SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
Commission File No: 0-22911
SOUTHERN SECURITY BANK CORPORATION
Delaware 65-0325364
(State or other jurisdiction (IRS Employer Identification
of incorporation) Number)
3475 Sheridan Street, Hollywood, FL 33021
(954) 985-3900
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the September 30, 1998 (latest practicable date):
(a) Class A Voting Common Stock: 4,486,976 shares
(b) Class B Non-Voting Common Stock: -0-
Transitional Small Business Disclosure Format (check one): YES____; NO X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS - UNAUDITED
September 30, 1998 and December 31,1997
<TABLE>
<CAPTION>
ASSETS 9/30/98 12/31/97
- ----------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $ 1,695,149 $ 1,107,669
Federal Funds sold 6,418,000 0
------------ -
Total cash and cash equivalents 8,113,149 1,107,669
Securities held to maturity 367,866 1,827,494
Securities available for sale 310,450 380,094
Federal Reserve Bank stock, at cost 78,550 63,100
Loans, net 15,512,933 12,463,278
Premises and equipment 361,360 399,799
Other real estate owned 414,297 406,298
Accrued interest receivable 135,815 125,870
Other assets 206,747 158,360
------------ -------
Total Assets $ 25,501,167 $ 16,931,962
========== ===========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS - UNAUDITED
September 30, 1998 and December 31, 1997
LIABILITIES 9/30/98 12/31/97
- ------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities $ $
Noninterest bearing deposits 3,873,469 3,974,999
Interest-bearing deposits 19,430,204 11,700,313
---------- ----------
Total deposits 23,303,673 15,675,312
Federal funds purchased 0 206,000
Securities sold under repurchase agreements 0 0
Notes payable 100,000 100,000
Other liabilities 915,162 452,550
------------ ----------
Total liabilities 24,318,835 16,433,862
------------ ------------
Commitments and Contingencies 0 0
Minority interest in subsidiary 40,261 25,270
------------ ------------
Stockholders' equity
Series A Preferred Stock 0 0
Class A Common Stock 44,870 42,997
Class B Common Stock 0 0
Surplus 5,149,933 4,215,371
Accumulated Profit/Loss (4,057,090) (3,786,230)
----------- -----------
1,137,713 472,138
Unrealized gain (loss) on securities available
for sale, net 4,358 692
----------- ------
Total stockholders' equity 1,142,071 472,830
------------- -----------
Total liabilities & stockholders equity $ 25,501,167 $16,931,962
========== ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
INCOME STATEMENT 9/30/98 9/30/97
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income: $ $
Interest and fees on loans 1,128,276 852,757
Interest and dividends on securities 108,429 183,620
Interest on fed funds sold & repurchase agreement 180,724 52,943
------- -------------
1,417,428 1,089,320
Interest Expense:
Deposits 658,972 423,214
Other 8,213 6,117
------ ------
Total interest expense 667,185 429,331
Net interest income 750,243 659,989
Provisions for loan losses 0 0
------------ ------------
Net interest income after provision for loan losses 750,243 659,989
------------ ------------
Other Income:
Service charges on deposit accounts 88,688 64,600
Securities gains (losses), net 543 698
Other 47,092 60,600
----------- ----------
Total other income 136,322 125,898
------------ ------------
Other expenses:
Salaries and employee benefits 519,449 883,666
Occupancy and equipment 265,298 300,867
Data and item processing 64,308 69,982
Professional Fees 68,466 75,863
Insurance 39,257 38,312
Other 200,745 178,539
----------- ----------
Total other expenses 1,157,526 1,547,229
------------ -------------
Net Profit (loss) before minority
interest in net profit (loss) of subsidiary
(270,961) (761,342)
Minority interest in net (profit) loss of subsidiary 101 4,438
--------- -----------
Net Income (loss) $ (270,860) $ (756,904)
========= =========
Basic and diluted earnings per share $ (0.06) $ (0.17)
====== ======
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
INCOME STATEMENT 9/30/98 9/30/97
- -----------------------------------------------------------------------------------
<S> <C> <C>
Interest Income: $ $
Interest and fees on loans 382,923 279,069
Interest and dividends on securities 18,395 61,006
Interest on fed funds sold & repurchase agreements 81,444 26,291
----------- ----------
482,761 366,366
Interest Expense:
Deposits 231,943 137,762
Other 4,124 2,117
------ ------
Total interest expense 236,067 139,879
Net interest income 246,694 226,487
Provisions for loan losses 0 0
------------ ----------
Net interest income after provision
for loan losses 246,694 226,487
----------- ----------
Other Income:
Service charges on deposit accounts 32,221 23,750
Securities losses, net 543 698
Other 16,782 35,252
----------- ---------
Total other income 49,545 59,700
---------- ---------
Other expenses:
Salaries and employee benefits 69,947 301,701
Occupancy and equipment 92,387 144,877
Data and item processing 23,140 24,480
Professional Fees 12,772 49,140
Insurance 13,097 1,748
Other 48,006 9,628
---------- --------
Total other expenses 259,349 531,574
----------- ---------
Net Profit (loss) before minority
interest in net profit (loss) of subsidiary
36,890 (245,387)
Minority interest in net (profit) loss of subsidiary 162 1,095
--------- -----------
Net Income (loss) $ 37,053 $ (244,292)
======
Basic and diluted earnings per share $ 0.01 $ (0.06)
==== ======
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
CASH FLOWS 9/30/98 9/30/97
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities $ $
Net Income (loss) (270,860) (756,904)
Adjustments to reconcile net profit (loss) to net cash
used in operating activities:
Net accretion on securities (2,060) (1,701)
Provision for loan losses 0 0
Depreciation and amortization 93,367 70,559
Securities (gains) losses, net (543) (698)
Minority interest in net income (loss) of subsidiary (101) (4,438)
(Increase) decrease in accrued interest receivable (9,945) (34,176)
(Increase) decrease in other assets (82,412) (90,854)
Increase in other liabilities 462,612 328,595
------------- ------------
Net cash provided by (used in) operating activities 190,058 (489,617)
------------- -------------
Cash Flows from Investing Activities
Net cash flows from securities 1,535,628 (168,607)
(Purchase) Sale of Federal Reserve Bank / Federal
Home Loan Bank stock (15,450) (1,500)
Loan originations and principal collections on loans - 2,674,138 1,069,007
net
Purchase of loans - net (5,723,793) 0
Purchase of premises and equipment - net (20,902) (48,662)
(Increase) Decrease of other real estate owned (7,999) 38,480
(Increase) Decrease in minority interest 15,005 0
--------- ---------
Net cash provided by (used in) investing activities (1,543,373) 1,206,807
----------------- -------------
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 7,628,360 (1,673,710)
Net increase (decrease) in notes payable 0 (150,000)
Proceeds from issuance of stock 936,435 689,608
Dividends paid on stock 0 0
------- -------
Net cash provided by (used in) financing activities 8,358,795 (1,884,102)
--------------- -------------
Net increase (decrease) in cash and cash
equivalents 7,005,480 (1,147,787)
Cash and cash equivalents, Beginning 1,107,669 4,236,602
-------------- -------------
Cash and cash equivalents, Ending $ 8,113,149 $ 3,088,815
--------------- -------------
</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
Nine Months Ended
COMPREHENSIVE INCOME 9/30/98 9/30/97
Net Income (loss) (270,860) (756,904)
Other comprehensive Income (loss):
Unrealized holding gains arising during period 3,666 13,537
----------- -----------
Comprehensive Income (loss) (267,195) (743,367)
------------ -----------
Three Months Ended
COMPREHENSIVE INCOME 9/30/98 9/30/97
Net Income (loss) 37,053 (244,292)
Other comprehensive Income (loss):
Unrealized holding gains arising during period 1,954 9,772
---------- ----------
Comprehensive Income (loss) 39,006 (234,520)
---------- ------------
See Notes to Consolidated Condensed Financial Statements
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
ANALYSIS OF ALLOWANCE FOR LOAN AND LEASE LOSSES - UNAUDITED
Nine Months Ended
September 30, 1998 and December 31, 1997
Nine Months Ended Year Ended
9/30/98 12/31/97
Balance, beginning of year $ 288,802 $ 196,139
Charge offs 35,500 40,978
Recoveries 6,357 3,641
Provision for loan & lease losses 0 130,000
--------- --------
Ending Balance $ 259,659 288,802
========= ========
Loan loss reserve as percent of gross
loans & discount 1.65% 2.26%
======== ======
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 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 September 30, 1998, have been included. Operating results for the
nine month period ended September 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.
Following is information about the computation of earnings per share data for
the periods ended September 30, 1998 and September 30, 1997 (after giving effect
to the 1 for 3 reverse stock split executed in connection with the reverse
merger executed November 12, 1997).
Per-Share
Numerator Denominator Amounts
Nine Months Ended September 30, 1998
Net Profit (loss) $ (270,860)
Basic and diluted earnings per share,
income available to common
shareholders
$ (270,860) 4,486,976 $(0.06)
---------------------------------------
Nine Months Ended September 30, 1997
Net Profit (loss) $ (756,904)
Basic and diluted earnings per share,
income available to common
shareholders
$(756,904) 4,468,689 $(0.17)
---------------------------------------
Options for the purchase of 758,611 shares at September 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 863,687 shares at September 30,
1998 have not been included in the computation of diluted earnings per share for
September 30, 1998 and September 30, 1997 because their inclusion would have
been antidilutive as a result of losses being reported for these periods.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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 nine month period ended September 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
SEPTEMBER 30, 1998
FINANCIAL CONDITION
Total assets increased by 8.5 million, or 50.3%, from $16.9 million at December
31, 1997, to $25.5 million at September 30, 1998, with the increase consisting
principally of consumer loans and federal funds sold.
The Company's short-term investments, primarily consisting of Federal Funds Sold
("fed funds") and available-for-sale investments, increased by $6.3 million to
$6.7 million at September 30, 1998, from $.4 million at December 31, 1997. This
increase in short term investments is the result of increased deposits of $7.6
million or 48.7% since December 31, 1992.
The Company's net loans receivable increased by $3.1 million or 25.0%, to $15.5
million at September 30, 1998, from $12.4 million at December 31, 1997. The
significant portion of the loan growth was primarily due to several block
purchases of fixed rate, closed, seasoned, secured, fully amortizing, and
individually underwritten installment loans totaling $5.7 million. To finance
the loan growth, the deposit portfolio was increased, so that a normal
loan-to-deposit ratio was maintained.
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.
Deposits increased by $7.7 million, or 49.4%, to $23.3 million at September 30,
1998 from $15.6 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 $1,142,071 at September 30, 1998,
an increase of $669.2 thousand, or 141.5%, from $472,830. at December 31, 1997.
The increase is due primarily to the issuance of 187,287 shares of Class A
Common stock during the first nine months of 1998 pursuant to an offering with
net proceeds of $936,435.
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, the Company and the Bank are each required to maintain a minimum ratio of
total capital to weighted risk assets as well as maintaining 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 September 30, 1998 December 31, 1997 Minimum
Leverage: 4.47% 2.79% 3.00%
Bank Capital Ratios September 30, 1998 December 31, 1997 Adequately
Total risk-weighted capital: 10.95% 8.92% 8.00%
Tier I risk-weighted capital: 9.69% 7.65% 4.00%
Leverage: 6.28% 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 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.
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 September 30, 1998, consisted of $8.1 million in cash
and cash equivalents and $.3 million in available-for-sale investments, for a
total of $8.4 million, compared with a total of $1.5 million at year-end 1997,
an increase of approximately $6.6 million.
RESULTS OF OPERATIONS
Comparison of results in this section are for the nine month periods ended
September 30, 1998 and September 30, 1997.
The net loss recognized for the nine months ended September 30, 1998 was
$270,860 compared to a loss of $756,904 for the nine month period ended
September 30, 1997.
Net income for the three months ended September 30, 1998 was a profit of $37,053
compared to a loss of $244,292 for the three months ended September 30, 1997.
This was a positive change of $281,345. Earnings for the three months ended
September 30, 1998 as compared to the same quarter last year were primarily
impacted by an increase in net interest income and a decrease in operating
expenses due in part to a waiver of $125,000 in accrued but unpaid
salaries due Chairman Philip C. Modder.
NET INTEREST INCOME
Net interest income before provision for loan losses for the nine months ended
September 30, 1998 was $750,243 as compared to $659,989 for the nine months
ended September 30, 1997, an increase of $90,254 or 13.7%.
The increase in net interest income for the nine months ended September 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 $75,191 from $183,620 for the nine months period ended September
30, 1997 compared to the nine month period ended September 30, 1998 due to the
decrease of these assets by $1.5 million or 66.7%. The balance of net loans
increased by $3,049,655 to $15,512,933 and the investment portfolio decreased by
1,513,822 to $756,866 from December 31, 1997 to September 30, 1998.
Interest expense on deposits increased $235,758 from $423,214 at September 30,
1997 to $658,972 at September 30, 1998. The actual interest expense increase was
the result of a corresponding increase of interest bearing liabilities.
OPERATING EXPENSES
Operating expenses decreased by $389,703, or 25.2% from $1,547,229 at September
30, 1997 to $1,157,526 at September 30, 1998. The decrease for the nine months
ended September 30, 1998 as compared to the nine months ended September 30, 1997
consists primarily of decreases in salaries and employee benefits. At June 30,
1997, the Company settled contractual liabilities under employment agreements
with two officers totaling $207,072 through the issuance of 345,120 shares of
Class A common stock. Additionally, there was a decrease in occupancy and
equipment of $35,569 for the nine months ended September 30, 1998 as compared to
the nine months ended September 30, 1997 as the bank's lease was renegotiated in
July 1997. The category Other, which includes all not elsewhere classified,
increased from $175,539 for the nine months ended September 30, 1997 to $200,745
for the nine months ended September 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 $259,659 at September 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 September 30, 1998 and
no additional provision was expensed during the first nine 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 than not
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 nine months ending September 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 began the process of assessing and preparing its
computer systems and applications to be functional on January 1, 2000 in 1996.
The Company utilizes extensive electronic data processing hardware and software
in its banking operations, among other things, to process and record customer
transactions, determine and collect revenue to be earned and expenses to be paid
in connection with customer transactions, maintain and report customer
transaction information, record and manage the Company's short-term and
long-term investments, accounting and financial management, and risk management.
The Company also relies on certain vendors to provide critical services to the
Company's banking operations, including telecommunications and correspondent
banking. Failure of the electronic data processing hardware or software of the
Company, its third party service bureaus, or certain vendors to properly
recognize the Year 2000 could result in a significant disruption of the
Company's banking operations.
The Company's customer transactions are processed through a network of
electronic data processing workstations in its banking office and loan servicing
department and are recorded on electronic data processing hardware and software,
a substantial portion of which are maintained by two third party service
bureaus. The Company is in the process of replacing any hardware or software to
ensure compliance with Year 2000 issues, while both of the Company's third party
service bureaus are working with the Company to convert its customer transaction
software to a more advanced version which is expected to be completed by March
1999 and which will also be Year 2000 compliant. The Company is also seeking
Year 2000 compliance certifications from its major telecommunications and
correspondent banking vendors. Management of the Bank is in regular contact with
its service bureaus, major telecommunication providers and correspondent banking
vendors and closely monitors their reports on their progress in becoming year
2000 ready. Based on their most recent reports, each asserts it has completed
the assessment and evaluation phases. The Bank's service bureaus, major
telecommunication providers and correspondent banking vendors assure management
that it will achieve year 2000 compliance by 1999. Management is unable to
predict whether each will achieve year 2000 readiness on a timely basis or the
magnitude of the financial consequences to the Bank in the event of their
failure to achieve such readiness. Consequently, the Bank has contacted other
providers of such services, who assert they are year 2000 ready, to determine
the latest possible date the Bank could convert to their systems. The Bank is
currently working on contingency plans which address operational policies and
procedures in the event of data processing, electrical power supply and other
mission critical system failures. While a portion of the Company's financial
assets and liabilities are with commercial businesses and government sponsored
entities, the Company's loans and deposits are primarily with individuals. As a
result, the Company does not expect any significant disruptions resulting from
customers that may not be Year 2000 compliant.
The Company has designated a Year 2000 task force under the direction of a
senior officer of the Company which is identifying and coordinating the
Company's efforts to become Year 2000 compliant. Additionally, the Company and
its banking subsidiary are subject to regulation and supervision by Federal and
State Banking Regulators which regularly conduct reviews of the safety and
soundness of the Company's operations, including the Company's progress in
becoming Year 2000 compliant. Failure by the Company to adequately prepare for
Year 2000 issues could negatively impact the Company's banking operations
resulting in restrictions on its banking operations by the regulators. No such
restrictions exist at this time, nor does the Company expect any such
restrictions resulting from failure to address Year 2000 issues.
The Company is in the process of preparing a budget of the costs associated with
becoming Year 2000 compliant. The bank's utilization of third party vendors
minimizes the direct expense of year 2000 compliance. Management has concluded
that the cost of upgrading non compliant personal computers and desktop software
will cost less than $10,000 of which $2,500 has already been incurred. These
costs are being capitalized and expensed in conformity with generally accepted
accounting principles. The Company is unable at this time to estimate the amount
of such costs, however, management does not anticipate that the total costs to
be Year 2000 compliant will be material to the Company's financial condition or
results of operations.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None.
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 Securities Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits. The following exhibits are filed as part of this report.
2.1 Agreement and Plan of Merger by and between Southern Security
Financial Corporation and Southern Security Bank Corporation,
dated October 31, 1997 (1)
2.2 Certificate of Merger of Southern Security Bank Corporation into
Southern Security Financial Corporation, under Florida law, dated
November 10, 1997 (1)
2.3 Articles of Merger of Southern Security Bank Corporation into
Southern Security Financial Corporation, under Florida law, dated
November 12, 1997 (1)
3.(i) Articles of Incorporation
(a) Certificate of Incorporation of Southern Security Bank
Corporation, dated October 3, 1996 (2)
(b) Certificate of Amendment of Certificate of Incorporation of
Southern Security Bank Corporation, dated January 17, 1998
(2)
(c) Certificate of Amendment of Certificate of Incorporation of
Southern Security Financial Corporation, dated November 12,
1997 (changing name to Southern Security Bank Corporation
(1)
(ii) By-laws of the registrant (3)
4.1 Stock Certificate for Class A Common Stock (3)
10.1 Executive Employment Agreement of Philip C. Modder, dated June
11, 1992, together with Amendment No.1 thereto (3) *
10.2 Executive Employment Agreement of James L. Wilson, dated June 11,
1992, together with Amendment No. 1 thereto (3) *
10.3 Minutes of Meeting of June 6, 1997, of the Board of Directors of
the registrant relating to modification of the compensation
arrangements for Philip C. Modder and James L. Wilson (3) *
10.4 Agreements between Southern Security Bank Corporation and the
Federal Reserve Bank of Atlanta, dated February 13, 1995 (4)
11.0 Statement of Computation of Per Share Earnings -- N/A
15.0 Letter on Unaudited Interim Financial Information -- N/A
18.0 Letter re change in accounting principles --N/A
19.0 Reports furnished to security holders --N/A
22.0 Published report re matters submitted to vote N/A
23.0 Consent of experts and counsel -- N/A
24.0 Power of attorney -- N/A
27.0 Financial Data Schedule -- filed herewith.
99.0 Additional Exhibits -- N/A
- -----------
(1) Filed as an exhibit to Form 8-K of the registrant on November 25, 1997.
(2) Filed as an exhibit to Form 10-SB of the registrant filed on July 1997.
(3) Filed as an exhibit to Form 10-SB of the registrant filed on April 2, 1998.
(4) Filed as an exhibit to Form 10-SB/A of the registrant filed on June 10,
1998.
* Management compensation plan or arrangement.
(b) Reports on Form 8-K. The following reports on Form 8-K were
filed during the period covered by this report:
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger by and between Southern Security Financial
Corporation and Southern Security Bank Corporation, dated October 31, 1997
(1)
2.2 Certificate of Merger of Southern Security Bank Corporation into Southern
Security Financial Corporation, under Florida law, dated November 10, 1997
(1)
2.3 Articles of Merger of Southern Security Bank Corporation into Southern
Security Financial Corporation, under Florida law, dated November 12, 1997
(1)
3.(i) Articles of Incorporation
(a) Certificate of Incorporation of Southern Security Bank Corporation,
dated October 3, 1996 (2)
(b) Certificate of Amendment of Certificate of Incorporation of Southern
Security Bank Corporation, dated January 17, 1998 (2)
(c) Certificate of Amendment of Certificate of Incorporation of Southern
Security Financial Corporation, dated November 12, 1997 (changing name
to Southern Security Bank Corporation (1)
(ii) By-laws of the registrant (3)
4.1 Stock Certificate for Class A Common Stock (3)
10.1 Executive Employment Agreement of Philip C. Modder, dated June 11,
1992, together with Amendment No.1 thereto (3) *
10.2 Executive Employment Agreement of James L. Wilson, dated June 11,
1992, together with Amendment No. 1 thereto (3) *
10.3 Minutes of Meeting of June 6, 1997, of the Board of Directors of the
registrant relating to modification of the compensation arrangements
for Philip C. Modder and James L. Wilson (3) *
10.4 Agreements between Southern Security Bank Corporation and the Federal
Reserve Bank of Atlanta, dated February 13, 1995 (4)
11.0 Statement of Computation of Per Share Earnings -- N/A
15.0 Letter on Unaudited Interim Financial Information -- N/A
18.0 Letter re change in accounting principles --N/A
19.0 Reports furnished to security holders --N/A
22.0 Published report re matters submitted to vote N/A
23.0 Consent of experts and counsel -- N/A
24.0 Power of attorney -- N/A
27.0 Financial Data Schedule -- filed herewith.
99.0 Additional Exhibits -- N/A
- -----------
(1) Filed as an exhibit to Form 8-K of the registrant on November 25, 1997.
(2) Filed as an exhibit to Form 10-SB of the registrant filed on July 1997.
(3) Filed as an exhibit to Form 10-SB of the registrant filed on April 2, 1998.
(4) Filed as an exhibit to Form 10-SB/A of the registrant filed on June 10,
1998.
* Management compensation plan or arrangement.
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: November 13, 1998 By:s/James L. Wilson
James L. Wilson,
Chief Executive Officer
Dated: November 13, 1998 By:s/Floyd D. Harper
Floyd D. Harper
Vice President and Secretary
(chief financial officer)
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