<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: MARCH 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 0-11401
SECURITY CHICAGO CORP.
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(Exact Name of Registrant as Specified In Its Charter)
DELAWARE 36-3236203
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
196 E. PEARSON, CHICAGO, ILLINOIS 60611
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(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 May 1, 1995
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Common Stock, par value $5.00 209,654 shares (excluding
30,346 shares held as treasury
shares)
<PAGE>
SECURITY CHICAGO CORP.
AND SUBSIDIARY
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1995 (unaudited)
and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income (unaudited) for the three
month periods ended March 31, 1995 and 1994 . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows (unaudited) for the three
month periods ended March 31, 1995 and 1994 . . . . . . . . . . . . . 5
Consolidated Statements of Changes in Stockholders' Equity
(unaudited) for the three month periods ended March 31, 1995
and 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to the Consolidated Financial Statements (unaudited)
as of March 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of the Financial
Condition and Results of Operation. . . . . . . . . . . . . . . . . . 8
Part II
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
Consolidated Balance Sheets
(000)
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
---------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $5,377 $4,106
Federal funds sold 3,515 7,150
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Total cash and cash equivalents 8,892 11,256
Securities available-for-sale 5,621 5,513
Securities held-to-maturity (Market value: 1995-$21,639; 1994-$21,380) 21,917 22,075
Loans, net of unearned discount and deferred loan fees 29,476 29,296
Allowance for loan losses (350) (350)
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29,126 28,946
Leasehold improvements and equipment, net 193 211
Accrued interest and other assets 558 429
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$66,307 $68,430
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---------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $11,815 $14,445
Interest-bearing 44,522 43,984
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Total deposits 56,337 58,429
Demand note payable 880 880
Accrued interest and other liabilities 1,134 1,127
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Total liabilities 58,351 60,436
Stockholders' equity:
Common stock, par value $5; 1,000,000 share authorized;
240,000 shares issued 1,200 1,200
Surplus 1,200 1,200
Retained earnings 6,465 6,328
Net unrealized holding gain (loss) on securities available-for-sale (258) (329)
Treasury stock, at cost (1995-30,346 shares; 1994-23,603 shares) (651) (405)
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Total stockholders' equity 7,956 7,994
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$66,307 $68,430
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</TABLE>
See accompanying notes.
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
Consolidated Statements of Income
(000)
<TABLE>
<CAPTION>
(unaudited)
Three months ended March 31,
1995 1994
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<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans, including fee income $633 $593
Securities:
Taxable 274 247
Tax-exempt 22 36
Federal funds sold 46 55
Dividends 29 -
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1,004 931
INTEREST EXPENSE
Deposits 355 352
Notes payable 19 10
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374 362
NET INTEREST INCOME 630 569
Provision for loan losses - 2
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630 567
OTHER INCOME
Service fees 182 137
Equity income in unconsolidated non-affiliate - 51
Other income 42 61
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224 249
OTHER EXPENSES
Salaries and employee benefits 291 317
Occupancy and equipment expense 150 141
Professional fees 47 74
Computer service fees 55 49
Other operating expenses 121 123
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664 704
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Income before taxes 190 112
Applicable income taxes 53 27
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NET INCOME $137 $85
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Earnings per share of common stock based on daily
weighted average shares outstanding (1995-210,005;
1994-216,397) $0.65 $0.39
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</TABLE>
See accompanying notes.
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flow
$ in 000's
<TABLE>
<CAPTION>
(unaudited)
Three months ended March 31,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $137 $85
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for depreciation and amortization 24 24
Provision for loan losses - 2
Net amortization of investment security premiums/discounts 13 10
Undistributed equity income in unconsolidated non-affiliate - (52)
Increase (decrease) in deferred loan fees (14) 18
(Increase) decrease in accrued interest receivable and other
assets (129) (93)
Increase (decrease) in accrued interest payable and other
liabilities 78 (7)
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Net cash provided by (used in) operating activities 109 (13)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of securities available-for-sale - 4,000
Proceeds from maturity of securities held-to-maturity 145 683
Purchases of securities held-to-maturity - (4,197)
Net (increase) decrease in loans (166) 1,813
Purchases of equipment, net (6) -
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Net cash provided by (used in) investing activities (27) 2,299
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (2,092) (1,756)
Cash dividends paid (108) (87)
Purchase of treasury stock (246) -
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Net cash provided by (used in) financing activities (2,446) (1,843)
Net increase (decrease) in cash & cash equivalents (2,364) 443
Cash and cash equivalents at beginning of period 11,256 14,113
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Cash and cash equivalents at end of period $8,892 $14,556
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Supplemental disclosure of cash flow information
Cash paid during period for:
Interest on deposits and other borrowings $377 $372
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Income taxes - $65
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</TABLE>
See accompanying notes.
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
Consolidated Statement of Changes
in Stockholders' Equity for Three Months Ended
March 31, 1995 and 1994
Unaudited
(000)
<TABLE>
<CAPTION>
Unrealized
Holding
Gain(Loss)
on Securities
Common Retained Available- Treasury Total
Stock Surplus Earnings for-sale Stock Equity
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $1,200 $1,200 $6,328 ($329) ($405) $7,994
Net income for three months
ended March 31, 1995 137 137
Purchase of 6,743 Treasury shares (246) (246)
Change in unrealized holding gain (loss)
on securities available-for-sale 71 71
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BALANCE, MARCH 31, 1995 $1,200 $1,200 $6,465 ($258) ($651) $7,956
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BALANCE, DECEMBER 31, 1993 $1,200 $1,200 $5,083 $29 ($405) $7,107
Net income for three months
ended March 31, 1994 85 85
Cash dividends paid (at $0.40 per share) (87) (87)
Change in unrealized holding gain (loss)
on securities available-for-sale (32) (32)
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BALANCE, MARCH 31, 1994 $1,200 $1,200 $5,081 ($3) ($405) $7,073
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</TABLE>
See accompanying notes.
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<PAGE>
SECURITY CHICAGO CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 unaudited consolidated financial
statements contain all adjustments (consisting of normally re-occurring items)
necessary to present fairly the Corporation's financial position as of March 31,
1995 and December 31, 1994 and the results of its operations, cash flows and
changes in stockholders' equity for the three month periods ended March 31, 1995
and 1994.
The results of operations for the period ended March 31, 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 March 31, 1995, the carrying value of the AMCORE common stock was
$3,629,000.
At March 31, 1994, total assets of Princeton aggregated $160 million.
Princeton's net income for the three months ended March 31, 1994 was $258,000,
of which the Corporation recorded its $51,000 equity interest therein in the
consolidated statement of income as "Equity income in unconsolidated non-
affiliate".
NOTE 3. The Bank has the following contractual amounts of financial
instruments outstanding at March 31, 1995 (in 000's):
Commitments to originate loans $3,303
Standby letters of credit $ 480
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<PAGE>
SECURITY CHICAGO CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Consolidated net income of the Corporation totaled $137,000 or $.65 per share
and $85,000 or $.39 per share for the three month periods ended March 31, 1995
and 1994, respectively. The primary factors that led to the $52,000 or (61%)
increase in 1995 income were improvements in deposit fee income coupled with
favorable reductions in operating expense levels. While net interest income
before provision for loan losses improved by $61,000 in 1995, this improvement
was substantially offset by the decline in the Corporations' equity earnings in
Princeton. These factors are discussed more fully below.
NET INTEREST INCOME:
Net interest income totaled $630,000 in 1995 compared to $569,000 in 1994 for
the comparable period. Approximately one-half of the net increase of $61,000 is
attributable to a shift in the components of earning assets resulting from the
1994 exchange of common shares (Princeton exchanged for AMCORE). More
specifically, AMCORE dividends of $29,000 received in the 1995 quarter are
reported as a component of net interest income, while in the 1994 quarter the
Corporations' equity in the earnings of Princeton are reported as a component of
other income. If the 1994 Princeton earnings are considered part of net
interest income, then net interest income on a fully tax equivalent basis is
essentially unchanged 1995 over 1994. The impact of changes in volumes and
rates for earning assets and interest bearing liabilities is as follows for the
quarters ended March 31, 1995 and 1994:
Favorable (Unfavorable) Changes In Net Interest Income (1)
(In 000's)
THREE MONTHS ENDED MARCH 1995 OVER 1994
<TABLE>
<CAPTION>
Volume Rate Total
------ ---- -----
<S> <C> <C> <C>
Federal funds sold ($ 43) $34 ($9)
Investments:
Securities held-to-maturity 64 20 84
Securities available-for-sale ( 25) ( 25) (50)
Princeton ( 52) - (52)
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Total Investments ( 13) ( 5) (18)
Loans ( 21) 61 40
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Total earning assets ( 77) 90 13
Interest-bearing liabilities:
Deposits (62) 65 3
Notes payable 3 6 9
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Total (59) 71 12
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Change in net interest income ($18) $19 $1
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------ ---- ----
</TABLE>
Note 1 -- Table presented on fully taxable equivalent basis. In 1994 period,
investment in Princeton is included in earning assets.
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<PAGE>
As can be seen in the preceding table, the impact of decreases in volumes of
earning assets and interest-bearing liabilities in the 1995 quarter were
substantially offset by favorable improvements in rates.
Credit quality and collection experience continued to be good in 1995, resulting
in no provision for loan losses during the 1995 quarter compared to a modest
$2,000 provision for loan losses in the quarter ended March 31, 1994.
CHANGES IN NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Service fee income improved $45,000 (33%) in 1995 compared to the year earlier
period, principally as a result higher fees associated with commercial and
retail demand deposit account products. This increase was partially offset by a
$19,000 decrease in Other income as the Bank continued to experience strong
competition in its mortgage brokerage business in 1995 as well as the
discontinuance of the Bank's investment brokerage function in January 1995, both
of which resulted in reduced commission income in the 1995 period.
Operating expenses again showed improvement by decreasing $40,000 (5.7%) over
the 1994 period. One component of the decrease was a reduction in compensation
and benefits of $26,000 in 1995 as the Bank continued its efforts to reduce head
count and improve operating efficiencies. The other major contributing factor
to the decrease in non-interest expense was the elimination of approximately
$22,000 of expenses incurred in 1994 associated with the merger transaction that
was terminated in 1994.
FINANCIAL CONDITION
Consolidated total assets aggregated $66 million and $68 million at March 31,
1995 and December 31, 1994, respectively. Most of the decrease in assets was in
fed funds sold which were liquidated to fund decreases in deposits during the
quarter. Securities available-for-sale and held-to-maturity were substantially
unchanged during the quarter ended March 31, 1995. Similarly, loans were also
substantially unchanged in that net loans increased during the period by
$180,000 (0.6%). Cash and cash equivalents amounted to $8.9 million at March
31, 1995, which is a strong, high level of liquidity.
The Corporation's allowance for loan losses was unchanged at $350,000 at March
31, 1995. The allowance represented 1.19% of outstanding loans at both March
31, 1995 and December 31, 1994.
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<PAGE>
The Corporations' equity capital was $7,956,000 at March 31, 1995 compared to
$7,994,000 at December 31, 1994. The decrease was primarily attributable to
treasury stock purchases of $246,000 made during the quarter ended March 31,
1995, which exceeded net income during the period. The Corporations' regulatory
capital position was as follows:
<TABLE>
<CAPTION>
Regulatory
Requirement 3/31/95 12/31/94
----------- ------- --------
<S> <C> <C> <C>
Risk-based total capital 8.0% 22.37% 22.24%
Risk-based tier 1 capital 4.0% 21.15% 21.00%
Tier 1 leveraged capital 4.0% - 5.0% 9.69% 8.71%
</TABLE>
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<PAGE>
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.
/s/ Thomas R. Beverlin
----------------------------------
Thomas R. Beverlin
Executive Vice President
May 1, 1995
/s/ Sarah G. O'Sullivan
----------------------------------
Sarah G. O'Sullivan
Chief Financial Officer
May 1, 1995
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 5,377
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,515
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,621
<INVESTMENTS-CARRYING> 21,917
<INVESTMENTS-MARKET> 21,639
<LOANS> 29,476
<ALLOWANCE> (350)
<TOTAL-ASSETS> 66,307
<DEPOSITS> 56,337
<SHORT-TERM> 880
<LIABILITIES-OTHER> 1,134
<LONG-TERM> 0
<COMMON> 1,200
0
0
<OTHER-SE> 6,756
<TOTAL-LIABILITIES-AND-EQUITY> 66,307
<INTEREST-LOAN> 633
<INTEREST-INVEST> 325
<INTEREST-OTHER> 46
<INTEREST-TOTAL> 1,004
<INTEREST-DEPOSIT> 355
<INTEREST-EXPENSE> 374
<INTEREST-INCOME-NET> 630
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 664
<INCOME-PRETAX> 190
<INCOME-PRE-EXTRAORDINARY> 137
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 4.25
<LOANS-NON> 41
<LOANS-PAST> 14
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 350
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 350
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 350
</TABLE>
