from market value adjustments
of investments. 12




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##### Table of Contents



Liabilities Total liabilities increased approximately $6,622,000, or 5.4%, from
$121,977,000 at September 30, 2003 to $128,599,000 at June 30, 2004. Deposits
increased approximately $4,492,000, or 4.8%, during the period, which
represents an increase in certificates of deposit of approximately $4,090,000
and an increase in checking and other savings accounts of approximately
$402,000. Borrowed funds increased approximately $2,000,000, which represents
an increase of approximately $1,565,000 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 $435,000. Loan Quality Key to long-term earnings growth is maintenance of a high-quality loan
portfolio. SouthFirsts directive 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 June 30, 2004, the allowance for loan losses was $831,664, compared to
$1,191,033 at September 30, 2003, which represents a decrease of approximately
$359,000. Non-performing loans at June 30, 2004 were approximately $820,000 as
compared to approximately $2,299,000 at September 30, 2003. At June 30, 2004
and September 30, 2003, the allowance for loan losses represented 0.90% 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 June 30, 2004, First Federals average daily balance of liquid assets was
approximately 24.0% of its March 31, 2004 liquidity base, far exceeding the 4%
requirement set by the previous regulation. These liquid assets included
approximately $6,271,000 in cash and cash equivalents, and approximately
$19,044,000 in other qualifying assets. In addition, as of June 30, 2004, the
fair market value of the companys investment securities portfolio, which is
held for sale, was $14,232,000, which represents a decrease of approximately
$18,368,000. Of this amount, on May 13, 2004, $16,000,000 was re-classified
from available-for-sale to held-to-maturity due to managements decision
discussed above. In addition, during the quarter ending June 30, 2004, $5,000,000 of the Companys investment
portfolio was sold 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. 13




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##### Table of Contents



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 June 30, 2004, the amount of deposits was
$98,050,000, which represents an increase of $4,492,000 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 Federal Home Loan Bank of Atlanta (the FHLBA).
As of June 30, 2004, the Company had a line of credit, based on prime, with
First Commercial Bank in the amount of $2,500,000 which matures on June 1,
2005, and of which there is an outstanding balance at June 30, 2004 for
approximately $2,353,000. At June 30, 2004, the Company had outstanding
balances with the FHLBA of $22,340,000. First Federal also has short-term borrowings through reverse repurchase
agreements with Morgan Keegan & Co. As of June 30, 2004, the balance
outstanding on these borrowings was approximately $4,328,000. 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 June 30, 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
    
    $
    12,857,000
    
    
    
    9.23
    %Core capital
    
    
    12,857,000
    
    
    
    9.23
    %Tier-based capital
    
    
    13,330,000
    
    
    
    15.32
    %
 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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##### Table of Contents



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 August 16, 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
August 16, 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 August 16, 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. No reports on Form 8-K were filed during the quarter ended June 30, 2004. 16




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##### Table of Contents



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: August 16, 2004
    
    By:
    
    /s/ Joe K. McArthur
Joe K. McArthur
Chief Executive Officer
(principal executive officer)Date: August 16, 2004
    
    By:
    
    /s/ Janice Browning
Janice Browning
Controller, 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 August 16, 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 August 16, 2004.32.1
    
    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
August 16, 2004.
 18