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: June 30, 2000
Commission File No: 0-22911
SOUTHERN SECURITY BANK CORPORATION
(Name of small business as specified in charter)
Delaware 65-0325364
(State or other jurisdiction (IRS Employer Identification
of incorporation) 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 June 30, 2000 (latest practicable date):
(a) Class A Voting Common Stock: 13,578,150 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
June 30, 2000 and December 31, 1999
<TABLE>
<S> <C> <C>
ASSETS June 30, 2000 December 31, 1999
(Unaudited) (Note)
Cash and due from banks $ 801,090 $ 1,430,387
Federal Funds sold 6,556,000 1,744,933
------------- ------------
Total cash and cash equivalents 7,357,090 3,175,320
Securities held to maturity 255,101 320,908
Securities available for sale 3,922,494 247,095
Federal Reserve Bank stock, at cost 148,600 88,600
Loans, net 15,456,865 12,788,261
Premises and equipment 317,618 339,707
Other real estate owned 171,179 267,634
Accrued interest receivable 104,607 107,017
Other assets 224,965 150,021
------------- ------------
Total Assets $ 27,958,519 $ 17,484,563
============= ============
</TABLE>
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
June 30, 2000 and December 31, 1999
<TABLE>
<S> <C> <C>
LIABILITIES June 30, 2000 December 31, 1999
----------- -------------- -----------------
Liabilities (Unaudited) (Note)
Noninterest bearing deposits $ 7,308,116 $ 3,525,043
Interest-bearing deposits 14,072,462 12,169,048
------------ --------------
Total deposits 21,380,578 15,694,091
Securities sold under repurchase agreements 2,692,000 0
Notes payable 100,000 100,000
Other liabilities 679,774 704,665
------------ --------------
Total liabilities 24,852,352 16,498,756
------------ --------------
Commitments and Contingencies 0 0
Minority interest in subsidiary 46,792 31,692
------------ --------------
Stockholders' equity
Preferred Stock 0 0
(Authorized: 5,000,000; Outstanding: 0)
Class A Common Stock 135,782 59,130
(Authorized: 30,000,000; Outstanding: June
30, 2000 13,578,150; December 31, 1999
5,913,050)
Class B Common Stock 0 0
(Authorized: 5,000,000; Outstanding: 0)
Capital Surplus 8,512,157 5,921,300
Accumulated deficit (5,573,943) (5,021,898)
------------ --------------
3,073,996 958,532
Accumulated other comprehensive income (loss) (14,621) (4,417)
------------ --------------
Total stockholders' equity 3,059,375 954,115
------------ --------------
Total liabilities & stockholders equity $ 27,958,519 $ 17,484,563
============ ==============
</TABLE>
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
Six Months Ended June 30, 2000 and 1999
<TABLE>
<S> <C> <C>
June 30, 2000 June 30, 1999
-------------- -------------
Interest Income:
Interest and fees on loans $ 649,801 $ 659,117
Interest and dividends on securities 68,907 26,488
Interest on federal funds sold & repurchase 92,349 90,730
agreement -------------- -------------
811,057 776,335
-------------- -------------
Interest Expense:
Deposits 199,566 280,858
Other 42,049 4,248
-------------- -------------
241,614 285,106
-------------- -------------
Net interest income 569,442 491,229
Provisions for loan losses 0 0
-------------- -------------
Net interest income after
provision for loan losses 569,442 491,229
-------------- -------------
Other Income:
Service charges on deposit accounts 46,344 57,917
Securities gains (losses), net 314 0
Other 10,850 12,819
-------------- -------------
Total other income 57,508 70,736
-------------- -------------
Other Expenses:
Salaries and employee benefits 698,675 455,923
Occupancy and equipment 194,575 161,544
Data and item processing 67,779 61,454
Professional Fees 47,184 116,837
Insurance 19,436 25,925
Other 154,530 128,254
-------------- -------------
Total other expenses 1,182,179 949,937
-------------- -------------
Loss before minority interest in net
loss of subsidiary (552,229) (387,972)
Minority interest in net loss of subsidiary 3,184 2,266
-------------- -------------
Net loss $ (552,045) $ (385,706)
============== =============
Basic loss per share $ (0.06) $ (0.07)
============== =============
Diluted loss per share $ (0.06) $ (0.07)
============== =============
Weighted average number of shares &
common equivalent shares 9,783,714 5,240,346
============== =============
</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, 2000 and 1999
<TABLE>
<S> <C> <C>
June 30, 2000 June 30, 1999
-------------- -------------
Interest Income:
Interest and fees on loans $ 331,684 $ 336,074
Interest and dividends on securities 58,869 14,110
Interest on federal funds sold & repurchase
agreement 66,811 50,452
-------------- -------------
457,364 400,636
-------------- -------------
Interest Expense:
Deposits 99,004 138,615
Other 40,039 2,000
-------------- -------------
139,042 140,615
-------------- -------------
Net interest income 318,321 260,021
Provisions for loan losses 0 0
-------------- -------------
Net interest income after provision for
loan losses 318,321 260,021
-------------- -------------
Other Income:
Service charges on deposit accounts 20,385 27,733
Securities gains, net 314 0
Other 2,699 6,472
-------------- -------------
Total other income 23,398 34,205
-------------- -------------
Other Expenses:
Salaries and employee benefits 364,181 227,381
Occupancy and equipment 124,039 82,513
Data and item processing 38,164 35,088
Professional Fees 25,903 105,402
Insurance 9,668 12,963
Other 52,431 46,650
-------------- -------------
Total other expenses 614,386 509,997
-------------- -------------
loss before minority interest in net
loss of subsidiary (272,667) (215,771)
Minority interest in net loss of subsidiary 2,054 927
-------------- -------------
Net loss $ (270,613) $ (214,844)
============== =============
Basic loss per share $ (0.02) $ (0.04)
============== =============
Diluted loss per share $ (0.02) $ (0.04)
============== =============
Weighted average number of shares &
common equivalent shares 13,537,227 5,240,346
============== =============
</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, 2000 and 1999
<TABLE>
<S> <C> <C>
June 30, 2000 June 30, 1999
-------------- --------------
Cash Flows from Operating Activities
Net loss $ (552,045) $ (385,706)
Adjustments to reconcile net loss to net cash
used in operating activities:
Net accretion on securities (19,807) (1,638)
Depreciation and amortization 68,496 47,990
Securities (gains) losses, net 314 0
Minority interest in net (loss)of subsidiary (3,184) (2,266)
(Increase) decrease in Accrued Interest Receivable 2,410 22,079
(Increase) decrease in Other Assets (76,393) (73,348)
Increase (decrease) in other liabilities (24,891) (27,299)
(Increase) Decrease of other real estate owned 96,455 61,192
------------- -------------
Net cash (used in) operating activities (508,645) (358,996)
------------- --------------
Cash Flows from Investing Activities
Net cash flows from securities (3,600,405) (186,418)
(Purchase) Sale of Federal Reserve Bk/Federal
Home Loan Bk stock (60,000) (4,300)
Loan originations & principal collections on
loans - net (2,668,604) 632,916
Purchase of premises and equipment - net (26,572) (75,596)
------------- -------------
Net cash provided by (used in) investing
activities (6,355,581) 366,602
------------- -------------
Cash Flows From Financing Activities
Net increase (decrease) in federal funds purchased
and securities sold under repurchase agreements 2,692,000 0
Net increase (decrease) in deposits 5,686,487 (809,101)
Proceeds from issuance of stock 2,667,509 422,500
------------- -------------
Net cash provided by (used in)financing
activities 11,045,996 (386,601)
------------- -------------
Net increase (decrease)in cash and cash
equivalents 4,181,770 (381,995)
Cash and cash equivalents, Beginning 3,175,320 5,857,269
------------- -------------
Cash and cash equivalents, Ending $ 7,357,090 $ 5,475,274
============= =============
</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 - UNAUDITED
<TABLE>
<S> <C> <C>
Six Months Ended
June 30, 2000 June 30, 1999
------------- -------------
Net loss $ (552,045) $ (385,705)
Other comprehensive loss:
Unrealized holding gains arising during period (10,204) (4,937)
------------- -------------
Comprehensive loss $ (562,249) (390,643)
------------- -------------
Three Months Ended
June 30, 2000 June 30, 1999
------------- -------------
Net loss $ (270,613) $ (214,843)
Other comprehensive loss:
Unrealized holding gains arising during period (13,810) (293)
------------- -------------
Comprehensive loss $ (284,423) (215,137)
------------- -------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements
<PAGE>
SOUTHERN SECURITY BANK CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - UNAUDITED
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Other
Comprehensive Common Stock Paid-In Accumulated Comprehensive
Income Shares Amount Capital (Deficit) Income Total
------------- ------------------ ---------- ----------- ------------- ----------
Balance, January 1, 1999 4,567,641 $45,676 $5,537,269 $(4,370,251) $3,426 $1,216,120
Comprehensive income (loss): - - -
Net loss $ (385,706) - - - (385,706) - (385,706)
Other Comprehensive income,
net of tax:
Change in unrealized gain
(loss) on securities available
for sale (4,937) - - - - (4,937) (4,937)
------
Comprehensive income (loss) $ (390,643)
============
Issuance of stock in
private placements 1,345,409 13,454 409,046 - - 422,500
--------- ------ ------- ----------- ---------- ----------
Balance June 30, 1999 5,913,050 $59,130 $5,946,315 $(4,755,957) $(1,511) $1,247,977
========= ======= ========== ============ =========== ==========
Accumulated
Other
Comprehensive Common Stock Paid-In Accumulated Comprehensive
Income Shares Amount Capital (Deficit) Income Total
------------- ------------------ ---------- ----------- ------------- ----------
Balance, January 1, 2000 5,913,050 $59,130 $5,921,300 $(5,021,898) $ (4,417) $ 954,115
Comprehensive income (loss):
Net loss $ (552,045) - - - (552,045) - (552,045)
Other comprehensive income,
net of tax:
Change in unrealized gain
(loss) on securities available
for sale (10,204) - - - - (10,204) (10,204)
-------------
Comprehensive income (loss) $ (562,249)
=============
Issuance of stock 7,665,100 76,652 2,590,857 - - 2,667,509
----------
Balance June 30, 2000 13,578,150 135,782 8,512,157 $(5,573,943) ($14,621) 3,059,375
</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 for the financial statements not to be misleading have been
included. Operating results for the six month period ended June 30, 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 financial statements and notes to consolidated financial
statements.
All material intercompany balances and transactions have been eliminated.
The Company is a bank holding company that owns 98.58% 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 June 30, 2000 and June 30, 1999.
Per-Share
Numerator Denominator Amounts
Six Months Ended June 30, 2000
Net loss $ (552,045)
Basic and diluted loss per share,
loss available to common
shareholders $ (552,045) 9,783,714 $(0.06)
----------- --------- -------
Six Months Ended June 30, 1999
Net loss $ (385,706)
Basic and diluted loss per share,
loss available to common
shareholders $(385,706) 5,240,346 $(0.07)
---------- --------- -------
Options for the purchase of 811,298 shares at June 30, 2000 and 1,173,749 shares
at June 30, 1999 have not been included in the computation of diluted earnings
per share for June 30, 2000 and June 30, 1999 because their inclusion would have
been antidilutive as a result of losses being reported for these periods. On
April 11, 2000, the Company paid $43,168 to a former officer to completely
satisfy options for the purchase of 440,056 shares.
The Company issued 7,620,767 shares of common stock at a price of $0.35 per
share under a private placement memorandum concluded in March, 2000.
Note 2. ANALYSIS OF ALLOWANCE FOR LOAN AND LEASE LOSSES
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
----------------- ----------------
Balance, beginning of year $ 183,675 $ 271,498
Total charge-offs (19,951) (51,791)
Recoveries 21,074 5,194
Provision for loan & lease losses 0 0
----------------- ----------------
Allowance balance at end of period $ 184,798 $ 224,901
================= ================
Total loans and discount $ 15,141,664 $ 14,204,983
Allowance to total loans and
discount 1.22% 1.58%
Note 3. CAPITAL ADEQUACY REVIEW
The Bank's capital ratios as of June 30, 2000, and regulatory minimum ratios are
as follow:
For Capital Adequacy
June 30, 2000 Purposes Under Prompt
Southern Security Bank Bank Corrective Action Provisions
---------------------- ---- ----------------------------
Total Risk-weighted Ratio:
Tier 2 Capital + ALLL 3,476,000
----------
Risk Weighted Assets 17,015,000 = 20.43% 8.00%
Tier 1 Risk Weighted Ratio:
Tier 1 Capital 3,291,203
----------
Risk Weighted Assets 17,015,000 = 19.34% 4.00%
Tier 1 Leverage Ratio:
Tier 1 Capital 3,291,203
----------
Average Quarterly
Assets 23,422,000 = 14.05% 4.00%
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 and six month periods ended June 30, 2000 and 1999. This discussion
and analysis should be read in conjunction with the Consolidated 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 JUNE 30,
2000 FINANCIAL CONDITION
Total assets increased by $9.95 million, or 56.9%, from $17.5 million at
December 31, 1999, to $27.4 million at June 30, 2000. The Company's short-term
investments, primarily consisting of federal funds sold ("fed funds") and
available-for-sale investments, increased by $8.5 million to $10.5 million at
June 30, 2000, from $2.0 million at December 31, 1999. This increase in
short-term investments is the result of increased deposits of $5.2 million, an
increase in securities sold under repurchase agreements of $2.7 million and
proceeds of $2.7 million from the issuance of stock since December 31, 1999.
The Company's net loans receivable increased by $2.2 million or 17.2%, to $15.0
million at June 30, 2000, from $12.8 million at December 31, 1999.
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: (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 increased substantially to $20.9 million on June 30, 2000 from $15.7
million at December 31, 1999. Management has begun pursuing deposits as the
result of the infusion of capital obtained in late March which provides the
capital necessary to support the growth of the Bank.
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 $238,778 at June 30, 2000 (2.71% 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 $171,000 at June 30, 2000 (1.12%
of total loans).
June 30, 2000 December 31, 1999
============= =================
Classified Loans & Discount $ 238,778 $ 489,539
Other Real Estate Owned &
Repossessions 171,179 267,634
------------- -----------------
Total Classified and Other 409,957 757,173
============= =================
Percent Classified and
Other / Total Loans 2.71% 5.84%
Total Loans & Discount $ 15,141,664 $ 12,971,937
In management's best judgement, 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 $3,039,374 at June 30, 2000, an
increase of $2.1 million, or 218.5%, 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 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 Bank is 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). 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. For all but the most highly rated banks meeting
the above conditions, the minimum leverage ratio may require an additional 100
to 200 basis points. The Bank's ratios are listed below.
Bank Capital Ratios June 30, 2000 December 31, 1999 Adequate
Total risk-weighted capital: 20.43% 12.86% 8.00%
Tier I risk-weighted capital: 19.34% 11.61% 4.00%
Leverage: 14.05% 8.38% 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.
The Company will seek to raise additional capital through sales of its common
stock to meet its capital needs and fulfill its business plan.
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 June 30, 2000, consisted of $7.4 million in cash and
cash equivalents and $3.9 million in available-for-sale investments, for a total
of $11.3 million, compared with a total of $3.4 million at December 31, 1999, an
increase of approximately $7.9 million.
The composition of interest-bearing deposits at June 30, 2000 and December 31,
1999 is as follows:
2000 1999
---------- -----------
Now Accounts 3,000,699 1,893,708
Money market accounts 4,684,513 2,674,489
Savings accounts 665,784 655,206
Certificates of deposit less than $100,000 3,838,638 4,824,914
Certificates of deposit of $100,000 or more 1,882,828 2,120,731
---------- -----------
Total 14,072,462 12,169,048
RESULTS OF OPERATIONS
Comparison of results in this section are for the six month periods ended June
30, 2000 and June 30, 1999.
The net loss recognized for the six months ended June 30, 2000 was $552,045
compared to a loss of $385,706 for the six month period ended June 30, 1999.
This was a negative change of $166,339. Earnings for the six months as compared
to the same period last year were primarily impacted by an increase in operating
expenses consisting primarily of salaries (increase of $242,752 or 53.2%) and
other uncategorized (increase of $26,276 or 20.4%).
The net loss recognized for the three months ended June 30, 2000, was $270,613
compared to $214,844 for the three months ended June 30, 1999. This resulted in
a negative change of $36,896 or 26.5%, which was primarily due to an increase in
salaries and employee benefits of $136,800 or 60.2% Interest income and
dividends on securities increased by $44,759 or 317.2% The company had purchased
several securities during the three months ended June 30, 2000.
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. 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 ("Wilson Settlement") of $160,000 was posted on March 31, 2000
as compensation expense in accordance with generally accepted accounting
principles. In addition, the Company paid Mr. Wilson $43,168 on April 11, 2000,
in complete satisfaction of Mr. Wilson's options for the purchase of common
stock.
NET INTEREST INCOME
Net interest income before provision for loan losses for the six months ended
June 30, 2000 was $569,442 as compared to $491,229 for the six months ended June
30, 1999, an increase of $78,213 or 15.9%. Net interest income before provision
for loan losses for the three months ended June 30, 2000 was $318,321 as
compared to $260,021 for the three months ended June 30, 1999, an increase of
$58,300 or 22.4%.
Income from interest earning deposits, securities and mortgage-backed related
securities (available-for-sale and held-to-maturity) and Federal Reserve Bank
stock increased by $42,419 from $26,488 for the six-month period ended June 30,
1999, to $68,907 for the six-month period ended June 30, 2000, due primarily to
an increase in the average balance of such investments. Interest and fees on
loans decreased by $9,316 in the six months ended June 30, 2000 as compared to
the same period in 1999. The decrease in income from loans outstanding resulted
primarily from a decrease in fee income generated from the origination of credit
facilities.
The interest expense for deposits decreased $81,292 (28.9%) from $280,858 for
the six month period ended June 30, 1999 to $199,566 for the six month period
ended June 30, 2000. Interest expense for deposits decreased $1,573 (1.1%) from
$140,615 for the three month period ended June 30, 1999 to $139,042 for the
three month period ended June 30, 2000. The deposit interest expense decrease
was the result of a reduction in rates offered on interest bearing liabilities
for the six month period ended June 30, 2000 as compared to the six month period
ended June 30, 1999. Other interest expense increased from $4,248 for the six
month period ended June 30, 1999 to $42,049 for the six month period ended June
30, 2000 as the result of the acquisition of liabilities obtained, i.e.,
securities sold under agreement to repurchase.
OPERATING EXPENSES
Operating expenses increased by $232,242, or 24.4% from $949,937 for the six
month period ended June 30, 1999 to $1,182,179 for the six month period ended
June 30, 2000. Operating expenses increased by $104,389, or 20.5% from $509,997
for the three month period ended June 30, 1999 to $614,386 for the three month
period ended June 30, 2000. The increase for the six months ended June 30, 2000
as compared to the six months ended June 30, 1999 consists primarily of
increases in salaries and employee benefits due to an increase in the number of
employees in the second quarter to generate and support planned growth and the
settlement with Mr. Wilson. The net present value of the Wilson Settlement
amount of $160,000 was posted on March 31, 2000 as compensation expense in
accordance with generally accepted accounting principles. Additionally, there
was an increase in other uncategorized expenses of $26,276 or 20.4% for the six
months ended June 30, 2000 as compared to the six months ended June 30, 1999,
due primarily to an OREO writedown of $25,000. The writedown occurred in the
first quarter of 2000.
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, they
may experience losses 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 $184,800 at June 30, 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 June 30, 2000, and no
additional provision was expensed during the first six 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 six months ending June 30, 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 Securities and Exchange Commission, 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 Securities and Exchange Commission
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
Notice was given that the Annual Meeting of the Shareholders of
Southern Security Bank Corporation would be held at the offices of Southern
Security Bank located at 3475 Sheridan Street, Hollywood, Florida, on Tuesday,
April 25, 2000 at 4:00 p.m. to elect three Class I Directors to serve until the
2003 Annual Meeting and elect one Class III Director to serve until the 2002
Annual Meeting. The nominees as Class I Directors, serving until 2003 were
Harold L. Connell, R. David Butler and Harold C. Friend; and as a Class III
Director, serving until 2002, Mr. G. Carlton Marlowe. Of the total shares
outstanding 65% either voted in person or by proxy. The nominees were elected by
a vote of 56% for, nine persent abstaining, and less than one percent against.
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 (3)
(ii) By-laws of the registrant (4)
4.1 Stock Certificate for Class A Common Stock (4)
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 (4) *
10.2 Executive Employment Agreement of James L. Wilson, dated June 11, 1992,
together with Amendment No. 1 thereto (4) *
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 (4) *
10.4 Agreements between Southern Security Bank Corporation and the Federal
Reserve Bank of Atlanta, dated February 13, 1995 (5)
10.5 Agreements, dated June 30, 1999, between Philip C. Modder and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (6)
10.6 Agreements, dated June 30, 1999, between James L. Wilson and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (6)
10.7 Termination Agreement with James L. Wilson, dated February 11, 2000 (3)
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 (8)
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 12, 1997.
(3) Filed as an exhibit to Form 10-KSB of the registrant filed on March 31,
2000.
(4) Filed as an exhibit to Form 10-KSB of the registrant filed on April 2, 1998.
(5) Filed as an exhibit to Form 10-KSB/A of the registrant filed on June 10,
1998.
(6) Filed as an exhibit to Form 10-QSB of the registrant filed on August 16,1999
(7) Filed as an exhibit to Form 10-KSB/A of the registrant filed on April 14,
2000.
(8) Filed as an exhibit to Form 10-QSB of the registrant filed on May 16, 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
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, 2000 By: /s/ Harold L. Connell
---------------------
Harold L. Connell,
President and Chief Executive Officer
Dated: August 14, 2000 By: /s/ Floyd D. Harper
-------------------
Floyd D. Harper
Vice President and Secretary
(chief financial officer)
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 (3)
(ii) By-laws of the registrant (4)
4.1 Stock Certificate for Class A Common Stock (4)
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 (4) *
10.2 Executive Employment Agreement of James L. Wilson, dated June 11, 1992,
together with Amendment No. 1 thereto (4) *
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 (4) *
10.4 Agreements between Southern Security Bank Corporation and the Federal
Reserve Bank of Atlanta, dated February 13, 1995 (5)
10.5 Agreements, dated June 30, 1999, between Philip C. Modder and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (6)
10.6 Agreements, dated June 30, 1999, between James L. Wilson and Southern
Security Bank Corporation, concerning compensation under his Employment
Agreement (6)
10.7 Termination Agreement with James L. Wilson, dated February 11, 2000 (3)
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 (8) 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-KSB of the registrant filed on March 31,
2000.
(4) Filed as an exhibit to Form 10-KSB of the registrant filed on April 2, 1998.
(5) Filed as an exhibit to Form 10-KSB/A of the registrant filed on June 10,
1998.
(6) Filed as an exhibit to Form 10-QSB of the registrant filed on August 16,
1999.
(7) Filed as an exhibit to Form 10-KSB/A of the registrant filed on April 14,
2000.
(8) Filed as an exhibit to Form 10-KSB of the registrant filed on May 16, 2000.
* Management compensation plan or arrangement.