<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 September 30, 1997
---------------------
[ ] 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
- --------------------------------------------------------------------------------
(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
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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
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 Oct. 15, 1997
- ------------------------------ ----------------------------
Common Stock, $3.125 Par Value 6,059,441
<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
September 30, 1997 and December 31, 1996. 3
Consolidated Condensed Statements of Income
for the three (3) months ended September 30, 1997
and September 30, 1996. 4
Consolidated Condensed Statements of Income for the nine (9)
months ended September 30, 1997 and September 30, 1996. 5
Consolidated Condensed Statements of Cash
Flows for the nine (9) months ended September 30,
1997 and September 30, 1996. 6
Notes to Consolidated Condensed Financial
Statements. 7
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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<PAGE> 3
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Sept. 30 Dec 31
1997 1996
---- ----
(in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 28,854 $ 36,527
Federal funds sold 31,370 13,300
-------- --------
TOTAL CASH AND CASH EQUIVALENT 60,224 49,827
-------- --------
Interest bearing deposits with other banks 2,700 1,500
Investments (Market Value $150,949 @9-30-97,
$191,970 @ 12-31-96) 150,545 190,983
Loans: Commercial and agricultural 244,947 212,046
Real estate and mortgage 222,635 234,935
Consumer 87,716 93,787
-------- --------
TOTAL LOANS 555,298 540,768
Less: Allowance for Loan Losses 6,343 6,827
-------- --------
NET LOANS 548,955 533,941
Premises & Equipment 8,535 8,431
Other Assets 36,426 31,652
-------- --------
TOTAL ASSETS $807,385 $816,334
======== ========
LIABILITIES
Non-interest bearing deposits $107,547 $107,913
Interest bearing demand deposits 124,995 122,996
Savings deposits 151,884 154,153
Time deposits, $100,000 and over 39,520 54,219
Other time deposits 233,380 227,754
-------- --------
TOTAL DEPOSITS 657,326 667,035
Fed funds purchased and securities sold
under agreement to repurchase 22,891 32,183
Federal Home Loan Bank Term Advances 14,895 11,574
Other liabilities 5,840 4,748
-------- --------
TOTAL LIABILITIES $700,952 $715,540
-------- --------
SHAREHOLDERS'S EQUITY
Common Stock (Par Value $3.125) $ 19,688 $ 19,658
Shares authorized 11,000,000
Shares issued 6,300,041 - 1997
6,285,696 - 1996
Surplus 21,784 21,670
Retained earnings 67,931 62,557
Net unrealized gain on investment securities classified
as available for sale (net of income tax) 223 102
Less: Treasury Stock, 240,600 shares 3,193 3,193
-------- --------
TOTAL SHAREHOLDERS' EQUITY 106,433 100,794
-------- --------
TOTAL LIABILITIES &
SHAREHOLDER'S EQUITY $807,385 $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
September 30 September 30
1997 1996
---- ----
(in thousands except
per share data)
<S> <C> <C>
Interest Income $15,830 $12,522
Interest Expense 6,235 4,539
------- -------
NET INTEREST INCOME 9,595 7,983
Provision for loan losses 700 700
------- -------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 8,895 7,283
OTHER OPERATING INCOME
Trust Income 384 345
Service charges on deposit accounts 794 666
Securities, Gains (Losses) 108 5
Other charges, rents and fees 694 328
------- -------
TOTAL OTHER OPERATING INCOME 1,980 1,344
OPERATING EXPENSES
Salaries and employee benefits 2,725 2,175
Equipment and occupancy expense 719 550
Other operating expense 2,383 1,704
------- -------
TOTAL OPERATING EXPENSE 5,827 4,429
INCOME BEFORE TAXES 5,048 4,198
Income taxes (See Note B) 1,554 1,025
------- -------
NET INCOME $ 3,494 $ 3,173
======= =======
Per share* $ .58 $ .53
Cash dividends
per share $ .21 $ .19
</TABLE>
*Earnings per common share is calculated using weighted average shares
outstanding of 6,059,175 for 1997 and 6,034,535 for 1996.
See notes to Consolidated Condensed Financial Statements.
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<PAGE> 5
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, Sept. 30,
1997 1996
---- ----
(in thousands except
per share data)
<S> <C> <C>
Interest Income $46,820 $37,293
Interest Expense 18,728 13,721
------- -------
NET INTEREST INCOME 28,092 23,572
Provision for loan losses 1,100 1,175
------- -------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 26,992 22,397
OTHER OPERATING INCOME
Trust Income 1,151 1,015
Service charges on deposit accounts 2,128 1,970
Securities, Gains (Losses) 213 363
Other charges, rents and fees 1,687 1,022
------- -------
TOTAL OTHER OPERATING INCOME 5,179 4,370
OPERATING EXPENSES
Salaries and employee benefits 8,164 6,641
Equipment and occupancy expense 2,083 1,719
Other operating expense 6,794 4,854
------- -------
TOTAL OPERATING EXPENSE 17,041 13,214
INCOME BEFORE TAXES 15,130 13,553
Income taxes (See Note B) 4,637 3,741
------- -------
NET INCOME $10,493 $ 9,812
======= =======
Per share* $ 1.73 $ 1.63
Cash dividends
per share $ .63 $ .57
</TABLE>
*Earnings per common share is calculated using weighted average shares
outstanding of 6,057,538 for 1997 and 6,022,677 for 1996.
See notes to Consolidated Condensed Financial Statements.
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<PAGE> 6
PART 1 ITEM 1 - FINANCIAL STATEMENTS
SECURITY BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Sept. 30, Sept. 30,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ........................................................... $ 10,493 $ 9,812
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ................................................. 777 671
(Gain)/Loss on sale of the following:
Investment Securities available for sale ................... (221) (362)
Investment Securities held to maturity ..................... 0 (1)
Other Assets ............................................... (103) (10)
Provision for loan losses .................................... 1,100 1,175
Amortization and accretion, net .............................. (19) 630
Amortization and core deposit intangible ..................... 592 40
Change in other operating assets and liabilities, net ........ (13,669) (2,074)
Total Adjustments ..................................... (11,543) 69
NET CASH PROVIDED BY OPERATING ACTIVITIES ........................................ (1,050) 9,881
Cash Flows From Investing Activities:
Net decrease(increase) in interest bearing deposits with other banks.. 4,035 (1,880)
Proceeds from maturities and sales of:
Investment securities available for sale ..................... 187,529 125,546
Investments held to maturity ................................. 12,366 6,205
Purchase of:
Investment securities available for sale ..................... (159,705) (143,167)
Investment securities held to maturity ....................... (722) (467)
Increase in loans .................................................... (16,303) (18,357)
Proceeds from sale of other assets ................................... 5,694 1,735
Capital expenditures ................................................. (767) (186)
Net cash used in acquisition ......................................... (1,302) 0
NET CASH USED IN INVESTING ACTIVITIES ................................ 30,825 (30,571)
Cash Flows from Financing Activities:
Net decrease in demand deposits, NOW accounts and
savings accounts ................................................ (638) (2,549)
Net decrease in certificates of deposit ............................. (9,115) (8,227)
Net (decrease) increase in short-term borrowed funds ................. (5,952) 11,914
Net purchase and sale of treasury stock .............................. 0 (18)
Dividends paid ....................................................... (3,816) (3,093)
Proceeds from exercise of stock options .............................. 143 324
NET CASH PROVIDED BY FINANCING ACTIVITIES ............................ (19,378) (1,649)
Net increase (decrease) in cash and cash equivalents ............................. 10,397 (22,339)
Cash and cash equivalents at beginning of year ................................... 49,827 76,758
Cash and cash equivalents at September 30 ........................................ $ 60,224 $ 54,419
</TABLE>
See Notes to Consolidated Financial Statements.
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<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 September 30, 1997
and the results of operations and cash flows for the nine month periods ended
September 30, 1997 and September 30, 1996.
NOTE B - TAXES
The effective tax rate of 31% is lower than the statutory 35% because of
investments made in tax exempt municipal securities. The subsidiaries of
Security Banc Corporation have approximately $16,182,000.00 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> 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.
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 $10,493,000 for the first nine months of 1997, compared to
$9,812,000 for the same period in 1996. Earnings per share were $1.73 for the
first nine months, a 6% increase over last year's $1.63.
Total assets were $807,385,000 at Sept. 30, 1997 compared to 1996's assets of
$682,195,000. For the first nine months of 1997, return on average equity was
13.57% and return on average assets was 1.69%.
Net interest income on a fully taxable equivalent basis for the first nine
months of 1997 was $28,800,000 compared to the $24,592,000 realized in the same
period of 1996.
The allowance for loan losses was $6,343,000 in the first nine months of 1997
and $5,597,000 in the first nine months of 1996. The allowance for losses as a
percent of loans and leases outstanding was 1.14% at Sept. 30, 1997 and l.36% at
Sept. 30, 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
Sept. 30, ---------------------------------
1997 1996 1995 1994 1993
--------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Non-accrual loans $2,671 $4,123 $2,772 $2,598 $2,229
Accruing loans past due
90 days or more 1,688 1,709 1,543 561 245
</TABLE>
Total other operating income was $5,179,000 and $4,370,000 during the first nine
months of 1997 and 1996 respectively. Trust income increased 13%. There was a 8%
increase in service charges on deposits, and a 94% increase in other charges,
rents and fees. Total securities gains for the first nine months of 1997 were
$213,000 or $138,000 after tax. Total securities gains for the same period of
1996 were $363,000 or $263,000 after tax.
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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 increased during the first nine months, 29% over the
similar period of 1996. Salaries, wages and employee benefits increased 23% over
1996. Equipment and net occupancy expenses during the first nine months were
$2,083,000 and $1,719.000 for 1997 and 1996 respectively, which reflects a 21%
increase. Other operating expenses increased 40% over 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>
SEPT. 30, DEC 31,
1997 1996 $+/- %+/-
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash and due from banks $28,854 $36,527 (7,673) (21)
Interest bearing deposits with other banks 2,700 1,500 1,200 80
Securities 150,545 190,983 (40,438) (21)
Federal funds sold 31,370 13,300 18,070 136
Loans and leases 555,298 540,768 14,530 3
Funds purchased and repos 22,891 32,183 (9,292) (29)
Demand Deposits
Non interest bearing 107,547 107,913 (366) 0
Interest bearing 124,995 122,996 1,999 2
Savings Deposits 151,884 154,153 (2,269) (1)
Time Deposits 272,900 281,973 (9,073) (3)
FHLB Advances 14,895 11,574 3,321 29
</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 demands 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 $15,517,000 at the one year interval or
a cumulative gap ratio of 1.05.
CAPITAL RESOURCES
The table below illustrates the Company's subsidiary banks regulatory
capital ratios at Sept. 30,1997 under the year end 1992 requirements: (000s)
<TABLE>
<S> <C>
Tier 1 Capital $ 92,985
Tier 2 Capital 6,343
--------
TOTAL QUALIFYING CAPITAL $ 99,328
--------
Risk Adjusted Total Assets (including off balance exposures) $528,387
========
Tier 1 Risk-Based Capital Ratio 17.60%
Total Risk-Based Capital Ratio 18.80%
Tier 1 Leverage Ratio 11.47%
</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:
Security National Bank, a subsidiary of The
Company, has purchased The Fifth Third Bank,
Jeffersonville, Ohio office. The Fayette
county site, 2 S. Main Street, has
approximately $11,500,000.00 of deposits.
This purchase was completed October 7, 1997.
ITEM 6 Exhibits and Reports on Form 8-K Inapplicable
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<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
Vice President/Controller
By /s/ J. William Stapleton
-------------------------------------
J. William Stapleton
Executive Vice President/CFO
November 10, 1997
-11-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 28,854
<INT-BEARING-DEPOSITS> 2,700
<FED-FUNDS-SOLD> 31,370
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 130,580
<INVESTMENTS-CARRYING> 19,965
<INVESTMENTS-MARKET> 20,369
<LOANS> 555,298
<ALLOWANCE> 6,343
<TOTAL-ASSETS> 807,385
<DEPOSITS> 657,326
<SHORT-TERM> 37,786
<LIABILITIES-OTHER> 5,840
<LONG-TERM> 0
0
0
<COMMON> 19,688
<OTHER-SE> 86,745
<TOTAL-LIABILITIES-AND-EQUITY> 807,385
<INTEREST-LOAN> 37,257
<INTEREST-INVEST> 8,598
<INTEREST-OTHER> 965
<INTEREST-TOTAL> 46,820
<INTEREST-DEPOSIT> 17,262
<INTEREST-EXPENSE> 18,728
<INTEREST-INCOME-NET> 28,092
<LOAN-LOSSES> 1,100
<SECURITIES-GAINS> 213
<EXPENSE-OTHER> 17,041
<INCOME-PRETAX> 15,130
<INCOME-PRE-EXTRAORDINARY> 10,493
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,493
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.73
<YIELD-ACTUAL> 8.30
<LOANS-NON> 2,671
<LOANS-PAST> 1,688
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,827
<CHARGE-OFFS> 1,812
<RECOVERIES> 233
<ALLOWANCE-CLOSE> 6,343
<ALLOWANCE-DOMESTIC> 3,037
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,306
</TABLE>
