SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number: 0-22911
SOUTHERN SECURITY BANK CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 65-0325364
(State or other jurisdiction (IRS Employer Identification
of incorporation) Number)
3475 Sheridan Street, Hollywood, FL 33021
(Address of principal executive offices)
(954) 985-3900
(Registrant's telephone number including area code)
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 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. Yes ______ No ______.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the June 30, 1998 (latest practicable date):
(a) Class A Voting Common Stock: 4,456,656 shares
(b) Class B Non-Voting Common Stock: -0-
Transitional Small Business Disclosure Format ______ Yes ___X___ No
<PAGE>
INDEX
Page No.
Part I Financial Information
Consolidated condensed balance sheets - 4-5
June 30, 1998 and December 31, 1997
Consolidated condensed statements of operations
for the six months ended June 30, 1998 and 1997 6-7
Consolidated condensed statements of operations
for the three months ended June 30, 1998 and 1997 8-9
Consolidated condensed statements of cash flows
for the six months ended June 30, 1998 and 1997 10-11
Consolidated condensed statements of comprehensive
income for the three and six months ended
June 30, 1998 and 1997 12
Notes to consolidated condensed financial
statements 13-14
Management's discussion and analysis of
financial condition and results of operations 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS - UNAUDITED
June 30, 1998 and December 31,1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 6/30/98 12/31/97
- -------------------------------------------------------------------------
Cash and due from banks $ 1,514,822 $ 1,107,669
Federal Funds sold 4,648,000 0
--------- ---------
Total cash and cash equivalents 6,162,822 1,107,669
Securities held to maturity 982,185 1,827,494
Securities available for sale 350,660 380,094
Federal Reserve Bank stock, at cost 78,550 63,100
Loans, net 16,642,919 12,463,278
Premises and equipment 375,147 399,799
Other real estate owned 414,297 406,298
Accrued interest receivable 148,812 125,870
Other assets 204,462 158,360
---------- ---------
Total Assets 25,359,854 $ 16,931,962
========== ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES 6/30/98 12/31/97
- ---------------------------------------------------------------------------------------------------------
Liabilities
Noninterest bearing deposits $ 4,650,207 $ 3,974,999
Interest-bearing deposits 18,787,453 11,700,313
---------- ----------
Total deposits 23,437,660 15,675,312
Federal funds purchased 0 206,000
Securities sold under repurchase agreements 0 0
Notes payable 100,000 100,000
Other liabilities 832,125 452,550
--------- ----------
Total liabilities 24,369,785 16,433,862
---------- ----------
Commitments and Contingencies 0 0
Minority interest in subsidiary 38,604 25,270
---------- ----------
Stockholders' equity
Series A Preferred Stock 0 0
Class A Common Stock 44,567 42,997
Class B Common Stock 0 0
Surplus 4,998,636 4,215,371
Accumulated Profit/Loss (4,094,142) (3,786,230)
----------- -----------
949,060 472,138
Unrealized gain (loss) on securities 2,404 692
available for sale, net --------- ----------
Total stockholders' equity 951,464 472,830
--------- ----------
Total liabilities & stockholders 25,359,854 16,931,962
========== ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C>
INCOME STATEMENT 6/30/98 6/30/98
- ---------------------------------------------------------------------------------------------
Interest Income:
Interest and fees on loans $ 745,354 $ 573,688
Interest and dividends on securities 90,033 122,614
Interest on fed funds sold & repurchase agreements 99,280 26,652
--------- ---------
934,667 722,954
Interest Expense:
Deposits 427,029 285,452
Other 4,089 4,000
-------- ---------
Total interest expense 431,118 289,452
NET INTEREST INCOME 503,549 433,502
Provisions for loan losses 0 0
NET INTEREST INCOME AFTER PROVISION FOR 503,549 433,502
LOAN LOSSES -------- ---------
Other Income:
Service charges on deposit accounts 56,467 40,850
Securities losses, net 0 0
Other 30,310 25,348
-------- ---------
TOTAL OTHER INCOME 86,777 66,198
-------- ---------
Other expenses:
Salaries and employee benefits 449,502 581,965
Occupancy and equipment 172,911 155,990
Data and item processing 41,168 45,502
Professional Fees 55,694 26,723
Insurance 26,160 36,564
Other 152,742 168,911
-------- ---------
TOTAL OTHER EXPENSES 898,177 1,015,655
-------- ---------
NET PROFIT (LOSS) BEFORE MINORITY INTEREST
IN NET PROFIT (LOSS) OF SUBSIDIARY (307,851) (515,955)
Minority interest in net (profit) loss of subsidiary (61) 3,343
--------- ---------
NET (LOSS) (307,912) (512,612)
========= =========
BASIC AND DILUTED EARNINGS PER SHARE (0.07) (0.14)
==== ====
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C>
INCOME STATEMENT 6/30/98 6/30/97
- --------------------------------------------------------------------------------------------
Interest Income:
Interest and fees on loans $ 406,144 $ 290,459
Interest and dividends on securities 51,783 62,483
Interest on fed funds sold & repurchase agreements 51,290 19,708
---------- ----------
509,217 372,650
Interest Expense:
Deposits 224,405 142,405
Other 4,089 4,000
Total interest expense 228,494 146,405
NET INTEREST INCOME 280,723 226,245
Provisions for loan losses 0 0
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 280,723 226,245
---------- ----------
Other Income:
Service charges on deposit accounts 29,246 21,664
Securities losses, net 0 0
Other 13,895 (932)
---------- ----------
TOTAL OTHER INCOME 43,141 20,732
---------- ----------
Other expenses:
Salaries and employee benefits 244,653 171,448
Occupancy and equipment 98,022 49,321
Data and item processing 26,540 22,735
Professional Fees 22,589 6,246
Insurance 13,081 23,861
Other 65,860 109,949
--------- ----------
TOTAL OTHER EXPENSES 470,745 383,560
--------- ----------
NET PROFIT (LOSS) BEFORE MINORITY INTEREST
IN NET PROFIT (LOSS) OF SUBSIDIARY (146,881) (136,583)
Minority interest in net (profit) loss of subsidiary (641) 1,400
--------- -----------
NET (LOSS) (147,522) (135,183)
========== ===========
BASIC AND DILUTED EARNINGS PER SHARE (0.03) (0.04)
==== ====
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
Six Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS 6/30/98 6/30/97
- -----------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net Income (loss) $ (307,912) $ (512,612)
Adjustments to reconcile net profit (loss) to net cash
used in operating activities:
Net accretion on securities (19,314) 0
Provision for loan losses 0 0
Depreciation and amortization 62,266 37,283
Securities (gains) losses, net 0 0
Minority interest in net income (loss) of subsidiary 61 (3,343)
(Increase) decrease in accrued interest receivable (22,942) (21,506)
(Increase) decrease in other assets (69,160) (106,942)
Increase in other liabilities 379,575 222,418
-------- ----------
Net cash provided by (used in) operating activities 22,574 (384,702)
-------- ----------
Cash Flows from Investing Activities
Net cash flows from securities 895,810 (110,229)
(Purchase) Sale of Federal Reserve Bank / Federal
Home Loan Bank stock (15,450) (1,500)
Loan originations and principal collections on loans - 1,544,151 1,379,546
net
Purchase of loans - net (5,723,793) 0
Purchase of premises and equipment - net (14,555) (13,680)
(Increase) Decrease of other real estate owned (7,999) (25,661)
(Increase) Decrease in minority interest 13,233 0
----------- ----------
Net cash provided by (used in) investing activities (3,308,603) 1,228,476
----------- ----------
Cash Flows From Financing Activities
Net increase (decrease) in federal funds purchased and
securities sold under repurchase agreements (206,000) (750,000)
Net increase (decrease) in deposits 7,762,348 (522,910)
Net increase (decrease) in notes payable 0 (150,000)
Proceeds from issuance of stock 784,834 680,915
Dividends paid on stock 0 0
--------- ----------
Net cash provided by (used in) financing activities 8,341,182 (741,995)
--------- ----------
Net increase (decrease) in cash and cash
equivalents 5,055,153 101,779
Cash and cash equivalents, Beginning 1,107,669 4,236,602
--------- ----------
Cash and cash equivalents, Ending 6,162,822 4,338,381
</TABLE>
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks and federal funds sold. Generally, federal funds
are purchased and sold for one-day periods.
See notes to Consolidated Condensed Financial Statements
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
Six Months Ended
----------------
COMPREHENSIVE INCOME 6/30/98 6/30/97
Net Income (loss) (307,912) (512,612)
Other comprehensive Income (loss):
Unrealized holding gains arising during period 1,712 12,291
-------- --------
Comprehensive Income (loss) (306,200) (500,321)
--------- ---------
Three Months Ended
-------------------
COMPREHENSIVE INCOME 6/30/98 6/30/97
Net Income (loss) (147,522) (135,183)
Other comprehensive Income (loss):
Unrealized holding gains arising during period (662) 436
-------- --------
Comprehensive Income (loss) (148,184) (134,747)
-------- ---------
See Notes to Consolidated Condensed Financial Statements
<PAGE>
Notes to Consolidated Condensed Financial Statements (unaudited)
The accompanying unaudited consolidated condensed financial statements of
Southern Security Bank Corporation (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in accordance with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation of the results for the interim
period ended June 30, 1998, have been included. Operating results for the six
month period ended June 30, 1998, are not necessarily indicative of the results
that may be expected for the full year. For further information, refer to the
consolidated financial statements and the notes to consolidated financial
statements included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1997, as filed with the Securities and Exchange Commission,
which are incorporated herein by reference. All capitalized terms used in these
notes to consolidated condensed financial statements that are not defined herein
have the meanings given to them in such consolidated condensed financial
statements and notes to consolidated condensed financial statements.
All material intercompany balances and transactions have been eliminated.
The Company is a bank holding company that owns 97.5% of the outstanding capital
stock of Southern Security Bank ("Bank"). The Company is organized under the
laws of the state of Delaware, while the Bank is a Florida State Chartered
Commercial Bank that is a member of the Federal Reserve System whose deposits
are insured by the Federal Deposit Insurance Corporation. The Bank provides a
full range of commercial banking and consumer banking services to businesses and
individuals. The Company is regulated by the Federal Reserve, its affiliate Bank
is regulated by the Florida Department of Banking and Finance and the Federal
Reserve.
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net income or stockholders' equity. SFAS 130 requires unrealized gain
or losses on the Company's available-for-sale investments, which prior adoption
were reported separately in stockholders' equity, to be included in other
comprehensive income. All of the Company's other comprehensive income relates to
net unrealized gain (losses) on available-for-sale investments.
Effective for the year ended December 31, 1997, the Company adopted the
Statement of Financial Standards No. 128, "Earnings Per Share" ("SFAS 128"). In
accordance with SFAS 128, the Company is required to provide basic and dilutive
earnings per common share information.
<PAGE>
Following is information about the computation of earnings per share data for
the periods ended June 30, 1998 and June 30, 1997 (after giving effect to the 1
for 3 reverse stock split executed in connection with the reverse merger
executed November 12, 1997).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Per Share
Numerator Denominator Amounts
Six Months Ended June 30, 1998
-------------------------------
Net Loss $ (307,912)
Basic and diluted earnings per share,
income available to common shareholders $ (307,912) 4,456,656 (0.07)
------------------------------------------
Six Months Ended June 30, 1997
------------------------------
Net Loss (512,612)
Less preferred stock dividends accrued (7,417)
-----------
Basic and diluted earnings per share,
income available to common
shareholders (520,029) 3,674,689 (0.14)
-----------------------------------------------
</TABLE>
Options for the purchase of 758,611 shares at June 30, 1997 (after giving effect
to the 1 for 3 reverse stock split executed in connection with the reverse
merger executed November 12, 1997) and 810,207 shares at June 30, 1998 have not
been included in the computation of diluted earnings per share for June 30, 1998
and June 30, 1997 because their inclusion would have been antidilutive as a
result of losses being reported for these periods. Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion and analysis presents a review of the consolidated
condensed operating results and financial condition of Southern Security Bank
Corporation ("Company") and it's subsidiary Southern Security Bank ("Bank") for
the six month period ended June 30, 1998 and 1997. This discussion and analysis
should be read in conjunction with the Consolidated Condensed Financial
Statements and Notes thereto contained in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM DECEMBER 31, 1997 TO
JUNE 30, 1998
FINANCIAL CONDITION
Total assets increased by $8.5 million, or 49.8%, from $16.9 million at
December 31, 1997, to $25.4 million at June 30, 1998, with the increase
principally consisting of consumer loans and federal funds.
The Company's short-term investments, primarily consisting of Federal Funds Sold
("fed funds") and available-for-sale investments, increased by $4.6 million to
$5.0 million at June 30, 1998, from $.4 million at December 31, 1997.
The Company's net loans receivable increased by $4.1 million or 33.5%, to $16.6
million at June 30, 1998, from $12.5 million at December 31, 1997, primarily due
to the purchase of $5.7 million of individually underwritten consumer loans. The
loans purchased were fixed rate at market secured by automobiles with each fully
amortizing. These loans were purchased primarily to invest the proceeds from
deposits, loan repayments, and to enhance overall earnings performance.
The Allowance For Credit Losses reflects management's judgement of the level of
allowance adequate to provide for reasonably foreseeable losses, based upon the
following factors: (i) the general economic conditions; (ii) the credit
condition of its customers, as well as the underlying collateral, if any; (iii)
historical experience; and (iv) the average maturity of its loan portfolio.
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
ANALYSIS OF ALLOWANCE FOR LOAN AND LEASE LOSSES - UNAUDITED
Six Months Ended June 30, 1998 and June 30, 1997
6/30/98 6/30/97
Balance, beginning of year 288,802 196,139
Charge offs 30,434 10,909
Recoveries 5,689 3,641
Provision for loan and lease losses 0 0
Ending Balance 264,057 188,871
Loan loss reserve as percent of gross loans 1.56% 1.85%
and discount
Deposits increased by $7.7 million, or 49.5%, to $23.4 million at June 30, 1998
from $15.7 million at December 31, 1997. Management believes this increase is
attributable to the Company's offering of competitive interest rates and
personalized service in a market area dominated by super-regional banks and
continued industry consolidation.
CAPITAL
The Company's total stockholders' equity was $951,464 at June 30, 1998, an
increase of $478,635, or 101.2%, from $472,830. at December 31, 1998. The
increase is due primarily to the issuance of 156,967 shares of Class A Common
stock during the first half of 1998 pursuant to an offering with net proceeds of
$784,834.
The Company and the Bank are subject to various regulatory capital requirements
administered by the regulatory banking agencies. Failure to meet minimum capital
requirements can result in certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. The regulations require
the Company and the Bank to meet specific capital adequacy guidelines that
involve quantitative measures of their assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices. The
Company's and the Bank's capital classification is also subject to qualitative
judgement by the regulators about interest rate risk, concentration of credit
risk and other factors.
In accordance with risk-based capital guidelines issued by the Federal Reserve
Board to ensure capital adequacy of banks and bank holding companies, the
Company and the Bank are each required to maintain a minimum ratio of
total capital to risk-weighted assets of 8%, in addition to minimum
amounts and other minimum ratios, each as set forth below. Additionally, all
bank holding companies and member banks must maintain minimum leverage ratios
(set forth in the table below). Holding Companies and Member banks operating at
or near the minimum ratio levels are expected to have well diversified risks,
including no undue interest rate risk exposure, excellent control systems,
good earnings, high asset quality, high liquidity, and well managed on- and
off-balance sheet activities, and in general be considered strong organizations
with a composite 1 rating under the CAMELS rating system of banks and BOPEC
rating system for holding companies. For all but the most highly rated banks
and bank holding companies meeting the above conditions, the minimum leverage
ratio may require an additional 100 to 200 basis points. The Leverage Ratio of
the Company as well as the Tier 1 Capital, Total Capital, and Leverage Ratio
of the Bank are set forth in the table below.
Company Capital Ratios June 30, 1998 December 31, 1997 Minimum
Leverage: 4.07% 2.79% 3.00%
Bank Capital Ratios June 30, 1998 December 31, 1997 Adequately
Total risk-weighted capital: 9.67% 8.92% 8.00%
Tier I risk-weighted capital: 8.42% 7.65% 4.00%
Leverage: 5.94% 5.08% 4.00%
The Bank entered into a written agreement ("Agreement") with the Federal
Reserve Bank of Atlanta (the "FRB") and the State of Florida Department of
Banking and Finance (the "Department") on March 17, 1992. The Agreement
includes the requirement that, in the event the Bank's leverage ratio falls
below 6.25%, the Bank will notify the FRB and the Department about the
capital deficiency and submit a written statement detailing the steps to be
taken to increase the leverage ratio. On July 6, 1998, in accordance with the
Agreement, the Bank notified the FRB and the Department that the Bank's
leverage ratio was 5.94% and that the Bank would increase its capital by
$95,000 through an offering of common stock by the Company to return the ratio
to at least 6.25%.
LIQUIDITY
The Company's principals sources of liquidity and funding are generated by the
operations of its subsidiary Southern Security Bank ("Bank") through its diverse
deposit base as well as loan participations. For banks, liquidity represents the
ability to meet loan commitments, withdrawals of deposit funds, and operating
expenses. The level and maturity of deposits necessary to support the Company's
lending and investment activities is determined through monitoring loan demand
and through its asset/liability management process. Considerations in managing
the Company's liquidity position include scheduled cash flows from existing
assets, contingencies and liabilities, as well as projected liquidity conducive
to efficient operations and is continuously evaluated as part of the
asset/liability management process.
Historically, the Company has increased its level of deposits to allow for its
planned asset growth. The level of deposits are influenced by general interest
rates, economic conditions and competition, among other things.
The Company's liquidity at June 30, 1998, consisted of $6.2 million in cash and
cash equivalents and $.4 in available-for-sale investments, for a total of $6.6
million, compared with a total of $1.5 million at year-end 1997, an increase of
approximately $5.1 million.
RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND JUNE
30, 1997.
Net income for the six months ended June 30, 1998 was a loss of $307,912
compared to a loss of $512,612 for the six month period ended June 30, 1997.
This was an improvement of $204,700 or 39.9%. Earnings for the six months ended
June 30, 1998 as compared to the same period last year were primarily impacted
by a corresponding increase in net interest income and operating expenses.
Net income for the quarter ended June 30, 1998 was a loss of $147,522 compared
to a loss of $135,183 for the quarter ended June 30, 1997. This was a negative
change of $12,339 or 9.1%. Earnings for the quarter ended June 30, 1998 as
compared to the same quarter last year were primarily impacted by an increase in
net interest income and operating expenses.
NET INTEREST INCOME
Net interest income before provision for loan losses for the six months ended
June 30, 1998 was $503,549 as compared to $433,502 for the six months ended June
30, 1997, an increase of $70,047 or 16.2%.
The increase in net interest income for the six months ended June 30, 1998 was
in part due to higher yields from interest and fees on loans. Income from
interest earning deposits, securities and mortgage backed related securities
(available-for-sale and held-to-maturity) and Federal Reserve Bank stock
decreased by $32,581 from $122,614 for the six months period ended June 30, 1997
compared to the six month period ended June 30, 1998. The balance of net loans
increased by $4,179,641 to $16,642,919 and the investment portfolio decreased by
859,293 to $1,411,395 from December 31, 1997 to June 30, 1998.
Interest expense on deposits increased $141,577 from $285,452 at June 30, 1997
to $427,029 at June 30, 1998. The actual interest expense increase was the
result of a corresponding increase of interest bearing liabilities.
OPERATING EXPENSES
Operating expenses decreased by $117,478, or 11.6% from $1,015,655 at June 30,
1997 to $898,177 at June 30, 1998. The increase of $87,185 in other expenses for
the quarter ended June 30, 1998 as compared to the quarter ended June 30, 1997
includes increases in salaries and employee benefits. Additionally, there was an
increase in occupancy and equipment of $16,921 for the six months ended June 30,
1998 as compared to the six months ended June 30, 1997. The Company and the Bank
occupy the same quarters and in June 1997 the lease was renegotiated reducing
the Bank's obligation. The category Other, which includes all not elsewhere
classified, decreased from $168,911 for the six months ended June 30, 1997 to
$152,742 for the six months ended June 30, 1998.
PROVISION FOR LOAN LOSSES
Although management uses its best judgement in underwriting each loan, industry
experience indicates that a portion of the Bank's loans will become delinquent.
Regardless of the underwriting criteria utilized by financial institutions,
losses may be experienced as a result of many factors beyond their control
including among other things, changes in market conditions affecting the value
of security and unrelated problems affecting the credit of the borrower. Due to
the concentration of loans in South Florida, adverse economic conditions in this
area could result in a decrease in the value of a significant portion of the
Bank's collateral. In the normal course of business, the Bank has recognized and
will continue to recognize losses resulting from the inability of certain
borrowers to repay loans and the insufficient realizable value of collateral
securing such loans. Accordingly, management has established an allowance for
loan losses, which totaled $264,057 at June 30, 1998. The allowance for credit
losses is maintained at a level believed adequate by management to absorb
estimated credit losses. Management's periodic evaluation of the adequacy of the
allowance is based on the Company's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay (including the timing of future payments), the
estimated value of any underlying collateral, composition of the loan portfolio,
current economic conditions, and other relevant factors. This evaluation is
inherently subjective as it requires material estimates including the amounts
and timing of future cash flows expected to be received on impaired loans that
may be susceptible to significant change. The Bank's allowance for loan and
credit losses was analyzed and deemed to be adequate at June 30, 1998 and no
additional provision was expensed during the first six months of 1998.
PROVISION FOR INCOME TAXES
The Company has recorded a valuation allowance on the deferred tax assets to
reduce the total to an amount that management believes is more likely to be
realized. Realization of deferred tax assets is dependent upon sufficient future
taxable income during the period that deductible temporary differences and carry
forwards are expected to be available to reduce taxable income. No income tax
benefits have been provided for the six months ending June 30, 1998 and 1997
because the results of operations do not provide evidence that the net operating
losses available for carryforward will be utilized in the future.
YEAR 2000
The Company and the Bank have begun assessing the potential impact of the
computer systems and software products situation commonly referred to as the
"Year 2000 Issue". The Year 2000 Issue, which affects most corporations,
concerns the inability of information systems, primarily computer software
programs, to properly recognize and process date-sensitive information relating
to the year 2000 and beyond. The Company utilizes a significant number of
computer software programs and operating systems across its entire organization.
To the extent the Company's software applications contain source code that is
unable to appropriately interpret the upcoming calendar year "2000," some level
of modification, or even possibly replacement of such applications may be
necessary. The Company and the Bank are preparing its computer systems and
applications to be functional on January 1, 2000 in 1999. Data processing for
the Company and the Bank's major applications are performed by two third-party
service bureaus who have indicated that their systems will be Year 2000
compliant. Consequently, management believes that a majority of its systems are
Year 2000 compliant and accordingly, does not anticipate that the total costs to
be incurred to be Year 2000 compliant will be material to the Company's
financial condition or results of operations.
<PAGE>
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.
SOUTHERN SECURITY BANK CORPORATION
Dated: August 14, 1997 By: /s/ James L. Wilson
--------------------
James L. Wilson,
Chief Executive Officer
Dated: August 14, 1997 By:/s/Floyd D. Harper
---------------------
Floyd D. Harper
Vice President and Secretary
(chief financial officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-1-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,514,822
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,648,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 350,660
<INVESTMENTS-CARRYING> 982,185
<INVESTMENTS-MARKET> 987,361
<LOANS> 16,906,976
<ALLOWANCE> 264,057
<TOTAL-ASSETS> 25,359,854
<DEPOSITS> 23,437,660
<SHORT-TERM> 100,000
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0
0
<COMMON> 44,567
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<INTEREST-INVEST> 90,033
<INTEREST-OTHER> 99,280
<INTEREST-TOTAL> 934,667
<INTEREST-DEPOSIT> 427,029
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<INTEREST-INCOME-NET> 503,549
<LOAN-LOSSES> 0
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<EXPENSE-OTHER> 898,177
<INCOME-PRETAX> (307,912)
<INCOME-PRE-EXTRAORDINARY> (307,912)
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<NET-INCOME> (307,912)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
<YIELD-ACTUAL> 7.47
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<ALLOWANCE-CLOSE> 264,057
<ALLOWANCE-DOMESTIC> 264,057
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</TABLE>
