<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended: SEPTEMBER 30, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission file number 0-11401
SECURITY CHICAGO CORP.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified In Its Charter)
DELAWARE 36-3236203
--------------------------------------- -------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
196 E. PEARSON, CHICAGO, ILLINOIS 60611
--------------------------------------- -------------------------------
(Address of Principal Executive Offices) (Zip Code)
312/280-0360
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for 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
--- ---
Indicate the number of shares outstanding of each the issuer's classes of common
stock, as of the latest practicable date:
Class Outstanding at October 1, 1995
--------------------------------------- --------------------------------
Common Stock, par value $5.00 208,714 shares (excluding 31,286
shares held as treasury shares)
-1-
<PAGE>
SECURITY CHICAGO CORP.
AND SUBSIDIARY
INDEX
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994. . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income for the nine months
ended September 30, 1995 and 1994 and the three months
ended September 30, 1995 and 1994. . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Changes in Stockholders' Equity
for the nine months ended September 30, 1995 and 1994. . . . . . . . . 6
Notes to the Condensed Consolidated Financial Statements as of
September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operation . . . . . . . . . . . . . . . . . . . . . . . . 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 14
-2-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 3,753 $ 4,106
Federal funds sold 13,600 7,150
--------- ---------
Total cash and cash equivalents 17,353 11,256
Securities available-for-sale 3,198 5,513
Securities held-to-maturity (market value:
1995 - $20,638; 1994 - $21,380) 20,667 22,075
Loans, net of unearned discount and deferred loan
fees 27,628 29,296
Less: Allowance for loan losses (353) (350)
--------- ---------
27,275 28,946
Leasehold improvements and equipment, net 157 211
Accrued interest and other assets 667 429
--------- ---------
$ 69,317 $ 68,430
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 10,633 $ 14,445
Interest-bearing 48,525 43,984
--------- ---------
Total deposits 59,158 58,429
Demand note payable - 880
Accrued interest and other liabilities 1,586 1,127
--------- ---------
60,744 60,436
Stockholders' equity
Common stock, $5 par value; 1,000,000 shares
authorized; 240,000 shares issued 1,200 1,200
Surplus 1,200 1,200
Retained earnings 6,728 6,328
Net unrealized gain (loss) on securities
available-for-sale, net of tax 133 (329)
Treasury stock, at cost (1995 - 31,286 shares;
1994 - 23,603 shares) (688) (405)
--------- ---------
8,573 7,994
--------- ---------
$ 69,317 $ 68,430
--------- ---------
--------- ---------
</TABLE>
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See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans, including fee income $ 640 $ 616 $ 1,920 $ 1,788
Securities
Taxable 282 260 836 760
Tax-exempt 33 27 77 93
Federal funds sold 109 77 230 185
Dividends 22 - 80 -
--------- --------- --------- ---------
1,086 980 3,143 2,826
INTEREST EXPENSE
Deposits 411 352 1,162 1,046
Notes payable 14 13 54 36
--------- --------- --------- ---------
425 365 1,216 1,082
--------- --------- --------- ---------
NET INTEREST INCOME 661 615 1,927 1,744
Provision for loan losses - - - 2
--------- --------- --------- ---------
661 615 1,927 1,742
OTHER INCOME
Service fees 123 107 495 403
Equity income in unconsolidated
non-affiliate - 13 - 127
Gain on exchange of common stock - 1,510 - 1,510
Loss on sale of AMCORE stock (22) - (22) -
Other income 86 163 166 269
--------- --------- --------- ---------
187 1,793 639 2,309
OTHER EXPENSES
Salaries and employee benefits 278 290 849 925
Occupancy and equipment expense 144 143 435 422
Professional fees 43 36 136 167
Computer service fees 50 53 157 153
Other operating expenses 100 111 352 364
--------- --------- --------- ---------
615 633 1,929 2,031
--------- --------- --------- ---------
Income before income taxes 233 1,775 637 2,020
Provision for income taxes 44 675 153 718
--------- --------- --------- ---------
NET INCOME $ 189 $ 1,100 $ 484 $ 1,302
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per share $ 0.90 $ 5.08 $ 2.31 $ 6.02
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average shares outstanding 208,842 216,397 209,423 216,397
- -----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial sttatements.
-4-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Nine months ended
September 30,
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 484 $ 1,302
Adjustments to reconcile net income to net cash provided
by operating activities
Gain on exchange of common stock - (1,510)
Provision for depreciation and amortization 74 76
Provision for loan losses - 2
Net amortization of investment security premiums/discounts 4 37
Undistributed equity income in unconsolidated non-affiliate - (96)
Loss on sale of securities available-for-sale 22 -
Decrease in deferred loan fees (39) (24)
(Increase) decrease in accrued interest receivable and
other assets (238) 262
Increase in accrued interest payable and other liabilities 307 689
--------- ---------
Net cash provided by operating activities 614 738
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available-for-sale 1,015 -
Proceeds from maturities of securities available-for-sale 2,000 4,000
Proceeds from maturities of securities held-to-maturity 7,352 2,279
Purchases of securities held-to-maturity (5,948) (5,584)
Net decrease in loans 1,710 1,195
Purchase of investment in unconsolidated non-affiliate - (18)
Purchase of equipment, net (20) (18)
--------- ---------
Net cash provided by investing activities 6,109 1,854
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 729 (5,126)
Cash dividends paid (192) (87)
Payments on notes payable (880) (30)
Purchases of treasury stock (283) -
--------- ---------
Net cash used in financing activities (626) (5,243)
--------- ---------
Net increase (decrease) in cash and cash equivalents 6,097 (2,651)
Cash and cash equivalents at beginning of period 11,256 14,113
--------- ---------
Cash and cash equivalents at end of period $ 17,353 $ 11,462
--------- ---------
--------- ---------
Supplemental disclosure of cash flow information
Cash paid during period for
Interest $ 1,195 $ 1,074
Income taxes 155 166
Noncash investing activities
Exchange of common shares in unconsolidated
non-affiliate for AMCORE common shares - 2,509
- -----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY
For the nine months ended September 30, 1995 and 1994
(In thousands, except share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net Unrealized
Gain (Loss)
on Securities
Available- Total
Common Retained for-Sale, Treasury Stockholders'
Stock Surplus Earnings Net of Tax Stock Equity
----- ------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $ 1,200 $ 1,200 $ 5,083 $ 29 $ (405) $ 7,107
Net income for nine months ended
September 30, 1994 - - 1,302 - - 1,302
Cash dividends paid ($0.40 per share) - - (87) - - (87)
Change in unrealized gain (loss) on
securities available-for-sale, net of tax - - - (42) - (42)
---------- ---------- ---------- -------------- ---------- ------------
Balance at September 30, 1994 $ 1,200 $ 1,200 $ 6,298 $ (13) $ (405) $ 8,280
---------- ---------- ---------- -------------- ---------- ------------
---------- ---------- ---------- -------------- ---------- ------------
Balance at December 31, 1994 $ 1,200 $ 1,200 $ 6,328 $ (329) $ (405) $ 7,994
Net income for nine months ended
September 30, 1995 - - 484 - - 484
Purchase of 7,683 treasury shares - - - - (283) (283)
Cash dividends paid ($0.40 per share) - - (84) - - (84)
Change in unrealized gain (loss) on
securities available-for-sale, net of tax - - - 462 - 462
---------- ---------- ---------- -------------- ---------- ------------
Balance at September 30, 1995 $ 1,200 $ 1,200 $ 6,728 $ 133 $ (688) $ 8,573
---------- ---------- ---------- -------------- ---------- ------------
---------- ---------- ---------- -------------- ---------- ------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-6-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
- -------------------------------------------------------------------------------
NOTE 1
Security Chicago Corp. (the "Corporation") is a one bank holding company which
owns 100% of the voting stock of First Security Bank of Chicago (the "Bank"), a
state chartered commercial bank located in Chicago, Illinois. In the opinion of
management, the accompanying condensed consolidated financial statements contain
all adjustments (consisting of normally recurring items) necessary to present
fairly the Corporation's consolidated financial position as of September 30,
1995 and December 31, 1994, the results of its consolidated operations for the
nine months and three months ended September 30, 1995 and 1994, and its
consolidated cash flows and changes in stockholders' equity for the nine months
ended September 30, 1995 and 1994. The results of operations for the period
ended September 30, 1995 are not necessarily indicative of the results to be
expected for the full year.
The financial statements and notes are presented as permitted by Form 10-Q and
do not contain certain information included in the Corporation's annual
financial statements and notes thereto.
NOTE 2
Prior to August 1, 1994, the Corporation owned an approximate 20% interest in
First State Bancorp of Princeton, Illinois, Inc. ("Princeton"), a multibank
holding company located in north-central Illinois. Effective August 1, 1994,
Princeton merged with AMCORE Financial, Inc. ("AMCORE"), a multibank holding
company in northern Illinois. Pursuant to the terms of the merger the
Corporation exchanged its common stock interest in Princeton for 194,623 shares
of AMCORE common stock.
The Corporation accounted for its ownership interest in Princeton using the
equity method. Subsequent to the August 1, 1994 exchange of shares, the AMCORE
common shares were classified as available-for-sale and are carried at fair
value. At September 30, 1995, the carrying value of the AMCORE common stock was
$3,198,000. The Corporation sold 50,000 shares of the AMCORE common stock
during the third quarter of 1995, realizing a loss of $22,000.
At July 31, 1994, total assets of Princeton aggregated $14.3 million.
Princeton's net income for the seven months ended July 31, 1994 was $631,000, of
which the Corporation recorded its $127,000 equity interest therein in the
consolidated statement of income as "Equity income in unconsolidated non-
affiliate".
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
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NOTE 3
The Bank has the following contractual amounts of financial instruments
outstanding at September 30, 1995 (in 000's):
<TABLE>
<S> <C>
Commitments to originate loans $ 2,309
Standby letters of credit $ 10
</TABLE>
NOTE 4
On May 25, 1995, the Bank entered into a contract to purchase a building to
house its main office at 190 E. Delaware, Chicago. The Bank is committed to
advance approximately $2,800,000 for the purchase of the land and building and
management anticipates advancing an additional $1,500,000 for the remodeling and
refurbishing of the building. Management intends to fund the purchase and
remodeling with cash and cash equivalents. This transaction is expected to
occur in January 1996.
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-8-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
- -------------------------------------------------------------------------------
The following discussion focuses on the consolidated financial condition of
Security Chicago Corp. and Subsidiary at September 30, 1995 and the consolidated
results of operations for the three and nine months ending September 30, 1995,
compared to the same period in 1994. The purpose of this discussion is to
provide a better understanding of the consolidated financial statements and the
operations of the Corporation and its subsidiary, First Security Bank ("The
Bank"). This discussion should be read in conjunction with the interim
condensed consolidated financial statements and notes thereto included herein.
RESULTS OF OPERATIONS
Consolidated net income of the Corporation for the third quarter of 1995 totaled
$189,000, or $.90 per share, a 83% decrease compared to $1,100,000, or $5.08 per
share, earned for the third quarter of 1994. Net income was $484,000, or $2.31
per share, and $1,302,000, or $6.02 per share, for the nine months ended
September 30, 1995 and 1994, respectively. The primary factors that led to the
$818,000 (63%) decrease in 1995 nine month net income and the $911,000 (83%)
decrease in the third quarter net income were the gain on exchange of common
stock of $1,510,000 during the third quarter of 1994, partly offset by
improvements in net interest income and deposit fee income, and reductions in
operating expense levels during 1995. These improvements in 1995 were somewhat
offset by a decline in equity earnings from an unconsolidated subsidiary. These
factors are discussed more fully below.
NET INTEREST INCOME:
As is discussed in note 2 to the accompanying September 30, 1995, consolidated
financial statements, in August of 1994 the Corporation received shares in
AMCORE Financial, Inc. ("AMCORE") in exchange for previously owned shares in
First State Bancorp of Princeton, Illinois, Inc. ("Princeton") pursuant to a
merger of these entities, and recorded a gain of $1,510,000. In the September
30, 1995 income statement, the Corporation received $80,000 ($22,000 for the
third quarter) in dividend income from its AMCORE investment. This is included
in interest and dividend income in the September 30, 1995 income statement. In
the September 30, 1994 income statement, the Corporation recognized $127,000 of
income ($13,000 for the third quarter) on its investment in Princeton as equity
income in an unconsolidated non-affiliate. This is included in other income on
the income statement.
Excluding the dividend income of $80,000, net interest income totaled $1,847,000
for the nine month period ended September 30, 1995 compared to $1,744,000 in
1994 for the comparable period. Interest income increased $237,000 over 1994,
mainly due to $132,000 increase in loan income and a $60,000 increase in
securities income as a result of increased rates over the prior period. This is
partially offset by a $134,000 increase in interest expense which is primarily
due to increased interest rates as well. The impact of changes in volumes and
rates for earning assets and interest bearing liabilities is as follows for the
nine months ended September 30, 1995 and 1994. The following table analyzes the
change in net interest income, excluding dividend income, on a fully tax
equivalent basis using a 34% tax rate.
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
- -------------------------------------------------------------------------------
Favorable (Unfavorable) Changes In Net Interest Income
(In 000's)
Nine Months ended September 30, 1995 over 1994
----------------------------------------------
<TABLE>
<CAPTION>
Volume Rate Total
------ ---- -----
<S> <C> <C> <C>
Federal funds sold $ (42) $ 87 $ 45
Securities (58) 118 60
Loans (52) 184 132
---------- ---------- ----------
Total earning assets (152) 389 237
Interest-bearing deposits (123) 239 116
Notes payable (3) 21 18
---------- ---------- ----------
Total interest bearing liabilities (126) 260 134
---------- ---------- ----------
Change in net interest income $ (26) $ 129 $ 103
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
In the above table, securities available-for-sale and held-to-maturity are
combined in the rate/volume analysis, and income from the Corporation's
investment in AMCORE is excluded from net interest income.
As can be seen in the preceding table, the impact of decreases in volumes of
earning assets and interest-bearing liabilities in 1995 was more than offset by
favorable improvements in rates.
PROVISION FOR LOAN LOSSES
Credit quality and collection experience continued to be good in 1995, resulting
in no provision for loan losses during the first three quarters of 1995 compared
to a modest $2,000 provision for loan losses in the first three quarters of
1994.
CHANGES IN NON-INTEREST INCOME AND NON-INTEREST EXPENSE
As discussed previously, during the third quarter of 1995 the Company recorded a
$1,510,000 gain on the exchange of common stock of a non-affiliate accounted for
on the equity method for stock in AMCORE. The $1,510,000 gain, and equity
income in the unconsolidated non-affiliate prior to the exchange date, are
included in other income.
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
- -------------------------------------------------------------------------------
Exclusive of the equity income is an unconsolidated non-affiliate and the gain
on exchange of common stock, total other income decreased $33,000 and $83,000
for the nine months and three months ended September 30, 1995, respectively,
compared to the same periods in 1994. Service fee income improved $92,000 (23%)
and $16,000 (15%) in the 1995 nine month period and three month period ,
respectively, compared to the year earlier periods, principally as a result of
higher fees associated with commercial and retail demand deposit account
products. This increase was more than offset by a $125,000 and $99,000 decrease
in nine month and three month other income components, respectively. The
decrease in other income components resulted from reduced commissions on
mortgage originations and sales, as well as the Bank's discontinuance of the
investment brokerage function in January 1995.
Operating expenses for the nine months and three months ended September 30, 1995
decreased $102,000 (5.0%) and $18,000 (2.8%), respectively, over the 1994
periods. The largest component of the decrease was a reduction in compensation
and benefits of $76,000 and $12,000 for the nine month and three month periods
ending September 30, 1995, respectively, as the Bank continued its efforts to
reduce the number of full-time equivalents. In addition, collectively other
operating expenses, none of which were individually significant, decreased by
$26,000 and $6,000, respectively, as a result of the Bank's efforts to improve
operating efficiencies.
The provision for income tax for the nine months and three months ended
September 30, 1995 was $565,000 and $631,000, respectively, lower than the same
periods for 1994 as a result of a decrease of $1,383,000 and $1,542,000,
respectively, in income before income taxes. The reduction in income before
income taxes for both periods was primary due to the 1994 AMCORE transaction
discussed previously.
FINANCIAL CONDITION
Consolidated total assets aggregated $69 million and $68 million at September
30, 1995 and December 31, 1994, respectively. Most of the increase in assets
was in federal funds sold, which was a result of a reduction in loans and
securities during the nine month period. Federal funds sold also increased
significantly due to decreases in various other assets. During the nine months
ended September 30, 1995, securities available-for-sale decreased by $2 million
as a result of sales and maturities, and securities held-to-maturity decreased
by $2 million as a result of maturities Net loans also decreased during the
period by $1,671,000 (5.8%) primarily due to borrowers refinancing at other
institutions to obtain 15 and 30 year fixed rate loans, which are not currently
offered by the Bank. Cash and cash equivalents amounted to $17.4 million at
September 30, 1995, which is a strong level of liquidity.
The Corporation's allowance for loan losses was relatively unchanged at $353,000
at September 30, 1995. The allowance represented 1.3% and 1.2% of outstanding
loans at September 30, 1995 and December 31, 1994, respectively.
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
- -------------------------------------------------------------------------------
Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan."
SFAS 114 requires that the fair value of impaired loans be calculated and if the
fair value is less than the loan's carrying value, a valuation allowance be
established. The adoption of this statement has not had a material effect on
the Company's financial statements.
CAPITAL RESOURCES
Bank regulatory agencies have adopted capital standards by which all banks and
bank holding companies will be evaluated. Under the risk-based method of
measurement, the resulting ratio is dependent upon not only the level of capital
and assets, but the composition of assets and capital and the amount of off-
balance sheet commitments. Since the Company has consolidated assets of less
than $150 million, regulatory minimum capital tests are applied primarily to the
subsidiary Bank. In accordance with the guidelines of the Federal Reserve,
unrealized net gains and losses, net of deferred income taxes, which are
recorded as an adjustment to equity capital on the financial statements, are not
included in the calculation of these ratios.
The Corporation's equity capital was $8,573,000 at September 30, 1995 compared
to $7,994,000 at December 31, 1994. The slight increase was primarily
attributable to net income of $484,000 exceeding dividends of $84,000 and
treasury stock purchases of $283,000 made during 1995. In addition, the Bank
had a net unrealized gain on securities available-for-sale of $133,000 at
September 30, 1995 compared to an unrealized loss of $329,000 at December 31,
1994.
The Bank's equity capital was $6,213,000 at September 30, 1995 compared to
$5,933,000 at September 30, 1994. The increase was attributable to net income
for the period, offset by dividends of $219,000. The Bank's regulatory capital
position was as follows:
Regulatory
Requirement 9/30/95 12/31/94
----------- ------- --------
Risk-based total capital 8.0% 23.80% 22.24%
Risk-based tier 1 capital 4.0% 22.52% 21.00%
Tier 1 leveraged capital 4.0% - 5.0% 9.75% 8.71%
Commitments for capital expenditures are an important factor in evaluating
capital adequacy. Additional capital expenditures are anticipated in
association with the future of the Corporation's main banking facility in
Chicago. As discussed in note 4, the Bank is committed to advance approximately
$2,800,000 for the purchase of a building to house its main office. This
transaction is to occur on January 4, 1996.
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-12-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1995
- -------------------------------------------------------------------------------
LIQUIDITY
Liquidity measures the ability of the Corporation to meet maturing obligations
and its existing commitments, to withstand fluctuations in deposit levels, to
fund operations, and to provide for customers' credit needs. The liquidity of
the Corporation principally depends on cash flows from operating activities,
investment in and maturity of assets, changes in balances of deposits and
borrowings, and its ability to borrow funds in the money or capital markets.
Net cash inflows resulted primarily from a net decrease in securities of $4.4
million which was the result of maturities of $9.3 million and sales proceeds of
$1.0 million offset by purchases of $5.9 million. In addition, loans decreased
by $1.7 million, which was partially offset by an increase in total deposits of
$729,000. The combination of these transactions resulted in a like increase in
cash and cash equivalents.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS 122
Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage
Servicing Rights", will become effective for financial statements issued for
fiscal years beginning after December 15, 1995. The pronouncement will require
that the fair value of the retained mortgage servicing rights on loans that are
sold be recorded as an asset and with a corresponding credit to income. The
asset will then be amortized over the estimated remaining life of the loan
servicing portfolio. The Company is planning to adopt the standard in 1996, and
the impact is not expected to be material as the Company currently does not sell
loans into the secondary market.
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-13-
<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
- -------------------------------------------------------------------------------
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits - None
b. Reports on Form 8-K - 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.
SECURITY CHICAGO CORP.
(Registrant)
Thomas R. Beverlin_________________
Thomas R. Beverlin
Executive Vice President
November 6, 1995
Sarah G. O'Sullivan________________
Sarah G. O'Sullivan
Chief Financial Officer
November 6, 1995
- -------------------------------------------------------------------------------
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,753
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,198
<INVESTMENTS-CARRYING> 20,667
<INVESTMENTS-MARKET> 20,638
<LOANS> 27,628
<ALLOWANCE> (353)
<TOTAL-ASSETS> 69,317
<DEPOSITS> 59,158
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,586
<LONG-TERM> 0
<COMMON> 1,200
0
0
<OTHER-SE> 7,373
<TOTAL-LIABILITIES-AND-EQUITY> 69,317
<INTEREST-LOAN> 1,920
<INTEREST-INVEST> 993
<INTEREST-OTHER> 230
<INTEREST-TOTAL> 3,143
<INTEREST-DEPOSIT> 1,162
<INTEREST-EXPENSE> 1,216
<INTEREST-INCOME-NET> 1,927
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (22)
<EXPENSE-OTHER> 1,929
<INCOME-PRETAX> 637
<INCOME-PRE-EXTRAORDINARY> 637
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 484
<EPS-PRIMARY> 2.31
<EPS-DILUTED> 2.31
<YIELD-ACTUAL> 5.21
<LOANS-NON> 40
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 350
<CHARGE-OFFS> 3
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 353
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 353
</TABLE>
