<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, 1997
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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 Number: 0-13655
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Security Banc Corporation
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(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)
(937) 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 dur
ing 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 require
ments 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 15, 1997
- ------------------------------- -----------------------------
<S> <C>
Common Stock, $3.125 Par Value 6,057,906
</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, 1997 and December 31, l996 3
Consolidated Condensed Statements of Income
for the three (3) months ended March 31, 1997
and March 31, 1996. 4
Consolidated Condensed Statements of Cash 5
Flows for the three (3) months ended March 31,
1997 and March 31, 1996.
Notes to Consolidated Condensed Financial 6
Statements.
Item 2 - Management's Discussion and Analysis of
Condition and Results of Operations 7-8
Part II - Other Information 9
Signature 10
</TABLE>
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<PAGE> 3
PART I ITEM 1 - FINANCIAL STATEMENTS
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 Dec 31
1997 1996
---- ----
(in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $34,251 $36,527
Federal funds sold 22,960 13,300
-------- --------
Total Cash and Cash Equivalent 57,211 49,827
-------- --------
Interest bearing deposits with other banks 1,500 1,500
Investments (Market Value $196,533 @3-31-97,
$191,970 @ 12-31-96) 195,486 190,983
Loans: Commercial and agricultural 215,471 212,046
Real estate and mortgage 234,677 234,935
Consumer 91,621 93,787
-------- --------
Total Loans 541,769 540,768
Less: Allowance for Loan Losses 6,815 6,827
-------- --------
Net Loans 534,954 533,941
Premises & Equipment 8,506 8,431
Other Assets 34,851 31,652
-------- --------
TOTAL ASSETS $832,508 $816,334
======== ========
LIABILITIES
Non-interest bearing deposits $108,758 $107,913
Interest bearing demand deposits 142,171 122,996
Savings deposits 155,995 154,153
Time deposits, $100,000 and over 44,022 54,219
Other time deposits 237,030 227,754
-------- --------
Total Deposits 687,976 667,035
Fed funds purchased and securities sold
under agreement to repurchase 24,393 32,183
Federal Home Loan Bank Term Advances 11,515 11,574
Other liabilities 7,380 4,748
-------- --------
TOTAL LIABILITIES $731,264 $715,540
-------- --------
SHAREHOLDERS'S EQUITY
Common Stock (Par Value $3.125) $19,683 $19,658
Shares authorized 11,000,000
Shares issued 6,298,506 - 1997
6,290,617 - 1996
Surplus 21,748 21,670
Retained earnings 63,653 62,557
Net unrealized (loss)gain on investment securities classified
as available for sale (net of income tax) (647) 102
Less: Treasury Stock, 240,600 shares 3,193 3,193
-------- --------
TOTAL SHAREHOLDERS' EQUITY 101,244 100,794
-------- --------
TOTAL LIABILITIES &
SHAREHOLDER'S EQUITY $832,508 $816,334
======== ========
</TABLE>
See notes to Consolidated Condensed Financial Statements
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<PAGE> 4
PART 1 ITEM 1 - FINANCIAL STATEMENTS
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31 March 31
1997 1996
---- ----
(in thousands except
per share data)
<S> <C> <C>
Interest Income $15,063 $12,286
Interest Expense 6,095 4,607
------- -------
NET INTEREST INCOME 8,968 7,679
Provision for loan losses 200 237
------- -------
Net interest income after provision for
loan losses 8,768 7,442
OTHER OPERATING INCOME
Trust Income 390 330
Service charges on deposit accounts 663 634
Securities, Gains (Losses) 56 358
Other charges, rents and fees 530 387
------- -------
Total other operating income 1,639 1,709
OPERATING EXPENSES
Salaries and employee benefits 2,703 2,350
Equipment and occupancy expense 685 602
Other operating expense 2,149 1,594
------- -------
Total operating expense 5,537 4,546
INCOME BEFORE TAXES 4,870 4,605
Income taxes (See Note B) 1,486 1,333
------- -------
NET INCOME $ 3,384 $ 3,272
======= =======
Per share* $ .56 $ .54
Cash dividends
per share $ .21 $ .19
</TABLE>
*Earnings per common share is calculated using weighted average shares
outstanding of 6,055,200 for 1997 and 6,015,256 for 1996.
See notes to Consolidated Condensed Financial Statements.
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<PAGE> 5
Part 1 Item 1 - Financial Statements
SECURITY BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
March 31 March 31
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income................................................................ $ 3,384 $ 3,272
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation...................................................... 251 229
(Gain)/Loss on sale of the following:
Investment Securities available for sale (57) (358)
Other Assets.................................................... (17) 0
Provision for loan losses......................................... 200 238
Amortization and accretion, net................................... 156 153
Amortization and core deposit intangible.......................... 188 13
Change in other operating assets and liabilities, net............. (1,775) 618
--------- ---------
Total Adjustments....................................... (1,054) 893
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............................................. $ 2,330 $ 4,165
Cash Flows From Investing Activities:
Net increase in interest bearing deposits with other banks................ 0 (1,900)
Proceeds from maturities and sales of:
Investment securities available for sale.......................... 130,299 114,972
Investments held to maturity...................................... 7,373 2,809
Purchase of:
Investment securities available for sale.......................... (142,984) (134,125)
Investment securities held to maturity............................ (708) 0
Increase in loans......................................................... (1,362) (2,309)
Proceeds from sale of other assets........................................ 1,770 317
Capital expenditures...................................................... (242) (56)
Net cash used in acquisition.............................................. (1,015) 0
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES..................................... (6,869) (20,292)
Cash Flows from Financing Activities:
Net increase (decrease) in demand deposits, NOW accounts and
savings accounts..................................................... 21,862 (10,638)
Net (decrease) increase in certificates of deposit........................ (921) 6,810
Net (decrease) increase in short-term borrowed funds...................... (7,849) 1,733
Net purchase and sale of treasury stock................................... 0 (18)
Dividends paid............................................................ (1,272) (970)
Proceeds from exercise of stock options................................... 103 14
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES................................. 11,923 (3,069)
Net increase (decrease) in cash and cash equivalents................................... 7,384 (19,196)
Cash and cash equivalents at beginning of year......................................... 49,827 76,758
--------- ---------
Cash and cash equivalents at March 31.................................................. $ 57,211 57,562
</TABLE>
See Notes to Consolidated Financial Statements.
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<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, 1997 and
the results of operations and cash flows for the three month periods ended
March 31, 1997 and March 31, 1996.
NOTE B - TAXES
The effective tax rate of 31% is considerably lower than the statutory 35%
because of investments made in tax exempt municipal securities. The
subsidiaries of Security Banc Corporation have approximately $21,089,000.00
invested in tax exempt municipal securities.
NOTE C - FASB Statement No. 128
In February, 1997, The Financial Accounting Standards board issued Statement
No. 128, "Earnings per Share," ("SFAS 128") which is required to be adopted on
December 31, 1997. The Company has not yet determined what the impact of SFAS
128 will be on the calculation of fully diluted earnings per share.
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<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.
ACQUISITIONS
On September 30, 1996, CitNat Bancorp merged with and into Security Bancorp
(Company) and shares of the Company's common stock was issued in exchange for
all of the common stock of CitNat. The merger was accounted for as a pooling of
interest, and accordingly, the accompanying financial statements have been
restated to include the accounts and operations of CitNat for all periods prior
to the merger.
On October 21, 1996, the Company acquired all of the outstanding shares of
Third Financial Corporation for $41 million. The acquisition was funded with
existing cash. The results of Third Financial Corporation's operations have
been combined with those of the Company since the date of acquisition.
RESULTS OF OPERATIONS
Net income was $3,384,000 for the first three months of 1997, compared to
$3,272,000 for the same period in 1996. Earnings per share were $.56 for the
first three months, a 4% increase over last year's $.54.
Total assets were $832,508,000 at March 31, 1997 compared to 1996's assets of
$677,043,000. For the first three months of 1997, return on average equity was
13.35% and return on average assets was 1.65%.
Net interest income on a fully taxable equivalent basis for the first three
months of 1997 was $9,245,000 compared to the $8,035,000 realized in the same
period of 1996.
The allowance for loan losses was $6,815,000 in the first three months of 1997
and $5,491,000 in the first three months of 1996. The allowance for losses as a
percent of loans and leases outstanding was 1.26% at March 31, 1997 and l.38%
at March 31, 1996.
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
March 31, ------------------------------------------
1997 1996 1995 1994 1993
--------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Non-accrual loans $3,668 $4,123 $2,772 $2,598 $2,229
Accruing loans past due
90 days or more 1,325 1,709 1,543 561 245
</TABLE>
Total other operating income was $1,639,000 and $1,709,000 during the first
three months of 1997 and 1996 respectively. Trust income increased 18%. There
was a 5% increase in service charges on deposits, and a 37% increase in other
charges, rents and fees. Total securities gains for the first three months of
1997 were $56,000 or $36,000 after tax. Total securities gains for the same
period of 1996 were $358,000 or $233,000 after tax.
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<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, 22%
over the similar period of l996. Salaries, wages and employee benefits
increased 15% over 1996. Equipment and net occupancy expenses during the
first three months were $685,000 and $602,000 for 1997 and 1996
respectively, which reflects a 14% increase. Other operating expenses
increased 35% over 1996.
A portion of these increases is due to Third Financial Corporation being
accounted for as a purchase. Under the purchase method of accounting, prior
period financial statement are not restated. Therefore, Third Financial
Corporation's financials are not included in the financial statements prior to
October 21, 1996.
Material Changes in Financial Condition
The material changes that have occurred in the Registrant's financial
condition during 1997 are as follows (000s):
<TABLE>
<CAPTION>
March 31, Dec 31,
1997 1996 $+/- %+/-
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash and due from banks $34,251 $36,527 (2,276) (6)
Interest bearing deposits with other banks 1,500 1,500 0 0
Securities 195,486 190,983 4,503 2
Federal funds sold 22,960 13,300 9,660 73
Loans and leases 541,769 540,768 1,001 0
Funds purchased and repos 24,393 32,183 (7,790) (24)
Demand Deposits
Non interest bearing 108,758 107,913 845 1
Interest bearing 142,171 122,996 19,175 16
Savings Deposits 155,995 154,153 1,842 1
Time Deposits 281,052 281,973 921 0
FHLB Advances 11,515 11,574 (59) (1)
</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 cumulative gap of
$7,502,000 at the one year interval or a cumulative gap ratio of
.98.
Capital Resources
The table below illustrates the Company's regulatory
capital ratios at March 31, 1997 under the year
end 1992 requirements: (000s)
<TABLE>
<S> <C>
Tier 1 Capital $88,302
Tier 2 Capital 6,479
--------
TOTAL QUALIFYING CAPITAL $94,781
--------
Risk Adjusted Total Assets (including off balance exposures) $518,014
========
Tier 1 Risk-Based Capital Ratio 17.05%
Total Risk-Based Capital Ratio 18.30%
Tier 1 Leverage Ratio 10.95%
</TABLE>
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<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 Inapplicable
ITEM 6 Exhibits and Reports on Form 8-K Financial Data Schedule
as required under
Article 9 of Regulation S-X
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<PAGE> 10
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
--------------------------------------
Thomas L. Miller
Vice President/Controller
By
--------------------------------------
J. William Stapleton
Executive Vice President/CFO
May 8, 1997
-10-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 34,251
<INT-BEARING-DEPOSITS> 1,500
<FED-FUNDS-SOLD> 22,960
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 169,815
<INVESTMENTS-CARRYING> 25,671
<INVESTMENTS-MARKET> 26,718
<LOANS> 541,769
<ALLOWANCE> 6,815
<TOTAL-ASSETS> 832,508
<DEPOSITS> 687,976
<SHORT-TERM> 35,908
<LIABILITIES-OTHER> 7,380
<LONG-TERM> 0
0
0
<COMMON> 19,863
<OTHER-SE> 81,561
<TOTAL-LIABILITIES-AND-EQUITY> 832,508
<INTEREST-LOAN> 11,938
<INTEREST-INVEST> 2,726
<INTEREST-OTHER> 399
<INTEREST-TOTAL> 15,063
<INTEREST-DEPOSIT> 5,610
<INTEREST-EXPENSE> 6,095
<INTEREST-INCOME-NET> 8,968
<LOAN-LOSSES> 200
<SECURITIES-GAINS> 56
<EXPENSE-OTHER> 5,538
<INCOME-PRETAX> 4,870
<INCOME-PRE-EXTRAORDINARY> 4,870
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,384
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
<YIELD-ACTUAL> 8.02
<LOANS-NON> 3,668
<LOANS-PAST> 1,325
<LOANS-TROUBLED> 342
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,827
<CHARGE-OFFS> 314
<RECOVERIES> 102
<ALLOWANCE-CLOSE> 6,815
<ALLOWANCE-DOMESTIC> 3,793
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,021
</TABLE>
