<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 March 31, 1996
/ / 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
Number: 0-13655
Security Banc Corporation
(Exact name of registrant as specified in its charter)
Ohio 31-1133284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 South Limestone Street, Springfield, OH 45502
(Address of principal executive offices) (Zip Code)
(513) 324-6920
(Registrant's telephone number, including area code)
(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.
<TABLE>
<CAPTION>
Class Outstanding at April 16, 1996
- - ------------------------------ -----------------------------
<S> <C>
Common Stock, $3.125 Par Value 5,107,834
</TABLE>
<PAGE> 2
SECURITY BANC CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets
March 31, 1996 and December 31, l995 3
Consolidated Condensed Statements of Income
for the three (3) months ended March 31, l996
and March 31, 1995. 4
Consolidated Condensed Statements of Cash
Flows for the three (3) months ended March 31,
1996 and March 31, 1995. 5
Notes to Consolidated Condensed Financial
Statements. 6
Item 2 - Management's Discussion and Analysis of
Condition and Results of Operations 7-8
Part II - Other Information 9-11
Signature 12
</TABLE>
-2-
<PAGE> 3
PART I ITEM 1 - FINANCIAL STATEMENTS
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 Dec 31
1996 1995
-------- --------
(in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 18,176 $ 21,658
Federal funds sold 27,450 34,800
-------- --------
TOTAL CASH AND CASH EQUIVALENT 45,626 56,458
-------- --------
Investments (Market Value $164,063 @ 3-31-96,
$151,784 @ 12-31-95) 162,556 150,013
Loans: Commercial and agricultural 151,584 148,957
Real estate and mortgage 89,243 88,198
Consumer 77,367 77,420
-------- --------
TOTAL LOANS 318,194 314,575
Less: Allowance for Loan Losses 3,828 3,741
-------- --------
NET LOANS 314,366 310,834
Premises & Equipment 5,075 5,182
Other Assets 14,389 13,488
-------- --------
TOTAL ASSETS $542,012 $535,975
======== ========
LIABILITIES
Non-interest bearing deposits 81,117 86,682
Interest bearing demand deposits 69,855 73,140
Savings deposits 104,770 101,741
Time deposits, $100,000 and over 29,227 24,874
Other time deposits 152,359 149,819
-------- --------
TOTAL DEPOSITS 437,328 436,256
Fed funds purchased and securities sold
under agreement to repurchase 26,587 24,293
Other liabilities 3,950 2,640
-------- --------
TOTAL LIABILITIES $467,865 $463,189
-------- --------
SHAREHOLDERS'S EQUITY
Common Stock (Par Value $3.125) $ 16,714 $ 16,710
Shares authorized 11,000,000
Shares issued 5,348,434 - 1996
5,347,234 - 1995
Surplus 17,894 17,883
Retained earnings 43,052 41,178
Net unrealized (loss)gain on investment securities classified
as available for sale (net of income tax) (320) 208
Less: Treasury Stock, 240,600 shares 3,193 3,193
-------- --------
TOTAL SHAREHOLDERS' EQUITY 74,147 72,786
-------- --------
TOTAL LIABILITIES &
SHAREHOLDER'S EQUITY $542,012 $535,975
======== ========
</TABLE>
See notes to Consolidated Condensed Financial Statements
-3-
<PAGE> 4
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
----- -----
(in thousands except
per share data)
<S> <C> <C>
Interest Income $ 9,788 $ 9,386
Interest Expense 3,663 3,289
----- -----
NET INTEREST INCOME 6,125 6,097
Provision for loan losses 200 200
----- -----
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 5,925 5,897
OTHER OPERATING INCOME
Trust Income 330 300
Service charges on deposit accounts 517 531
Securities, Gains (Losses) 358 0
Other charges, rents and fees 233 177
----- -----
TOTAL OTHER OPERATING INCOME 1,438 1,008
OPERATING EXPENSES
Salaries and employee benefits 1,706 1,600
Equipment and occupancy expense 400 335
Other operating expense 1,254 1,402
----- -----
TOTAL OPERATING EXPENSE 3,360 3,337
INCOME BEFORE TAXES 4,003 3,568
Income taxes (See Note 1) 1,157 996
----- -----
NET INCOME $ 2,846 $ 2,572
===== =====
Per share* $ .56 $ .51
Cash dividends
per share $ .19 $ .17
</TABLE>
*Earnings per common share is calculated using weighted average shares
outstanding of 5,107,370 for 1996 and 5,102,071 for 1995.
See notes to Consolidated Condensed Financial Statements.
-4-
<PAGE> 5
SECURITY BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31 March 31
1996 1995
-------- -------
(in thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 2,846 $ 2,572
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 144 122
Gain on sale of Investment Securities AFS (358) 0
Provisions for loan losses 200 200
Amortization and accretion, Net 239 321
Amortization of core deposit intangibles 13 18
Change in other operating assets/liabilities, net 680 119
-------- -------
Total adjustments 918 780
-------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,764 3,352
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 2,809 5,627
Proceeds from sales of investment securities AFS 104,872 0
Purchase of investment securities AFS (120,918) 0
Net increase in loans (4,049) (4,012)
Proceeds from sale of loans 317 47
Capital expenditures (37) (220)
-------- -------
NET CASH USED IN INVESTING ACTIVITIES (17,006) 37,128
Cash Flows from Financing Activities:
Net decrease in demand deposits, NOW
accounts and savings accounts (5,821) (15,691)
Net increase in certificates of deposit 6,893 9,455
Net increase (decrease) in short term
borrowed funds 2,294 (6,692)
Dividends paid (970) (868)
Proceeds from exercise of stock option 14 15
Purchase of Treasury Stock 0 0
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,410 (13,781)
-------- -------
Net (decrease)increase in cash and cash equivalents (10,832) 26,699
Cash and cash equivalents at beginning of year 56,458 29,089
-------- -------
Cash and Cash Equivalents at March 31 $45,626 $55,788
======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE> 6
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 March 31, l996 and
the results of operations and cash flows for the three month periods ended March
31, 1996 and March 31, 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 $24,300,000.00 invested in tax exempt municipal
securities.
-6-
<PAGE> 7
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 $2,846,000 for the first three months of 1996, compared to
$2,572,000 for the same period in l995. Earnings per share were $.56 for the
first three months, a 10% increase over last year's $.51.
Total assets were $542,012,000 at March 31, l996 compared to l995's assets of
$510,519,000. For the first three months of l996, return on average equity was
15.41% and return on average assets was 2.13%.
Net interest income on a fully taxable equivalent basis for the first three
months of l996 was $6,436,000 compared to the $6,462,000 realized in the same
period of l995. This decrease resulted from a 5% increase in average earning
assets and a decrease of 29 basis points in the net interest margin.
The allowance for loan losses was $3,828,000 in the first three months of l996
and $3,715,000 in the first three months of l995. The allowance for losses as a
percent of loans and leases outstanding was 1.20% at March 31, l996 and l.17% at
March 31, 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 1995 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>
March 31, December 31
-------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Non-accrual loans $4,753 $2,516 $2,592 $2,035 $1,734
Accruing loans past due
90 days or more $1,782 1,445 558 243 280
Restructured loans 0 0 0 0 97
</TABLE>
Total other operating income was $1,438,000 and $1,008,000 during the first
three months of 1996 and 1995 respectively. There was a 3% decrease in service
charges on deposits, and a 32% increase in other charges, rents and fees. Total
securities gains for the first three months of 1996 were $358,000 or $232,700
after tax. Total securities gains for the same period of 1995 were zero.
-7-
<PAGE> 8
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 increased during the first three months, 1% over
the similar period of l995. Salaries, wages and employee benefits increased
7% over 1995. Equipment and net occupancy expenses during the first three
months were $400,000 and $335,000 for 1996 and 1995 respectively, which
reflects a 19% increase. Other operating expenses decreased 11% over 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>
March 31 Dec 31
1996 1995 $+/- %+/-
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash and due from banks $ 18,176 $ 21,658 (3,482) (16)
Securities 162,556 150,013 12,543 8
Federal funds sold 27,450 34,800 (7,350) (21)
Loans and leases 318,194 314,575 3,619 1
Funds purchased and repos 26,587 24,293 2,294 9
Demand Deposits
Non interest bearing 81,117 86,682 (5,565) (6)
Interest bearing 69,855 73,140 (3,285) (4)
Savings Deposits 104,770 101,741 3,029 3
Time Deposits 181,586 174,693 6,893 4
</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
$15,804,000 at the one year interval or a sensitivity ratio of 1.08.
CAPITAL RESOURCES
The table below illustrates the Company's regulatory capital ratios at
March 31,1996 under the year end 1992 requirements: (000s)
<TABLE>
<S> <C>
Tier 1 Capital $ 74,312
Tier 2 Capital 3,828
--------
TOTAL QUALIFYING CAPITAL $ 78,140
--------
Risk Adjusted Total Assets (including off balance exposures) $344,685
========
</TABLE>
<TABLE>
<S> <C>
Tier 1 Risk-Based Capital Ratio 21.56%
Total Risk-Based Capital Ratio 22.67%
Leverage Ratio 13.65%
</TABLE>
-8-
<PAGE> 9
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:
On April 22, 1996 Registrant entered into a definitive agreement
to merge with Third Savings and Loan Company, a subsidiary of
Third Financial Corporation, Piqua, Ohio.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Press release-Third Savings and
Loan Company.
(b) Form 8K, Item 2, Acquisition or Disposition of Assets, was
filed March 29, 1996 in regard to merger agreement with
CitNat Bancorp., Inc.,
Urbana, Ohio.
-9-
<PAGE> 10
SECURITY NATIONAL BANK
40 South Limestone Street - Springfield, OH 45502
- (513) 324-6800 - Fax: (513) 324-6958
NEWS RELEASE
FOR FURTHER INFORMATION CONTACT:
Glenda S. Greenwood OR Kenneth F. Rupp
Director of Retail Services/Marketing President and CEO
SECURITY NATIONAL BANK Third Financial Corporation
40 S. Limestone Street 212 N. Main Street
Springfield, OH 45502-1200 Piqua, OH 45356-0913
(513) 324-6800/372-9211 (513)773-0752
(513) 324-6861 FAX
(513) 390-3465 Residence
FOR IMMEDIATE RELEASE
Security Banc Corporation, Springfield, Ohio and Third Financial Corp., Piqua,
Ohio, jointly announced today the signing of a definitive agreement in which
Third Financial Corp. will be merged into Security Banc Corporation. Following
the closing of the merger, The Third Savings and Loan Company, a subsidiary of
Third Financial Corporation, will be operated as a separate subsidiary of
Security Banc Corporation.
Under the terms of the agreement, Third Financial Corporation shareholders will
receive $33.23 at closing for each of the 1,135,954 shares outstanding. Holders
of Third's 105,476 options will receive cash equal to the offer price less the
applicable strike price. The aggregate transaction value is approximately $40
million. With this acquisition, Security will expand into Miami County, where
Third has four branches.
Harry O. Egger, President, Chairman and Chief Executive Officer of Security
said, "We are pleased that Third Savings is joining our organization. We are
excited about extending our banking market into Miami County and the
opportunities that exist to grow further Third's market areas. More importantly,
the philosophy of our two community organizations is to provide the best
personalized financial services to all of our communities and customers. The
communities of Piqua, Troy, and Tipp city, which are currently being served by
Third, will continue to play a prominent part in the future of our
organization." These offices will continue to be branches of Third Savings.
Kenneth F. Rupp, President and Chief Executive Officer of Third Financial Corp.
said, "In order to best represent the interests of all of our shareholders, the
many communities as well as the staff, the Directors evaluated our ownership
options. When it became apparent that the advantages of formulating a
transaction with Security Banc Corporation clearly outweighed the long term
prospects of total independence, the Directors agreed that the transaction was
very desirable. Third Savings will operate autonomously as a subsidiary of
Security Banc Corporation."
-10-
<PAGE> 11
NEWS RELEASE (CONT'D)
PAGE 2
Security Banc Corporation's plan is to encourage Third Savings' growth as a
financial institution existing with its present charter. Third Savings will
retain its original charter and original name. The employees will retain their
present positions and the savings and loan will continue to operate under the
direction of its present Board of Directors. The Board of Directors of both
institutions are confident that this affiliation will provide for the
continuation of the successful operation of Third Savings and an improved
customer service capability for its clientele.
As of December 31, 1995, Security had total assets of $536 million and
stockholders equity of $72.8 million. Security's subsidiary, The Security
National Bank and Trust Co. operates 14 banking offices in Clark and Greene
counties.
At December 31, 1995, Third Financial reported total assets of $157 million and
total stockholders equity of $27.8 million. Third Financial Corp. through its
subsidiary, Third Savings, operates four offices in Piqua, Troy, and Tipp City,
Ohio.
This is Security Banc Corporation's second acquisition in the past sixty days.
With the Citizens National Bank, Urbana, Ohio and Third Savings, Piqua, Ohio
mergers, Security Banc Corporation will report total assets of approximately
$830 million. Security Banc Corporation will operate banking offices in Clark,
Greene, Champaign, Madison, and Miami counties.
-11-
<PAGE> 12
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
May 8, 1996
-12-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 18176
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27450
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 136,296
<INVESTMENTS-CARRYING> 26,260
<INVESTMENTS-MARKET> 27,766
<LOANS> 318,194
<ALLOWANCE> 3,828
<TOTAL-ASSETS> 542,012
<DEPOSITS> 437,328
<SHORT-TERM> 26,587
<LIABILITIES-OTHER> 3,950
<LONG-TERM> 0
0
0
<COMMON> 16,714
<OTHER-SE> 57,433
<TOTAL-LIABILITIES-AND-EQUITY> 542,012
<INTEREST-LOAN> 7,104
<INTEREST-INVEST> 2,216
<INTEREST-OTHER> 468
<INTEREST-TOTAL> 9,788
<INTEREST-DEPOSIT> 3,391
<INTEREST-EXPENSE> 3,663
<INTEREST-INCOME-NET> 6,125
<LOAN-LOSSES> 200
<SECURITIES-GAINS> 358
<EXPENSE-OTHER> 3,360
<INCOME-PRETAX> 4,003
<INCOME-PRE-EXTRAORDINARY> 2,846
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,846
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
<YIELD-ACTUAL> 8.10
<LOANS-NON> 4,753
<LOANS-PAST> 1,782
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,741
<CHARGE-OFFS> 165
<RECOVERIES> 52
<ALLOWANCE-CLOSE> 3,828
<ALLOWANCE-DOMESTIC> 3,828
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
