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: March 31, 2000
Commission File No: 0-22911
SOUTHERN SECURITY BANK CORPORATION
(Name of small business as specified in charter)
Delaware
(State or other jurisdiction of incorporation)
65-0325364
(IRS Employer Identification Number)
1000 Brickell Avenue Suite 900 Miami, FL 33131
(305) 702-5520
(Address and telephone number of principal executive offices)
Indicate by check mark 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. Yes X No _____.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the March 31, 2000 (latest practicable date):
(a) Class A Voting Common Stock: 13,533,817 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
March 31, 2000 and December 31, 1999
ASSETS March 31, 2000 December 31, 1999
(Unaudited) (Note)
Cash and due from banks $ 804,952 $ 1,430,387
Federal Funds sold 5,960,000 1,744,933
------------ ------------
Total cash and cash equivalents 6,764,952 3,175,320
Securities held to maturity 257,159 320,908
Securities available for sale 250,066 247,095
Federal Reserve Bank stock, at cost 88,600 88,600
Loans, net 11,822,690 12,788,261
Premises and equipment 320,688 339,707
Other real estate owned 242,634 267,634
Accrued interest receivable 87,997 107,017
Other assets 137,916 150,021
--------------- ---------------
Total Assets $ 19,972,702 $ 17,484,563
========== ==========
See Notes to Consolidated Condensed Financial Statements
Note: Information taken from audited financial statements as of that date.
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 2000 and December 31, 1999
LIABILITIES March 31, 2000 December 31 1999
- ----------- -------------- ----------------
Liabilities (Unaudited) (Note)
Noninterest bearing deposits $ 5,268,091 $ 3,525,043
Interest-bearing deposits 10,437,130 12,169,048
---------- ----------
Total deposits 15,705,221 15,694,091
Federal funds purchased 0 0
Securities sold under repurchase agreements 0 0
Notes payable 100,000 100,000
Other liabilities 781,912 704,665
---------- ----------
Total liabilities 16,587,133 16,498,756
---------- ----------
Commitments and Contingencies 0 0
Minority interest in subsidiary 46,429 31,692
---------- ----------
Stockholders' equity
Series A Preferred Stock 0 0
(Authorized: 5,000,000; Outstanding: 0)
Class A Common Stock 135,338 59,130
(Authorized: 30,000,000; Outstanding: March
31,2000 13,533,817; December 31, 1999
5,913,050)
Class B Common Stock 0 0
(Authorized: 5,000,000; Outstanding: 0)
Capital Surplus 8,512,360 5,921,300
Accumulated deficit (5,303,330) (5,021,898)
---------- ----------
3,344,368 958,532
Accumulated other comprehensive income (loss) (5,228) (4,417)
---------- ----------
Total stockholders' equity 3,339,140 954,115
---------- ----------
Total liabilities & stockholders equity $ 19,972,702 $ 17,484,563
========== ==========
See Notes to Consolidated Condensed Financial Statements
Note: Information taken from audited financial statements as of that date.
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
March 31, 2000 March 31 1999
-------------- -------------
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 318,117 $ 323,043
Interest and dividends on securities 10,038 12,378
Interest on federal funds sold & repurchase agreement 25,538 40,278
------- ---------
353,693 375,699
------- ---------
Interest Expense:
Deposits 100,562 142,243
Other 2,010 2,248
--------- ---------
102,572 144,491
--------- ---------
Net interest income 251,121 231,208
Provisions for loan losses 0 0
--------- ---------
Net interest income after provision for loan losses 251,121 231,208
-------- ---------
Other Income:
Service charges on deposit accounts 25,959 30,184
Securities gains (losses), net 0 0
Other 8,151 6,347
--------- ---------
Total other income 34,110 36,531
-------- ---------
Other Expenses:
Salaries and employee benefits 334,494 228,542
Occupancy and equipment 70,536 79,031
Data and item processing 29,615 26,366
Professional Fees 21,281 11,435
Insurance 9,768 12,962
Other 102,099 81,604
--------- ---------
Total other expenses 567,793 439,940
--------- ---------
Net income (loss) before minority
interest in net income (loss) of subsidiary (282,562) (172,201)
Minority interest in net (income) loss of subsidiary 1,130 1,339
--------- ---------
Net Income (loss) $ (281,432) $ (170,862)
========= =========
Basic earnings (loss) per share $ (0.05) $ (0.03)
========= =========
Diluted earnings (loss) per share $ (0.05) $ (0.03)
========= =========
Weighted average number of shares & common equivalent shares 6,152,996 4,990,141
========= =========
See Notes to Consolidated Condensed Financial Statements
</TABLE>
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income (loss) $ (281,432) $ (170,862)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Net accretion on securities (1,710) (954)
Provision for loan losses 0 0
Depreciation and amortization 45,599 24,522
Securities (gains) losses, net 0 0
Minority interest in net income (loss) of subsidiary (1,130) (1,339)
(Increase) decrease in Accrued Interest Receivable 19,020 25,566
(Increase) decrease in Other Assets 22,850 (95,277)
Increase (decrease) in other liabilities 77,247 (102,326)
(Increase) Decrease of other real estate owned 25,000 0
----------- ------------
Net cash provided by (used in) operating activities (94,556) (320,670)
----------- ------------
Cash Flows from Investing Activities
Net cash flows from securities 61,677 (211,662)
(Purchase) Sale of Federal Reserve Bk/Federal
Home Loan Bk stock 0 0
Loan originations & principal collections on loans - net 965,571 979,110
Purchase of loans - net 0 0
Purchase of premises and equipment - net (21,458) (4,136)
Increase (Decrease) in minority interest 0 0
----------- ------------
Net cash provided by (used in) investing activities 1,005,790 763,312
----------- ------------
Cash Flows From Financing Activities
Net increase (decrease) in federal funds purchased and
securities sold under repurchase agreements 0 0
Net increase (decrease) in deposits 11,130 (765,262)
Net increase (decrease) in notes payable 0 0
Proceeds from issuance of stock 2,667,268 422,500
Dividends paid on stock 0 0
------------ ------------
Net cash provided by (used in) financing activities 2,678,397 (342,762)
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,589,632 99,880
Cash and cash equivalents, Beginning 3,175,320 5,857,269
------------ ------------
Cash and cash equivalents, Ending $ 6,764,952 $5,957,149
============ ============
</TABLE>
<PAGE>
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 STATEMENTS OF STOCKHOLDERS' EQUITY - UNAUDITED
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Common Stock Paid-In Accumulated Comprehensive
Income Shares Amount Capital (Deficit) Income Total
------ ------ ------ ------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 4,567,641 $45,676 $5,537,269 $(4,370,251) $3,426 $1,216,120
Comprehensive income (loss): - - -
Net loss $ (170,862) - - - (170,862) - (170,862)
Other Comprehensive income,
net of tax:
Change in unrealized gain
(loss) on securities available
for sale (1,218) - - - - (1,218) (1,218)
------
Comprehensive income (loss) $ (172,080)
=========
Issuance of stock in
private placements 845,000 8,450 414,050 - - 422,500
--------- --------- --------- ------------ -------- ---------
Balance March 31, 1999 5,412,641 $ 54,126 $5,951,319 $(4,541,113) $ (2,208) $1,466,540
========= ========= ========= ============ ======== =========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Common Stock Paid-In Accumulated Comprehensive
Income Shares Amount Capital (Deficit) Income Total
------ ------ -------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 5,913,050 $ 59,130 $ 5,921,300 $ (5,021,898) $ (4,417) $ 954,115
Comprehensive income (loss):
Net loss $ (281,432) - - - (281,432) - (281,432)
Other comprehensive income,
net of tax:
Change in unrealized gain
(loss) on securities available
for sale (811) - - - - (811) (811)
---------
Comprehensive income (loss) $ (282,243)
=======
Issuance of stock 7,620,767 76,208 2,591,060 - - 2,667,268
---------- ------- --------- ----------- -------- ---------
Balance March 31, 2000 13,533,817 135,338 8,512,360 $(5,303,330) ($5,228) 3,339,140
========== ========= ========== ============ ======== ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
Notes to Consolidated Condensed Financial Statements (unaudited)
Note 1. Basis of Presentation and Disclosure
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 the financial statements not to be misleading have been
included. Operating results for the three month period ended March 31, 2000, 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, 1999, 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 98.42% 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.
Following is information about the computation of earnings per share data for
the periods ended March 31, 2000 and March 31, 1999.
Per-Share
Numerator Denominator Amounts
Three Months Ended March 31, 2000
Net Profit (loss) $ (281,432)
Basic and diluted earnings per share,
income available to common
shareholders $ (281,432) 6,152,996 $(0.05)
----------- --------- -------
Three Months Ended March 31, 1999
Net Profit (loss) $ (170,862)
Basic and diluted earnings per share,
income available to common
shareholders $(170,862) 4,990,141 $(0.03)
---------- --------- -------
Options for the purchase of 1,172,957 shares at March 31, 2000 and 863,687
shares at March 31, 1999 have not been included in the computation of diluted
earnings per share for March 31, 2000 and March 31, 1999 because their inclusion
would have been antidilutive as a result of losses being reported for these
periods.
The Company issued 7,620,767 shares of common stock at a price of $0.35 per
share under a private placement memorandum in March, 2000.
<PAGE>
Note 2. ANALYSIS OF ALLOWANCE FOR LOAN AND LEASE LOSSES
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
------------------- ------------------
Balance, beginning of year $ 183,675 $ 271,498
Total charge-offs 17,067 744
Recoveries 7,952 1,524
Provision for loan & lease losses 0 0
------------ --------------
Allowance balance at end of period $ 174,560 $ 272,278
========= ==========
Total loans and discount $11,997,251 $13,633,888
Allowance to total loans and discount 1.46% 1.96%
Note 3. CAPITAL ADEQUACY REVIEW
<TABLE>
<CAPTION>
For Capital Adequacy
March 31, 2000 Purposes Under Prompt
Southern Security Bank Bank Corrective Action Provisions
----------------------------- ------ ----------------------------
<S> <C> <C> <C>
Total Risk-weighted Ratio:
Tier 2 Capital + ALLL 3,102,000
---------
Risk Weighted Assets 13,035,000 = 23.80% 8.00%
Tier 1 Risk Weighted Ratio:
Tier 1 Capital 2,943,878
---------
Risk Weighted Assets 13,035,000 = 22.58% 4.00%
Tier 1 Leverage Ratio:
Tier 1 Capital 2,943,878
---------
Average Quarterly Assets 16,327,000 = 18.03% 4.00%
</TABLE>
Item 1. Legal Proceedings
In the normal course of business, the bank is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the Bank's financial
statements.
Item 2. Management's Discussion and Analysis or Plan 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 its subsidiary Southern Security Bank ("Bank") for
the three month period ended March 31, 2000 and 1999. 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, 1999.
DISCUSSION OF FINANCIAL CONDITION CHANGES FROM DECEMBER 31, 1999 TO March 31,
2000
FINANCIAL CONDITION
Total assets increased by $2.5 million, or 14.2%, from $17.5 million at December
31, 1999, to $20.0 million at March 31, 2000, with the increase invested
principally in federal funds sold.
The Company's short-term investments, primarily consisting of federal funds sold
("fed funds") and available- for-sale investments, increased by $4.2 million to
$6.2 million at March 31, 2000, from $2.0 million at December 31, 1999. This
increase in short-term investments is the result of decreased loans of $1.0
million or 7.6%, a decrease in cash and due from banks of $.6 million or 43.7%
and capital infusions of $2.7 million since December 31, 1999.
The Company's net loans receivable decreased by $1.0 million or 7.6%, to $11.8
million at March 31, 2000, from $12.8 million at December 31, 1999.
The Allowance For Credit Losses reflects management's judgment of the level of
allowance adequate to provide for reasonably foreseeable losses, based upon the
following factors: (1) the general economic conditions; (2) the credit condition
of its customers, as well as the underlying collateral, if any; (3) historical
experience; and (4) the average maturity of its loan portfolio. The general
valuation allowance is maintained to cover losses inherent in the portfolio of
performing loans. Specific valuation allowances are established to absorb losses
on loans for which full collectability may not be reasonably assured. The amount
of the allowance is based on the estimated value of the collateral securing the
loan and other analyses pertinent to each situation. Generally, a provision for
losses is charged against income on a quarterly basis to maintain the
allowances.
Deposits remained relatively constant at $15.7 million on March 31, 2000 from
$15.7 million at December 31, 1999. Management has not actively attempted to
increase deposits pending the infusion of capital obtained in late March.
ASSET QUALITY AND NON-PERFORMING ASSETS
The Company's classified loans decreased from $489,539 at December 31, 1999
(3.78% of total loans) to $152,278 at March 31, 2000 (1.27% of total loans).
Assets which are classified are those deemed by management as inadequately
protected by the current sound worth and paying capacity of the obligor or of
the collateral pledged, if any. Assets which are classified have a well-defined
weakness or weaknesses that jeopardize the liquidation of the debt. They are
characterized by the distinct possibility that the Company will sustain some
loss if the deficiencies are not corrected.
The Company's other real estate and repossessed assets decreased from $268,000
at December 31, 1999 (2.09% of total loans) to $243,000 at March 31, 2000 (2.05%
of total loans).
March 31, 2000 December 31, 1999
============== =================
Classified Loans & Discount $ 152, 278 $ 489,539
Other Real Estate Owned & Repossessions 242,634 267,634
------------ ----------------
Total Classified and Other 394,912 757,173
============ ================
Percent Classified and Other / Total Loans 3.29% 5.84%
Total Loans & Discount $ 11,997,251 $12,971,937
In management's best judgment, all non-performing assets are either fully
collateralized or appropriately reserved based on circumstances known at this
time.
CAPITAL
The Company's total stockholders' equity was $3,339,140 at March 31, 2000, an
increase of $2.4 million, or 249.97%, from $954,115 at December 31, 1999. The
increase is due primarily to the issuance of 7,620,767 shares of Class A Common
stock during the first three months of 2000 pursuant to an offering with net
proceeds of $2,667,268.
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
judgment 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
for 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 March 31, 2000 December 31, 1999 Minimum
Leverage: 16.72% 4.95% 4.00%
Bank Capital Ratios March 31, 2000 December 31, 1999 Adequate
Total risk-weighted capital: 23.80% 12.55% 8.00%
Tier I risk-weighted capital: 22.58% 11.30% 4.00%
Leverage: 18.03% 8.39% 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 November 13, 1998. The Agreement includes the
requirement that, in the event the Bank's leverage ratio falls below 7.00%, 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 principal 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 is influenced by general interest
rates, economic conditions and competition, among other things.
The Company's liquidity at March 31, 2000, consisted of $6.8 million in cash and
cash equivalents and $.2 million in available-for-sale investments, for a total
of $7.0 million, compared with a total of $3.4 million at year-end 1999, an
increase of approximately $3.6 million.
RESULTS OF OPERATIONS
Comparison of results in this section are for the three month periods ended
March 31, 2000 and March 31, 1999. The net loss recognized for the three months
ended March 31, 2000 was $281,432 compared to a loss of $170,862 for the three
month period ended March 31, 1999. This was a negative change of $110,570.
Earnings for the three months as compared to the same quarter last year were
primarily impacted by an increase in operating expenses consisting primarily of
salaries (increase of $105,952 or 46.4%) and other uncategorized (increase of
$20,495 or 25.1%).
<PAGE>
James L. Wilson, the Company's Chief Executive Officer and a director as well as
a director of Southern Security Bank, voluntarily resigned effective February 1,
2000 to pursue other interests. Subject to regulatory approval, Mr. Wilson is to
receive $180,000 as full and final settlement of all obligations under his
Employment Agreement dated June 11, 1992, as amended. Such amount will be
payable at the rate of $10,000 per month for 18 months beginning on January 2,
2001. The net present value of this settlement amount of $160,000 was posted on
March 31, 2000 as compensation expense in accordance with generally accepted
accounting principles
NET INTEREST INCOME
Net interest income before provision for loan losses for the three months ended
March 31, 2000 was $251,121 as compared to $231,208 for the three months ended
March 31, 1999, an increase of $19,913 or 8.6%.
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 $17,080 from $52,656 for the three-month period ended March
31, 1999, compared to $35,576 for the three-month period ended March 31, 2000,
due primarily to a decrease in the average balance of such investments. Interest
and fees on loans decreased by $4,926 in the three months ended March 31, 2000
as compared to the same period in 1999. The decrease in income from lower loans
outstanding resulted from a decrease of $1.8 million in average consumer loan
balances from the quarter ended March 31, 1999 to the quarter ended March 31,
2000, which was partially offset by a $600,000 increase in higher yielding loans
and a $200,000 increase in average purchased accounts receivable.
Interest expense on deposits decreased $41,681 (29.3%) from $142,243 for the
quarter ended March 31, 1999 to $100,562 for the quarter ended March 31, 2000.
The interest expense decrease was the result of a decrease in interest bearing
deposit balances to $10.4 million at March 31, 2000 from $14.7 million at March
31, 1999.
OPERATING EXPENSES
Operating expenses increased by $127,853, or 29.1% from $439,940 at March 31,
1999 to $567,793 at March 31, 2000. The increase for the three months ended
March 31, 2000 as compared to the three months ended March 31, 1999 consists
primarily of increases in salaries and employee benefits. Additionally, there
was an increase in other uncategorized of $20,495 or 25.1% for the three months
ended March 31, 2000 as compared to the three months ended March 31, 1999 due
primarily to the write down of other real estate owned in the amount of $25,000.
PROVISION FOR LOAN LOSSES
Although management uses its best judgment 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, they
may experience 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 $174,560 at March 31, 2000. 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 March 31, 2000, and no
additional provision was expensed during the first three months of 2000.
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 three months ending March 31,
2000 and 1999 because the results of operations do not provide evidence that the
net operating losses available for carryforward will be utilized in the future.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
On March 31, 2000, the Company completed a private offering of 7,285,714 shares
of its Class A common stock at a price of $0.35 per share (the "Offering"). The
Offering resulted in the sale of 7,620,767 shares to 65 individuals, all of whom
were "accredited investors" within the meaning of Rule 501 of the SEC, at an
aggregate price of $2,667,273.10. No underwriters were used, and no underwriting
discounts or commissions were paid. The Company made the offering in reliance
upon the exemptions from registration provided by Sections 4(2) and 4(6) of the
Securities Act of 1933 and Rule 506 of the SEC for sales by an issuer solely to
accredited investors and not involving any public offering.
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
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)
(d) Certificate of Amendment of Incorporation of Southern Security Bank
Corporation dated December 21, 1999 - filed herewith
(ii) By-laws of the registrant (3)
4.1 Stock Certificate for Class A Common Stock (3)
9.0 Voting Trust Agreement - N/A
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)
10.5 Agreements, dated June 30, 1999, between Philip C. Modder and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (5)
10.6 Agreements, dated June 30, 1999, between James L. Wilson and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (5)
10.7 Termination Agreement with James L. Wilson, dated February 11, 2000 (6)
10.8 Agreements, dated March 31, 2000, between Philip C. Modder and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (7)
<PAGE>
10.9 Executive Employment Agreement dated April 1, 2000, between Harold L.
Connell and Southern Security Bank Corporation - Filed herewith*
11.0 Statement of Computation of Per Share Earnings - N/A
13.0 Annual Report to security holders for the last fiscal year - N/A
15.0 Letter on Unaudited Interim Financial Information - N/A
16.0 Letter re change of Certifying Accountant - N/A
17.0 Letter re change in accounting principles - N/A
18.0 Letter re change in accounting principles - N/A
19.0 Reports furnished to security holders - N/A
21.0 Subsidiaries of the Registrant - filed herewith (3)
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.
(5) Filed as an exhibit to Form 10-QSB of the registrant filed on August
16,1999.
(6) Filed as an exhibit to Form 10-KSB of the registrant filed on March 31,
2000.
(7) Filed as an exhibit to Form 10-KSB of the registrant filed on April 14,
2000.
* 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:
None
<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: May 12, 2000 By: /s/ Harold L. Connell
---------------------
Harold L. Connell,
President and Chief Executive Officer
Dated: May 12, 2000 By: /s/ Floyd D. Harper
-------------------
Floyd D. Harper
Vice President and Secretary
(chief financial officer)
<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)
(d) Certificate of Amendment of Incorporation of Southern Security Bank
Corporation dated December 21, 1999 - filed herewith
(ii) By-laws of the registrant (3)
4.1 Stock Certificate for Class A Common Stock (3)
9.0 Voting Trust Agreement - N/A
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) *
<PAGE>
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)
10.5 Agreements, dated June 30, 1999, between Philip C. Modder and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (5)
10.6 Agreements, dated June 30, 1999, between James L. Wilson and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (5)
10.7 Termination Agreement with James L. Wilson, dated February 11, 2000 (6)
10.8 Agreements, dated March 31, 2000, between Philip C. Modder and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (7)
10.9 Executive Employment Agreement dated April 1, 2000, between Harold L.
Connell and Southern Security Bank Corporation - Filed herewith*
11.0 Statement of Computation of Per Share Earnings - N/A
13.0 Annual Report to security holders for the last fiscal year - N/A
15.0 Letter on Unaudited Interim Financial Information - N/A
16.0 Letter re change of Certifying Accountant - N/A
17.0 Letter re change in accounting principles - N/A
19.0 Reports furnished to security holders - N/A
21.0 Subsidiaries of the Registrant - filed herewith (3)
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.
(5) Filed as an exhibit to Form 10-QSB of the registrant filed on August 16,
1999.
(6) Filed as an exhibit to Form 10-KSB of the registrant filed on March 31,
2000.
(7) Filed as an exhibit to Form 10-KSB of the registrant filed on April 14,
2000.
* Management compensation plan or arrangement.
EXHIBIT 10.9
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 25th day of April, 2000, by and between
Southern Security Bank Corporation, a Delaware corporation (the "Company" or
"Employer") and Harold L. Connell, (the "Executive").
WITNESSETH:
WHEREAS, Executive is willing to assist the directors of the Company in
accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. Employer employs Executive and Executive accepts employment
upon the terms and conditions set forth in this Agreement.
2. TERM. The term of employment of Executive under this Agreement shall be
the one year period commencing on April 1, 2000 ("Commencement Date") and ending
on March 31, 2001 ("Ending Date"). This Agreement shall automatically renew for
one year on each anniversary date unless either party notifies the other, 60
days prior to Ending Date.
3. COMPENSATION. The Company shall pay Executive a minimum annual base
salary of $125,000, payable in semi-monthly installments immediately upon the
Commencement Date. Salary payments shall be subject to withholding and other
applicable taxes. Executive's salary will be reviewed annually for annual
increases by the Company's Board of Directors.
4. TITLE AND DUTIES. The Executive shall initially serve as Chairman,
President, and CEO of the Company, subject to the continuing approval of the
Board of Directors for the term of this Agreement. The Executive shall devote
his efforts, skills, attention, and such time as he deems necessary to the
business and affairs of the Company and shall serve the Company faithfully and
competently and shall at all times act in the Company's best interest. Such
supervisory and management responsibilities shall include those as delegated
from the board of directors from time to time.
5. EXTENT OF SERVICES. Executive shall devote such time, attention and
energies to the business of Employer as in necessary to accomplish his duties.
Also, recognition is given to the fact that Executive is expected on occasion to
participate in client development after normal business hours. Executive shall
notify Employer of any significant participation by him in any trade association
or similar organization and the Board of Directors shall approve in advance
Executive's service as a director of any entity or organization.
6. WORKING FACILITIES. Executive shall have such assistants, perquisites,
facilities and services as are suitable to his position and appropriate for the
performance of his duties.
7. EXPENSES. Executive may incur reasonable expenses for promoting the
business of the Employer, including expenses for entertainment, travel, and
similar items. Executive will be reimbursed for all such expenses upon
Executive's periodic presentation of an itemized account of such expenditures.
8. VACATIONS. Executive shall be entitled each year to a vacation in
accordance with the personnel policy established by the Company's Board of
Directors, during which time Executive's compensation shall be paid in full.
Executive shall also be entitled to all paid holidays made generally available
by the Company.
9. ADDITIONAL COMPENSATION. As additional consideration paid to Executive,
Executive shall be provided with:
(a) health, hospitalization, and disability
(b) Life Insurance
(c) An automobile or an allowance for Executive's use of an automobile
(d) Participation in an executive incentive bonus plan.
(e) Vacation Days
All the above additional compensation and benefits shall be in
accordance with policies to be established by the Company's Board of Directors.
10. STOCK OPTIONS. Executive is granted 125,000 shares at current market
value of $0.35 per share to be vested 25,000 shares as of April 1, 2000 and the
remaining 100,000 shares to be vested 33 1/3% at each year end exercisable for 5
years from date of vesting. Should executive not be employed by The Company for
any reason all options must be exercised within 90 days of separation. In
addition, Executive shall be entitled to participate in all employee and
executive stock option plans implemented by the Company.
11. TERMINATION. (a) In the event that the Board of Directors of the
Company determines in its sole discretion to terminate the Executive's
employment Without Cause prior to the Ending Date, the Executive shall be
entitled to receive one year's salary, which payment shall be subject to
withholding and other applicable taxes and shall be made simultaneously with
such termination of this Agreement.
(b) For Cause. This Agreement may be terminated by the Board of
Directors of the Company without notice and without further obligation than
for monies already paid, for any of the following reasons:
(i) Failure of Executive to follow reasonable written
instructions or policies of the Board of Directors of the Company;
(ii) Receipt by the Company of written notice from any bank
regulatory agency having jurisdiction over the Company or the
"Company" that such agency has criticized Executive's performance or
his area of responsibility and Executive does not take timely action
to remedy the situation;
(iii) Gross negligence or willful misconduct of Executive
materially damaging to the business of the Company or "Company" during
the term of this Agreement, or at any time while he was employed by
the Company prior to the term of this Agreement, if not disclosed to
the Company prior to the commencement of the term of this Agreement;
or
(iv) Conviction of Executive during the term of this Agreement of
a crime involving breach of trust or moral turpitude.
In the event that the "Company" discharges Executive alleging "cause"
under this Section 11(b) and it is subsequently determined judicially that the
termination was "without cause," then such discharge shall be deemed a discharge
without cause subject to the provisions of Section 11(c) hereof. In the event
that the "Company" discharges Executive alleging "cause" under this Section
11(b), such notice of discharge shall be accompanied by a written and specific
description of the circumstances alleging such "cause." The termination of
Executive for "cause" shall not entitle the "Company" to enforcement of the non-
competition and non-solicitation covenants contained in Section 13 hereof.
(c) Without Cause.
(i) The "Company" may, upon thirty (30) days' written notice to
Executive, terminate this Agreement without cause at any time during
the term of this Agreement upon the condition that Executive shall be
entitled, as liquidated damages in lieu of all other claims. The
severance payments provided for in this Section 11(a) shall commence
not later than thirty (30) days after the actual date of termination
of employment of Executive.
(ii) Executive may upon thirty (30 days' written notice to
Employer terminate this Agreement without cause at any time during the
term of this Agreement. In the event of termination of this Agreement
by Executive, the "Company" shall have no further obligation to
Executive than for monies paid.
12. DEATH OR DISABILITY. In the event of Executive's death, Employer shall
pay to Executive's designated beneficiary, or, if Executive has failed to
designate a beneficiary, to his estate, an amount equal to Executive's base
salary pursuant to Section 3 hereof for 90 days following date of death. Such
compensation shall be in lieu of any other benefits provided hereunder, except
that (i) the Executive's designated beneficiary or his estate, as the case may
be, shall be entitled to the benefits hereof, and (ii) any benefit payable
pursuant to Section 3 shall be prorated and made available to Executive in
respect of any period prior to his death. The Company may maintain insurance on
its behalf to satisfy in whole or in part the obligations of this Section 12.
In the event of Executive's disability, as hereinafter defined, Employer
shall pay to Executive the base salary then in effect through the end of the
month in which Executive became disabled. Executive shall be deemed disabled if,
by reason of physical or mental impairment, he is incapable of performing his
duties hereunder for a period of 180 consecutive days.
13. NON-COMPETITION AND NON-SOLICITATION. (a) Executive acknowledges that
he has performed services or will perform services hereunder which directly
affect Employer's business. Accordingly, the parties deem it necessary to enter
into the protective agreement set forth below, the terms and condition of which
have been negotiated by and between the parties hereto.
(b) In the event of termination of employment under this Agreement
by action of The Company pursuant to 11(c) (i) prior to the expiration of the
term of this Agreement, Executive agrees with Employer that through the actual
date of termination of the Agreement, and for a period of twelve (12) months
after such termination date, Executive shall not, without the prior written
consent of Employer, within the counties in which the Company operates either
directly or indirectly, serve as an executive officer of any Bank, Bank holding
company or other financial institution.
(c) The covenants of Executive set forth in this Section 13 are
separate and independent covenants for which valuable consideration has been
paid, the receipt, adequacy and sufficiency of which are acknowledged by
Executive, and have also been made by Executive to induce Employer to enter into
this Agreement. Each of the aforesaid covenants may be availed of or relied upon
by Employer in any court of competent jurisdiction, and shall form the basis of
injunctive relief and damages including expenses of litigation (including but
not limited to reasonable attorney's fees) suffered by Employer arising out of
any breach of the aforesaid covenants by Executive. The covenants of Executive
set forth in this Section 13 are cumulative to each other and to all other
covenants of Executive in favor of Employer contained in this Agreement and
shall survive the termination of this Agreement for the purposes intended.
Should any covenant, term, or condition contained in this Section 13 become or
be declared invalid or unenforceable by a court of competent jurisdiction, then
the parties may request that such court judicially modify such unenforceable
provision consistent with the intent of this Section 13 so that it shall be
enforceable as modified, and in any event the invalidity of any provision of
this Section 13 shall not affect the validity of any other provision in this
Section 13 or elsewhere in this Agreement.
14. NOTICES. Any Notice required, permitted or desired to be delivered
hereunder shall be deemed to be delivered when deposited in the United States
mail, return receipt requested, addressed to the parties at the addresses first
stated herein, or to such other address as either party hereto shall from time
to time designate to the other party by notice in writing as provided herein.
15. WAIVER OF BREACH. The waiver by Employer of a breach of any provision
of this Agreement by Executive shall not operate or be construed as a waiver of
any subsequent breach by Executive. No waiver shall be valid unless in writing
and signed by an authorized officer of Employer.
16. SEVERABILITY. Invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provisions.
17. TERMINOLOGY. All personal pronouns used in this Agreement, whether used
in the masculine, feminine or neuter gender, shall include all other genders;
the singular shall include the plural and vice versa. Titles of Paragraphs are
for convenience only, and neither limit nor amplify the provisions of the
Agreement itself.
18. ASSIGNMENT. Executive acknowledges that the services to be rendered by
him are unique and personal. Accordingly, Executive may not assign any of his
rights or delegate any of his duties or obligations under this Agreement. The
rights and obligations of Executive under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of Employer.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each such counterpart shall for all purposes be deemed an
original.
20. OTHER INSTRUMENTS. The parties hereby covenant and agree that they will
execute such other and further instruments and documents as are or may become
necessary or convenient to effectuate and carry out the terms of this Agreement.
21. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida.
22. ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties hereto regarding employment of Executive, and supersedes and
replaces any prior agreement relating thereto. It may not be changed orally but
only by an agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension, or discharge is sought.
IN WITNESS WHEREOF, this Agreement has been duly signed by the Executive
and on behalf of the Company on the day and year first above written.
For the Company:
By: /s/ Floyd D. Harper
--------------------
Floyd D. Harper, Vice President and Secretary
For the Executive:
/s/Harold L. Connell
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains financial information extracted from the audited
consolidated financial statements related notes and management discussion and
analysis contained in the report on Form 10-Q filed by Southern Security Bank
Corporation for the three months ended March 31, 2000 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 804,952
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,960,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 250,066
<INVESTMENTS-CARRYING> 257,159
<INVESTMENTS-MARKET> 256,849
<LOANS> 11,997,251
<ALLOWANCE> 174,560
<TOTAL-ASSETS> 19,972,702
<DEPOSITS> 15,705,220
<SHORT-TERM> 100,000
<LIABILITIES-OTHER> 781,912
<LONG-TERM> 0
0
0
<COMMON> 135,338
<OTHER-SE> 3,203,802
<TOTAL-LIABILITIES-AND-EQUITY> 19,972,702
<INTEREST-LOAN> 318,117
<INTEREST-INVEST> 10,038
<INTEREST-OTHER> 25,538
<INTEREST-TOTAL> 353,693
<INTEREST-DEPOSIT> 100,562
<INTEREST-EXPENSE> 2,010
<INTEREST-INCOME-NET> 251,121
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 567,793
<INCOME-PRETAX> (281,432)
<INCOME-PRE-EXTRAORDINARY> (281,432)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (281,432)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
<YIELD-ACTUAL> 7.86
<LOANS-NON> 0
<LOANS-PAST> 645,114
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 183,675
<CHARGE-OFFS> 17,067
<RECOVERIES> 7,952
<ALLOWANCE-CLOSE> 174,560
<ALLOWANCE-DOMESTIC> 174,560
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
