<PAGE> 1
FORM 10-Q -- QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 34-26589, eff. 4/12/89)
United States Securities and Exchange Commission
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 June 30, 1996
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.
For the transition period from to Commission File
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Number: 0-13655
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Security Banc Corporation
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1133284
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 South Limestone Street, Springfield, OH 45502
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(Address of principal executive offices) (Zip Code)
(513) 324-6920
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
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.
X Yes No
----- -----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock.
Class Outstanding at July 16, 1996
- ------------------------------- ----------------------------
Common Stock, $3.125 Par Value 5,111,234
<PAGE> 2
SECURITY BANC CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets
June 30, 1996 and December 31, 1995 3
Consolidated Condensed Statements of Income
for the three (3) months ended June 30, 1996
and June 30, 1995. 4
Consolidated Condensed Statements of Income 5
for the six (6) months ended June 30, 1996 and
June 30, 1995.
Consolidated Condensed Statements of Cash 6
Flows for the six (6) months ended June 30,
1996 and June 30, 1995.
Notes to Consolidated Condensed Financial 7
Statements.
Item 2 - Management's Discussion and Analysis of
Condition and Results of Operations 8-9
Part II - Other Information 10
Signature 11
</TABLE>
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(10Q-2)
<PAGE> 3
PART I ITEM 1 - FINANCIAL STATEMENTS
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30 Dec 31
1996 1995
---- ----
(in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 20,114 $ 21,658
Federal funds sold 6,350 34,800
--------- --------
Total cash and Cash Equivalent 26,464 56,458
--------- --------
Investments (Market Value $162,699 @ 6-30-96,
$151,784 @ 12-31-95) 161,497 150,013
Loans: Commericial and agricultural 156,497 148,957
Real Estate and mortgage 92,164 88,198
Consumer 74,866 77,420
--------- --------
TOTAL LOANS 323,527 314,575
Less: Allowance for Loan Losses 3,901 3,741
--------- --------
NET LOANS 319,626 310,834
Premises & Equipment 4,940 5,182
Other Assets 15,125 13,488
--------- --------
TOTAL ASSETS $ 527,652 $535,975
========= ========
LIABILITIES
Non-interest bearing deposits $ 80,290 $ 86,682
Interest bearing demand deposits 67,434 73,140
Savings deposits 103,135 101,741
Time deposits, $100,000 and over 24,061 24,874
Other time deposits 147,466 149,819
--------- --------
TOTAL DEPOSITS 422,386 436,256
Fed funds purchased and securities sold
under agreement to repurchase 26,744 24,293
Other liabilities 2,632 2,640
--------- --------
TOTAL LIABILITIES $ 451,762 $463,189
SHAREHOLDER'S EQUITY
Common Stock (Par Value $3.125) $ 16,724 $ 16,710
Shares authorized 11,000,000
Shares issued 5,348,434 - 1996
5,347,234 - 1995
Surplus 17,928 17,883
Retained earnings 44,984 41,178
Net unrealized (loss) gain on investment
securities classified
as available for sale (net of income tax) (553) 208
Less: Treasury Stock, 240,600 shares 3,193 3,193
--------- --------
TOTAL SHAREHOLDERS' EQUITY 75,890 72,786
--------- --------
TOTAL LIABILITIES &
SHAREHOLDER'S EQUITY $ 527,652 $535,975
========= ========
</TABLE>
See notes to Consolidated Condensed Financial Statements
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<PAGE> 4
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
1996 1995
---- ----
(in thousands except
per share dats)
<S> <C> <C>
Interest Income $9,977 $ 10,036
Interest Expense 3,642 3,555
------ --------
NET INTEREST INCOME 6,335 6,481
Provision for loan losses 200 200
------ --------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 6,135 6,281
OTHER OPERATING INCOME
Trust Income 340 300
Service charges on deposit accounts 549 513
Securities, Gains (Losses) 0 (96)
Other charges, rents and fees 208 167
------ --------
TOTAL OTHER OPERATING INCOME 1,097 884
OPERATING EXPENSES
Salaries and employee benefits 1,536 1,673
Equipment and occupancy expense 382 341
Other operating expense 1,226 1,469
------ --------
TOTAL OPERATING EXPENSE 3,144 3,483
INCOME BEFORE TAXES 4,088 3,682
Income taxes (See Note B) 1,186 1,057
------ --------
NET INCOME $2,902 $ 2,625
====== ========
Per share* $ .57 $ .51
Cash dividends
per share $ .19 $ .17
</TABLE>
*Earnings per common share is calculated using weighted average shares
outstanding of 5,109,852 for 1996 and 5,104,489 for 1995.
See notes to Consolidated Condensed Financial Statements.
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<PAGE> 5
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1996 1995
---- ----
(in thousands except
per share data)
<S> <C> <C>
Interest Income $19,765 $ 19,422
Interest Expense 7,305 6,844
------- --------
NET INTEREST INCOME 12,460 12,578
Provision for loan losses 400 400
------- --------
Net interest income after provision for
loan losses 12,060 12,178
OTHER OPERATING INCOME
Trust Income 670 600
Service charges on deposit accounts 1,066 1,044
Securities, Gains (Losses) 358 (96)
Other charges, rents and fees 441 344
------- --------
Total other operating income 2,535 1,892
OPERATING EXPENSES
Salaries and employee benefits 3,242 3,273
Equipment and occupancy expense 782 676
Other operating expense 2,480 2,871
------- --------
Total operating expense 6,504 6,820
INCOME BEFORE TAXES 8,091 7,250
Income taxes (See Note B) 2,343 2,053
NET INCOME $ 5,748 $ 5,197
======= ========
Per share* $ 1.13 $ 1.02
Cash dividends
per share $ .38 $ .34
</TABLE>
*Earnings per common share is calculated using weighted average shares
outstanding of 5,108,611 for 1996 and 5,103,630 for 1995.
See notes to Consolidated Condensed Financial Statements.
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<PAGE> 6
SECURITY BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30 June 30
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 5,748 $ 5,197
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 290 255
(Gain) loss on sale of Investment Securities AFS (358) 96
Gain on sale of other assets (10) 0
Provisions for loan losses 400 400
Amortization and accretion, Net 569 (160)
Amortization of core deposit intangibles 26 35
Change in other operating assets/liabilities, net (1,511) 87
--------- ---------
Total adjustments (594) 713
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,154 5,910
Cash Flows from Investing Activities:
Net decrease in interest bearing
deposits with other banks 0 686
Proceeds from maturities of invest. securities AFS 0 35,000
Proceeds from maturities of invest. securities HTM 3,181 7,968
Proceeds from sales of investment securities AFS 104,872 84,578
Purchase of investment securities AFS (120,918) (112,870)
Net increase in loans (10,620) (1,309)
Proceeds from sale of other assets 1,747 89
Capital expenditures (108) (519)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (21,846) 13,623
Cash Flows from Financing Activities:
Net decrease in demand deposits, NOW
accounts and savings accounts (10,704) (15,689)
Net (decrease) increase in certificates of deposit (3,166) 10,004
Net increase (decrease) in short term
borrowed funds 2,451 (1,461)
Dividends paid (1,942) (1,735)
Proceeds from exercise of stock option 59 53
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES (13,302) (8,828)
--------- ---------
Net (decrease) increase in cash and cash equivalents (29,994) 10,705
Cash and cash equivalents at beginning of year 56,458 29,089
--------- ---------
Cash and Cash Equivalents at June 30 $ 26,464 $ 39,794
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
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(10Q-6)
<PAGE> 7
SECURITY BANC CORPORATION
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Unaudited)
NOTE A - PREPARATION OF FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments consisting of normal re-occurring items necessary to
present fairly the financial condition of the company as of June 30, l996 and
the results of operations and cash flows for the six month periods ended June
30, 1996 and June 30, 1995.
NOTE B - TAXES
The effective tax rate of 29% is considerably lower than the statutory 35%
because of investments made in tax exempt municipal securities. Security
National Bank has approximately $24,119,000.00 invested in tax exempt municipal
securities.
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<PAGE> 8
Part 1 ITEM 2
SECURITY BANC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Registrant's financial condition and results of
operations during the periods included in the consolidated financial statements
enclosed with this filing.
RESULTS OF OPERATIONS
Net income was $5,748,000 for the first six months of 1996, compared to
$5,197,000 for the same period in 1995. Earnings per share were $1.13 for the
first six months, an 11% increase over last year's $1.02.
Total assets were $527,652,000 at June 30, 1996 compared to 1995's assets of
$517,949,000. For the first six months of 1996, return on average equity was
15.44% and return on average assets was 2.14%.
Net interest income on a fully taxable equivalent basis for the first six months
of 1996 was $13,061,000 compared to the $13,286,000 realized in the same period
of 1995. This decrease resulted from a 4% increase in average earning assets and
a decrease of 32 basis points in the net interest margin.
The allowance for loan losses was $3,901,000 in the first six months of 1996 and
$3,835,000 in the first six months of 1995. The allowance for losses as a
percent of loans and leases outstanding was 1.21% at June 30, 1996 and 1.22% at
June 30, 1995.
Beginning in 1995, the Company adopted Financial Accounting Standards Board
Statement No. 114, "Accounting by Creditors for Impairment of a Loan". Under the
new standard, the allowance for credit losses related to loans that are
identified for evaluation in accordance with Statement 114 is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans. Prior to
1995, the allowance for credit losses related to these loans was based on
undiscounted cash flows or the fair value of the collateral for collateral
dependent loans. The following table presents data concerning loans at risk at
the end of each period. (000s).
<TABLE>
<CAPTION>
December 31
June 30, ---------------------------------
1996 1995 1994 1993 1992
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Non-accrual loans $4,742 $2,516 $2,592 $2,035 $1,734
Accruing loans past due
90 days or more 981 1,445 558 243 280
Restructured loans 0 0 0 0 97
</TABLE>
Total other operating income was $2,535,000 and $1,892,000 during the first six
months of 1996 and 1995 respectively. Trust income increased 12%. There was a 2%
increase in service charges on deposits, and a 28% increase in other charges,
rents and fees. Total securities gains for the first six months of 1996 were
$358,000 or $232,700 after tax. Total securities losses for the same period of
1995 were 96,000.
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<PAGE> 9
Part 1 ITEM 2 - Page 2
SECURITY BANC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Total operating expenses decreased during the first six months, 5% under the
similar period of 1995. Salaries, wages and employee benefits decreased 1% under
1995. Equipment and net occupancy expenses during the first six months were
$782,000 and $676,000 for 1996 and 1995 respectively, which reflects a 16%
increase. Other operating expenses decreased 14% under 1995.
MATERIAL CHANGES IN FINANCIAL CONDITION
The material changes that have occurred in the Registrant's financial
condition during 1996 are as follows (000s):
<TABLE>
<CAPTION>
June 30, Dec 31,
1996 1995 $+/- %+/-
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash and due from banks $20,114 $21,658 (1,544) (7)
Securities 161,497 150,013 11,484 8
Federal funds sold 6,350 34,800 (28,450) (82)
Loans and leases 323,527 314,575 8,952 3
Funds purchased and repos 26,744 24,293 2,451 10
Demand Deposits
Non interest bearing 80,290 86,682 (6,392) (7)
Interest bearing 67,434 73,140 (5,706) (8)
Savings Deposits 103,135 101,741 1,394 1
Time Deposits 171,527 174,693 (3,166) (2)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The maintenance of an adequate level of liquidity is necessary to ensure
that sufficient funds are available to meet customers' loan demand and
deposit withdrawals. The Corporation's liquidity sources consist of short
term marketable securities, maturing loans, and Federal Funds sold. The
Corporation has a net asset position of $114,467,000 at the one year
interval or a sensitivity ratio of 1.59.
CAPITAL RESOURCES
The table below illustrates the Company's regulatory capital ratios at
June 30, 1996 under the year end 1992 requirements: (000s)
<TABLE>
<CAPTION>
<S> <C>
Tier 1 Capital $ 76,301
Tier 2 Capital 3,901
--------
TOTAL QUALIFYING CAPITAL $ 80,202
--------
Risk Adjusted Total Assets (including off balance exposures) $315,824
========
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Tier 1 Risk-Based Capital Ratio 24.16%
Total Risk-Based Capital Ratio 25.39%
Leverage Ratio 14.36%
</TABLE>
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<PAGE> 10
SECURITY BANC CORPORATION
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings Inapplicable
ITEM 2 Changes in Securities Inapplicable
ITEM 3 Defaults upon Senior Securities Inapplicable
ITEM 4 Submission of Matters to a Vote Inapplicable
of Security Holders
ITEM 5 Other Information Inapplicable
ITEM 6 Exhibits and Reports on Form 8-K Inapplicable
-10-
<PAGE> 11
SECURITY BANC CORPORATION
SIGNATURE
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 BANC CORPORATION
By /s/ Thomas L. Miller
----------------------------
Thomas L. Miller
Controller
By /s/ J. William Stapleton
----------------------------
J. William Stapleton
Vice President/CFO
July 31, 1996
-11-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 20,114
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,350
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 135,791
<INVESTMENTS-CARRYING> 25,706
<INVESTMENTS-MARKET> 26,908
<LOANS> 323,527
<ALLOWANCE> 3,901
<TOTAL-ASSETS> 527,652
<DEPOSITS> 422,386
<SHORT-TERM> 26,744
<LIABILITIES-OTHER> 2,632
<LONG-TERM> 0
<COMMON> 16,724
0
0
<OTHER-SE> 59,166
<TOTAL-LIABILITIES-AND-EQUITY> 527,652
<INTEREST-LOAN> 14,433
<INTEREST-INVEST> 4,579
<INTEREST-OTHER> 753
<INTEREST-TOTAL> 19,765
<INTEREST-DEPOSIT> 6,748
<INTEREST-EXPENSE> 7,305
<INTEREST-INCOME-NET> 12,460
<LOAN-LOSSES> 400
<SECURITIES-GAINS> 358
<EXPENSE-OTHER> 6,504
<INCOME-PRETAX> 8,091
<INCOME-PRE-EXTRAORDINARY> 5,748
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,748
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.13
<YIELD-ACTUAL> 8.23
<LOANS-NON> 4,742
<LOANS-PAST> 591
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,741
<CHARGE-OFFS> 323
<RECOVERIES> 83
<ALLOWANCE-CLOSE> 3,901
<ALLOWANCE-DOMESTIC> 3,399
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 502
</TABLE>
