U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
--- of 1934
For the quarterly period ended September 30, 2000 .
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Transition report under Section 13 or 15(d) of the Exchange Act
---
For the transition period from to
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Commission file number 0-22553
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SECURITY BANCORP, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Tennessee 62-1682697
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
306 West Main Street, McMinnville, TN 37110
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(Address of Principal Executive Offices)
(931) 473-4483
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(Issuer's Telephone Number, Including Area Code)
N/A
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(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
436,425 shares outstanding on October 31, 2000
Transitional Small Business Disclosure Format (check one):
Yes X No
--- ---
<PAGE>
Security Bancorp, Inc. and Subsidiary
McMinnville, Tennessee
INDEX
PART I Page(s)
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FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Balance Sheets - (Unaudited)
as of December 31, 1999 and September 30, 2000 . . . . . . . . . . . 3
Consolidated Statements of Income (Unaudited)
for the three and nine month periods
ended September 30, 1999 and 2000. . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Stockholders' Equity (Unaudited). . . . . . 5
for the nine month period ended September 30, 2000
Consolidated Statements of Cash Flows - (Unaudited)
for the nine months ended September 30, 1999 and 2000. . . . . . . . 6
Notes to (Unaudited) Consolidated Financial Statements . . . . . . . 7-9
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . . .9-13
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . .14
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . .14
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . .14
Item 4. Submission of Matters to a Vote of Security Holders. . . . . .14
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . .14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . .14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2
<PAGE>
ITEM 1. Financial Statements
Security Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
(Unaudited)
(in thousands except share information)
ASSETS December 31, September 30,
1999 2000
Cash and noninterest earning deposits $ 3,051 $ 4,806
Investment securities: Held to maturity 236 178
Available for sale 5,742 5,623
Loans receivable, net 60,189 64,763
Real estate owned 275 138
Premises and equipment, net 1,308 1,824
Federal Home Loan Bank stock 633 668
Accrued interest receivable 523 620
Prepaid expenses and other assets 247 268
-------- --------
Total Assets $ 72,204 $ 78,888
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 57,455 $ 64,462
FHLB borrowings 6,800 5,500
Advances from borrowers for property taxes and insurance 64 437
Accrued expenses and other liabilities 296 214
Federal income taxes payable 82 131
-------- --------
Total Liabilities 64,697 70,744
STOCKHOLDERS' EQUITY
Common stock (436,425 shares, $.01 par value,
issued and outstanding) 4 4
Paid-in capital 4,144 4,162
Treasury stock, at cost (244) (194)
Retained earnings 3,848 4,326
Unrealized gain on securities available for sale,
net of income taxes 25 93
Employee Stock Ownership Plan (ESOP) borrowing (270) (247)
-------- --------
Total stockholders' equity 7,507 8,144
-------- --------
Total Liabilities and Stockholders' Equity $ 72,204 $ 78,888
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
Security Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)
(in thousands, except per share information)
For Three Months For Nine Months
Ended September 30, Ended September 30,
1999 2000 1999 2000
INTEREST INCOME:
Loans $ 1,199 $ 1,446 $ 3,538 $ 4,127
Investments 97 90 223 274
Interest earning deposits 22 10 54 53
------- ------- ------- -------
Total interest income 1,318 1,546 3,815 4,454
INTEREST EXPENSE:
Deposits 593 746 1,690 2,051
Advances 80 70 237 226
------- ------- ------- -------
Interest expense 673 816 1,927 2,277
Provision for loan losses 62 45 126 135
Net interest income after ------- ------- ------- -------
provision for loan losses 583 685 1,762 2,042
NON-INTEREST INCOME:
Trust department income 81 122 234 346
Deposit account fees 62 75 168 212
Other 134 103 400 282
------- ------- ------- -------
Total non-interest income 277 300 802 840
NON-INTEREST EXPENSES
Compensation 251 269 724 792
Other employee benefits 81 83 242 245
Net occupancy expense 68 74 239 212
Deposit insurance premiums 7 3 20 9
Data processing 54 90 145 266
Other 146 129 391 378
------- ------- ------- -------
Total non-interest expenses 607 648 1,761 1,902
Income before income taxes 253 337 803 980
Income tax expense 97 131 312 381
------- ------- ------- -------
Net income 156 206 491 599
Other comprehensive income,
net of tax: (See Note 4)
Unrealized gains (losses)
on securities:
Unrealized holding gains (losses)
arising for the three month
period, before tax $(46) for
1999 and $98 for 2000, and
for the nine month period,
before tax $(160) for 1999
and $68 for 2000 (29) 61 (99) 42
------- ------- ------- -------
Comprehensive income $127 $267 $392 $641
======= ======= ======= =======
Weighted average shares outstanding:394,814 401,273 393,199 399,659
Basic earnings per share $.40 $.51 $1.25 $1.50
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
SECURITY BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
(Unaudited)
(in thousands, except share information)
Unrealized
Gain
Retained on ESOP
Common Stock Paid-in Earn- Secur- Bor- Treasury
Shares Amount Capital ings ities rowing Stock Total
Balance at
12/31/99 436,425 $4 $4,144 $3,848 $25 $ (270) $(244) $7,507
Allocation of
earned MRP
stock -- -- -- -- -- 50 50
Net Income -- -- 598 -- - -- 598
Unrealized gain
on securities
available for
sale, net of
Income taxes -- -- -- 68 -- -- 68
Dividend -- -- (120) -- -- -- (120)
ESOP shares
earned -- 18 -- -- 23 -- 41
---- ------ ------ ---- ----- ----- -----
Balance at
9/30/00 436,425 $4 $4,162 $4,326 $ 93 $(247) $(194) $8,144
======= ==== ====== ====== ==== ===== ===== ======
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
Security Bancorp. Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Nine months Ended September 30,
1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 491 $ 599
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 62 68
Dividend on FHLB stock (32) (35)
Provision for loan losses 126 135
(Increase) decrease in interest receivable (79) (97)
(Increase) decrease in other assets (276) (21)
Increase (decrease) in accrued liabilities 90 (82)
Increase (decrease) in income taxes payable (159) 7
Increase (decrease) in deferred taxes payable (103) 42
Sale of mortgage loans held for sale 7,733 2,568
Originations of mortgage loans held for sale (8,776) (2,613)
------- -------
Total adjustments (1,414) (28)
------- -------
Net cash provided by operating activities (923) 571
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations net of principal payments (3,527) (4,521)
Purchase of:
Available for sale - investment securities (4,461) -
Held to maturity - investment securities - -
Proceeds from maturities and repayments of:
Held to maturity - investment securities 650 -
Available for sale - investment securities 550 -
Held to maturity - mortgage-backed securities 249 58
Available for sale - mortgage-backed securities 241 203
Cash payments for the purchase of property (33) (516)
------- -------
Net cash provided (used) by investing activities (6,331) (4,776)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts 6,525 7,007
Proceeds from FHLB advances 1,400 (1,300)
Payment of cash dividend (109) (120)
Net increase (decrease) in escrow accounts 140 373
------- -------
Net cash provided (used) by financing activities 7,956 5,960
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 702 1,755
CASH AND EQUIVALENTS, BEGINNING OF YEAR 2,581 3,051
------- -------
CASH AND EQUIVALENTS, END OF PERIOD $3,283 $4,806
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest expense $1,927 $2,277
Income taxes $ 430 $ 406
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
Security Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
1. SECURITY BANCORP, INC.
Security Bancorp, Inc. (the "Company"), a Tennessee corporation, is the
savings and loan holding company for Security Federal Savings Bank of
McMinnville, TN (the "Savings Bank"). The Savings Bank converted from a
federally chartered mutual savings bank to a federally chartered stock savings
bank effective June 30, 1997 (the "Conversion").
The consolidated financial statements included herein are for the Company and
the Savings Bank.
2. BASIS OF PREPARATION
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
all disclosures necessary for a complete presentation of the consolidated
balance sheets, consolidated statements of income, consolidated statements of
stockholders' equity, and consolidated statements of cash flows in conformity
with generally accepted accounting principles. However, all adjustments,
which are, in the opinion of management, necessary for the fair presentation
of the interim financial statements have been included. All such adjustments
are of a normal recurring nature. The statements of income for the three and
nine month period ended September 30, 2000 are not necessarily indicative of
the results which may be expected for the entire year.
The unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto for the
Company for the year ended December 31, 1999.
3. EARNINGS PER SHARE
Earnings per share has been computed for the three months ended September 30,
1999 and September 30, 2000 based upon weighted average common shares
outstanding of 394,814 and 401,273, respectively, and for the nine months
ended September 30, 1999 and September 30, 2000 of 393,199 and 399,659,
respectively.
4. COMPREHENSIVE INCOME
The Company has adopted FASB Statement No. 130, Reporting Comprehensive
Income. Statement No. 130 requires the reporting of comprehensive income in
addition to net income from operations. Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income.
5. STOCKHOLDERS' EQUITY
In connection with the Conversion, the Company issued and sold 436,425 shares
of common stock at a price of $10.00 per share for total net proceeds of
approximately $4.1 million after
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conversion expenses of approximately $300,000. The Company retained $406,000
of the net proceeds and used the remaining net proceeds to purchase the newly
issued capital stock of the Savings Bank.
The ability of the Company to pay dividends depends primarily on the ability
of the Savings Bank to pay dividends to the Company. The Savings Bank may
not declare or pay a cash dividend if the effect thereof would cause its net
worth to be reduced below either the amounts required for the liquidation
account discussed below or the regulatory capital requirements imposed by
federal and state regulations.
As required by the regulations of the Office of Thrift Supervision (OTS), at
the time of Conversion, the Savings Bank established a liquidation account in
an amount equal to its retained earnings as reflected in the latest balance
sheet used in the final conversion prospectus. The liquidation account is
maintained for the benefit of eligible account holders who continue to
maintain their deposit accounts in the Savings Bank after Conversion. In the
event of a complete liquidation of the Savings Bank (and only in such an
event), eligible depositors who continue to maintain accounts shall be
entitled to receive a distribution from the liquidation account before any
liquidation may be made with respect to the Company's common stock.
6. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
As part of the Conversion discussed in Note 5, the Savings Bank established an
Employee Stock Ownership Plan (ESOP) for the benefit of all employees who have
attained the age of 21 and have been credited with at least 1000 hours of
service during a 12-month period. The ESOP borrowed approximately $349,000
from the Company and used the funds to purchase 34,914 shares of common stock
of the Company issued in the Conversion. The loan will be repaid principally
from the Company's discretionary contributions to the ESOP over a period of 10
years. On September 30, 2000, the loan had an outstanding balance of
approximately $247,000 and an interest rate of 8.50%. The loan obligation of
the ESOP is considered unearned compensation and, as such, recorded as a
reduction of the Company's stockholders' equity. Both the loan obligation and
the unearned compensation are reduced by an amount of the loan repayments made
by the ESOP. Shares purchased with the loan proceeds are held in a suspense
account for allocation among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense account are
allocated among participants on the basis of compensation in the year of
allocation. Benefits become fully vested at the end of six years of service
under the terms of the ESOP Plan. Benefits may be payable upon retirement,
death, disability, or separation from service.
Since the Savings Bank's annual contributions are discretionary, benefits
payable under the ESOP cannot be estimated. Compensation expenses are
recognized to the extent of the fair value of shares committed to be released.
For the three and nine months ending September 30, 2000, the ESOP related
compensation expense was approximately $13,000 and $41,000, respectively.
Compensation is recognized at the average fair value of the ratably released
shares during the accounting period as the employees performed services. At
September 30, 2000, the ESOP had 11,347 allocated shares and 23,567
unallocated shares.
The ESOP administrators have determined dividends on unallocated shares will
be used for debt service. Any allocated dividends used will be replaced with
common stock of equal value. For the purpose of computing earnings per share,
all ESOP shares committed to be released have been considered outstanding.
8
<PAGE>
7. MANAGEMENT RECOGNITION PLAN AND STOCK OPTION PLAN
The Company's stockholders approved the Company's 1998 Stock Option Plan and
the Savings Bank's Management Recognition and Development Plan (the "MRP"),
effective July 1, 1998. The Stock Option Plan reserves for issuance up to
43,642 stock options to certain officers, directors, and employees either in
the form of incentive stock options or nonincentive stock options. The
exercise price of the stock options may not be less than the fair value of the
Company's stock options at date of grant. The options granted in 1998 vest at
the rate of 20% annually beginning at date of grant and will expire in 2008.
The number and weighted average fair value of the options on the grant date
was 37,095 stock options at $17.25 per share. An additional 4,364 stock
options were granted in 2000 and vest at a rate of 20% annually beginning on
the date of grant and will expire in 2010. The weighted average fair value of
the additional options was $15.50 per share. As permitted under the generally
accepted accounting principles, grants under the plan will be accounted for
following the provisions of APB Opinion No. 25 and its related
interpretations. Accordingly, no compensation cost has been recognized for
grants made to date.
At September 30, 2000, options totalling 37,095 had been granted with an
exercise price of $17.25 and 4,364 options with an exercise price of $15.50,
of which 41,459 options are currently unexercisable and all options granted
are outstanding at September 30, 2000.
The Company purchased 17,457 common shares in the open market to fund the MRP
on September 9, 1998. The restricted common stock under the MRP vests at the
rate of 20% annually beginning at the date of grant. The expense related to
the vesting of the MRP was $12,000 and $36,000, respectively, for the three
and nine months ended September 30, 2000.
8. ASSET QUALITY
At September 30, 2000, the Company had total nonperforming loans (i.e., loans
which are contractually past due 90 days or more) of approximately $196,000.
As a percentage of net loans receivable at September 30, 2000, nonperforming
loans were .3%. Total nonperforming assets were $342,000 or .4% of total
assets at September 30, 2000.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The following discussion and analysis is intended to assist in understanding
the consolidated financial condition and the consolidated results of
operations of the Company. References to the "Company" include Security
Bancorp, Inc. and/or Security Federal Savings Bank of McMinnville, TN, as
appropriate.
This section contains forward-looking statements that have been prepared on
the basis of the Company's best judgments and currently available information.
These forward-looking statements are inherently subject to significant
business, economic, and competitive uncertainties and contingencies, many of
which are beyond the control of the Company. In addition, these
forward-looking statements are subject to assumptions with respect to future
business strategies and decisions that are subject to changes. Accordingly,
there can be no
9
<PAGE>
assurance that many of these strategies will be implemented or, if
implemented, achieve the amounts described or within the time periods
currently estimated.
Comparison of Financial Condition at December 31, 1999 and September 30, 2000
The Company's total consolidated assets increased by approximately $6.7
million or 9.3%, from $72.2 million at December 31, 1999 to $78.9 million at
September 30, 2000. The increase in assets for the period was primarily
attributable to an increase in loans receivable and noninterest earning
deposits.
Loans receivable, net, were $64.8 million at September 30, 2000 compared to
$60.2 million at December 31, 1999, a 7.6% increase. This increase was
attributable to an increase in first mortgage residential loans of $2.1
million, an increase in commercial business and real estate loans of $1.7
million, and an increase in consumer loans of $800,000.
Deposits increased $7.0 million or 12.2%, from $57.5 million at December 31,
1999 to $64.5 million at September 30, 2000. The increase in deposits was
primarily attributable to an increase in certificates of deposit and personal
checking accounts and reflects the Company's successful focus on offering full
service banking.
Comparison of Results of Operations for the Three Months Ended September 30,
1999 and 2000
Net Income. Net income for the three months ended September 30, 2000 was
$206,000 compared to $156,000 for the same quarter last year, an increase of
$50,000 or 32.1%. The increase resulted from an increase in net interest
income offset to a lesser degree by an increase in other expenses. The return
on average assets was 1.06% for the three months ended September 30, 2000.
Net Interest Income. Net interest income increased $102,000 or 17.5% from
$583,000 for the three months ended September 30, 1999 to $685,000 for the
three months ended September 30, 2000. The interest rate spread increased
from 4.07% for three months ending September 30, 1999 to 4.09% for the three
months ending September 30, 2000 as a result of the weighted average yield on
the loan portfolio increasing while the weighted average rate of deposits and
borrowings increased at a slower rate.
Total interest income increased $228,000 or 17.3% from $1.3 million for the
three months ended September 30, 1999 to $1.5 million for the three months
ended September 30, 2000. Interest on loans increased $247,000, or 20.6% from
$1.2 million for the three months ended September 30, 1999 to $1.4 million for
the three months ended September 30, 2000. The increase resulted from an $4.6
million increase in loans outstanding substantially in residential mortgage
loans, commercial business loans, and consumer loans since December 31, 1999.
Interest expense increased $143,000, or 21.2% from $673,000 for the three
months ended September 30, 1999 to $816,000 for the three months ended
September 30, 2000. The increase for the three months ending September 30,
2000 was the result of an increase in the average balance of deposits, which
were used to fund loan demand.
Provision for Loan Losses. Provisions for loan losses are charges to earnings
to bring the total allowance for loan losses to a level considered adequate by
management to provide for estimated loan losses based on management's
evaluation of the collectability of the loan
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portfolio, including past loan loss experience, adverse situations that may
affect the borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions. The provision for loan losses
was $45,000 for the three months ended September 30, 2000 compared to $62,000
for the three months ended September 30, 1999. Management deemed the
allowance for loan losses adequate at September 30, 2000.
Noninterest Income. Noninterest income increased $23,000, or 8.3% to $300,000
for the three months ended September 30, 2000 from $277,000 for the three
months ended September 30, 1999. The increase was attributable to an increase
in service charges on deposit accounts and revenues from trust operations.
Noninterest Expense. Noninterest expense increased $41,000, or 6.8% to
$648,000 for the three months ended September 30, 2000 from $607,000 for the
three months ended September 30, 1999. Compensation and benefits increased to
$352,000 for the three months ended September 30, 2000 from $332,000 for the
three months ended September 30, 1999 as a result of increases in
compensation. Data processing and other expenses increased to $219,000 for
the three months ended September 30, 2000 from $200,000 for the three months
ended September 30, 1999 primarily as a result of increased service bureau
expense for the Savings Bank and data processing for the trust department.
Income Taxes. Income tax expense for the three months ending September 30,
2000 was $131,000 compared to $97,000 for the three months ending September
30, 1999. This increase was the result of pre- tax income increasing for the
three months ending September 30, 2000.
Comparison of Results of Operations for the Nine Months Ended September 30,
1999 and 2000.
Net Income. Net income for the nine months ended September 30, 2000 was
$599,000 compared to $491,000 for the nine months ended September 30, 1999, an
increase of $108,000, or 22.0%. The increase resulted from an increase in net
interest income offset to a lesser degree by an increase in other expenses.
The return on average assets was 1.06% for the nine months ended September 30,
2000 compared to .98% for the nine months ended September 30, 1999.
Net Interest Income. Net interest income increased $280,000, or 15.9% to $2.0
million for the nine months ended September 30, 2000 from $1.8 million for the
nine months ended September 30, 1999 as a result of an increase in total
interest income that more than offset an increase in total interest expense.
Total interest income increased $639,000, or 16.7% to $4.5 million for the
nine months ended September 30, 2000 from $3.8 million for the same period a
year ago as a result of an increase in the average balance of, and average
yield on, loans receivable. The average balance on loans receivable increased
to $62.5 million from $55.5 million. The increase was attributable to the
substantial increase in first mortgage residential loans, commercial business,
and consumer loans.
Interest expense increased $350,000, or 18.2% to $2.3 million for the nine
months ended September 30, 2000 from $1.9 million for the same period a year
ago, primarily as a result of an increase in average balances of
interest-bearing deposits which were used to fund loan demand.
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<PAGE>
Provision for Loan Losses. The provision for loan losses for the nine months
ended September 30, 2000 was $135,000 compared to $126,000 for the same period
a year ago, an increase of $9,000. The higher provision was due to the
corresponding increase in loans outstanding. Historically, management has
emphasized the Company's loss expense over other factors in establishing
provisions for loan losses. Management deemed the allowance for loan losses
adequate at September 30, 2000.
Noninterest Income. Noninterest income increased $38,000, or 4.7% to $840,000
for the nine months ended September 30, 2000 from $802,000 for the same period
a year ago. This increase is primarily due to revenues from trust operations
of $346,000. Additionally, noninterest income increased as a result of an
increase in service charges on deposit accounts.
Noninterest Expense. Noninterest expenses increased $141,000, or 8.0% to $1.9
million for the nine months ended September 30, 2000 from $1.8 million for the
nine months ended September 30, 1999. Compensation and benefits increased to
$1,037,000 for the nine months ended September 30, 2000 from $966,000 for the
nine months ended September 30, 1999 primarily as a result increases in
compensation. Data processing and other expenses increased to $644,000 for
the nine months ended September 30, 2000 from $536,000 for the nine months
ended September 30, 1999 primarily as a result of increased service bureau
expense for the Savings Bank and data processing for the trust department.
Income Tax Expense. Income tax expense for the nine months ended September
30, 2000 was $381,000 compared to $312,000 for the same period a year ago.
The increase was the result of pre-tax income increasing by $177,000 for the
nine months ending September 30, 2000.
Liquidity and Capital Resources. The Company's primary sources of funds are
deposits and proceeds from principal and interest payments on loans. While
maturities and scheduled amortization of loans are a predictable source of
funds, deposit flows and mortgage prepayments are greatly influenced by
general interest rates, economic conditions and competition. The Company's
primary investing activity is loan originations. The Company maintains
liquidity levels adequate to fund loan commitments, investment opportunities,
deposit withdrawals and other financial commitments. At September 30, 2000,
the Savings Bank's liquidity ratio was 9.8% (required ratio at that date was
4% pursuant to OTS regulations). At September 30, 2000, there were no material
commitments for capital expenditures and the Company had unfunded loan
commitments of approximately $3.7 million and unfunded letters of credit of
$506,000. At September 30, 2000, management had no knowledge of any trends,
events or uncertainties that will have or are reasonably likely to have
material effects on the liquidity, capital resources or operations of the
Company. Further at September 30, 2000, management was not aware of any
current recommendations by the regulatory authorities, which, if implemented,
would have such an effect.
The Company is not subject to any separate regulatory capital requirements.
The Savings Bank exceeded all of its regulatory capital requirements at
September 30, 2000 with the following regulatory capital ratios:
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<TABLE>
Security Federal Savings Bank
(Unaudited)
As of September 30, 2000 Actual For Capital Categorized as
Adequacy Purposes "Well Capitalized"
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to risk weighted assets) $ 8,499 15.60% $ 4,358 8.00% $ 5,447 10.00%
Tier I Capital
(to risk weighted assets) 7,725 14.18 2,179 4.00 3,268 6.00
Tier 1 Capital
(to adjusted total assets) 7,725 9.80 2,364 3.00 3,940 5.00
Tangible Capital
(to tangible assets) 7,725 9.80 1,182 1.50 N/A ---
As categorized under the OTS Prompt Corrective Action Provisions.
</TABLE>
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
From time to time, the Company and any subsidiaries may be a party to various
legal proceedings incident to its or their business. At September 30, 2000,
there were no legal proceedings to which the Company or any subsidiary was a
party, or to which of any of their property was subject, which were expected
my management to result in a material loss.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
Exhibits
--------
3.1 Charter of Security Bancorp, Inc.*
3.2 Bylaws of Security Bancorp, Inc.*
10.1 Employment Agreement with Joe H. Pugh**
10.2 Severance Agreement with John W. Duncan**
10.3 Severance Agreement with Ray Talbert**
10.4 Severance Agreement with Kenneth W. Smith*****
10.5 Severance Agreement with Shannon L. Haston*****
10.6 Security Federal Savings Bank of McMinnville, TN 401(k) Plan*
10.7 Security Federal Savings Bank of McMinnville, TN
Employee Stock Ownership Plan***
10.8 Security Bancorp, Inc. Management Recognition and
Development Plan****
10.9 Security Bancorp, Inc. 1998 Stock Option Plan****
27 Financial Data Schedule
No reports on Form 8-K were filed during the quarter ended September 30, 2000.
_____________________
* Incorporated by reference to Registrant's Registration
Statement on Form SB-2, as amended (File No. 333-6670)
** Incorporated by reference to Registrant's Form 10-QSB for the quarter
ended September 30, 1997.
*** Incorporated by reference to Registrant's Form 10-KSB for the year ended
December 31, 1997.
**** Incorporated by reference to Registrant's Annual Meeting Proxy Statement
dated March 16, 1998.
***** Incorporated by reference to Registrant's Form 10-KSB for the year ended
December 31, 1998.
14
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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.
Security Bancorp, Inc.
Date: November 13, 2000 By /s/ Joe H. Pugh
Joe H. Pugh
President and Chief Executive Officer
Security Bancorp, Inc.
Date: November 13, 2000 By /s/ John W. Duncan
John W. Duncan
Vice President and Chief Financial Officer
15
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