<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, 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
------------------------
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)
(937) 324-6920
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(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.
Class Outstanding at July 15, 1997
- ------------------------------- ---------------------------
Common Stock, $3.125 Par Value 6,058,565
<PAGE> 2
SECURITY BANC CORPORATION AND SUBSIDIARIES
INDEX
PAGE NO.
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets
June 30, 1997 and December 31, 1996. 3
Consolidated Condensed Statements of Income
for the three (3) months ended June 30, 1997
and June 30, 1996. 4
Consolidated Condensed Statements of Income
for the six (6) months ended June 30, 1997 and
June 30, 1996. 5
Consolidated Condensed Statements of Cash
Flows for the six (6) months ended June 30,
1997 and June 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
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<PAGE> 3
PART I ITEM 1 - FINANCIAL STATEMENTS
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30 Dec 31
1997 1996
---- ----
(in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $39,510 $36,527
Federal funds sold 2,200 13,300
-------- --------
TOTAL CASH AND CASH EQUIVALENT 41,710 49,827
-------- --------
Interest bearing deposits with other banks 1,500 1,500
Investments (Market Value $202,053 @6-30-97,
$191,970 @ 12-31-96) 201,527 190,983
Loans: Commercial and agricultural 243,383 212,046
Real estate and mortgage 220,096 234,935
Consumer 91,687 93,787
-------- --------
TOTAL LOANS 555,166 540,768
Less: Allowance for Loan Losses 6,852 6,827
-------- --------
NET LOANS 548,314 533,941
Premises & Equipment 8,563 8,431
Other Assets 36,637 31,652
-------- --------
TOTAL ASSETS $838,251 $816,334
======== ========
LIABILITIES
Non-interest bearing deposits $111,439 $107,913
Interest bearing demand deposits 145,121 122,996
Savings deposits 157,444 154,153
Time deposits, $100,000 and over 38,906 54,219
Other time deposits 233,988 227,754
------- -------
TOTAL DEPOSITS 686,898 667,035
Fed funds purchased and securities sold
under agreement to repurchase 31,776 32,183
Federal Home Loan Bank Term Advances 9,956 11,574
Other liabilities 5,706 4,748
-------- --------
TOTAL LIABILITIES $734,336 $715,540
-------- --------
SHAREHOLDERS'S EQUITY
Common Stock (Par Value $3.125) $19,685 $19,658
Shares authorized 11,000,000
Shares issued 6,299,165 - 1997
6,259,720 - 1996
Surplus 21,767 21,670
Retained earnings 65,714 62,557
Net unrealized (loss)gain on investment securities classified
as available for sale (net of income tax) (58) 102
Less: Treasury Stock, 240,600 shares 3,193 3,193
------- -------
TOTAL SHAREHOLDERS' EQUITY 103,915 100,794
------- -------
TOTAL LIABILITIES &
SHAREHOLDER'S EQUITY $838,251 $816,334
======== ========
</TABLE>
See notes to Consolidated Condensed Financial Statements
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<PAGE> 4
PART 1 ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended
June 30 June 30
1997 1996
(in thousands except
per share data)
<S> <C> <C>
Interest Income $15,927 $12,485
Interest Expense 6,398 4,575
----- -----
NET INTEREST INCOME 9,529 7,910
Provision for loan losses 200 238
--- ---
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 9,329 7,672
OTHER OPERATING INCOME
Trust Income 377 340
Service charges on deposit accounts 670 670
Securities, Gains (Losses) 50 0
Other charges, rents and fees 464 308
--- ---
TOTAL OTHER OPERATING INCOME 1,561 1,318
OPERATING EXPENSES
Salaries and employee benefits 2,737 2,116
Equipment and occupancy expense 679 568
Other operating expense 2,261 1,556
----- -----
TOTAL OPERATING EXPENSE 5,677 4,240
INCOME BEFORE TAXES 5,213 4,750
Income taxes (See Note B) 1,597 1,384
----- -----
NET INCOME $3,616 $3,366
====== ======
Per share* $ .60 $ .56
Cash dividends
per share $ .21 $ .19
<FN>
*Earnings per common share is calculated using weighted average shares
outstanding of 6,058,195 for 1997 and 6,017,738 for 1996.
</TABLE>
See notes to Consolidated Condensed Financial Statements.
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<PAGE> 5
<TABLE>
<CAPTION>
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
Six Months Ended
June 30, June 30,
1997 1996
(in thousands except
per share data)
<S> <C> <C>
Interest Income $30,990 $24,771
Interest Expense 12,493 9,182
------ -----
NET INTEREST INCOME 18,497 15,589
Provision for loan losses 400 475
--- ---
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 18,097 15,114
OTHER OPERATING INCOME
Trust Income 767 670
Service charges on deposit accounts 1,334 1,304
Securities, Gains (Losses) 106 358
Other charges, rents and fees 993 695
--- ---
TOTAL OTHER OPERATING INCOME 3,200 3,027
OPERATING EXPENSES
Salaries and employee benefits 5,439 4,466
Equipment and occupancy expense 1,364 1,170
Other operating expense 4,411 3,150
----- -----
TOTAL OPERATING EXPENSE 11,214 8,786
INCOME BEFORE TAXES 10,083 9,355
Income taxes (See Note B) 3,083 2,717
----- -----
NET INCOME $7,000 $6,638
====== ======
Per share* $ 1.16 $ 1.10
Cash dividends
per share $ .42 $ .38
<FN>
*Earnings per common share is calculated using weighted average shares
outstanding of 6,056,706 for 1997 and 6,016,497 for 1996.
</TABLE>
See notes to Consolidated Condensed Financial Statements.
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<PAGE> 6
<TABLE>
PART 1 ITEM 1 - FINANCIAL STATEMENTS
<CAPTION>
SECURITY BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
June 30 June 30
1997 1996
---- ----
(IN THOUSANDS)
------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income .......................................................... $ 7,000 $ 6,638
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ................................................ 507 454
(Gain)/Loss on sale of the following:
Investment Securities available for sale ................... (107) (358)
Other Assets ............................................... (21) (10)
Provision for loan losses .................................... 400 475
Amortization and accretion, net .............................. 48 398
Amortization and core deposit intangible ..................... 391 26
Change in other operating assets and liabilities, net ........ (10,660) (1,960)
--------- ---------
Total Adjustments .................................. (9,442) (975)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ....................................... ($ 2,442) $ 5,663
Cash Flows From Investing Activities:
Net decrease (increase) in interest bearing deposits with other banks 3,828 (1,894)
Proceeds from maturities and sales of:
Investment securities available for sale ..................... 135,545 117,722
Investments held to maturity ................................. 7,960 3,406
Purchase of:
Investment securities available for sale ..................... (154,564) (138,822)
Investment securities held to maturity ....................... (708) (173)
Increase in loans ................................................... (14,785) (10,727)
Proceeds from sale of other assets .................................. 3,507 1,747
Capital expenditures ................................................ (557) (130)
Net cash used in acquisition ........................................ (1,298) 0
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES ............................... (21,072) (28,871)
Cash Flows from Financing Activities:
Net decrease in demand deposits, NOW accounts and
savings accounts ............................................... 28,943 (15,448)
Net decrease in certificates of deposit ............................. (9,121) (4,106)
Net (decrease) increase in short-term borrowed funds ................ (2,005) 2,840
Net purchase and sale of treasury stock ............................. 0 (18)
Dividends paid ...................................................... (2,544) (2,118)
Proceeds from exercise of stock options ............................. 124 59
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........................... 15,397 (18,791)
--------- ---------
Net decrease in cash and cash equivalents ....................................... (8,117) (41,999)
Cash and cash equivalents at beginning of year .................................. 49,827 76,758
--------- ---------
Cash and cash equivalents at June 30 ............................................ $ 41,710 34,759
========= =========
</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 June 30, 1997 and
the results of operations and cash flows for the six month periods ended June
30, 1997 and June 30, 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 $20,607,000.00 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 $7,000,000 for the first six months of 1997, compared to
$6,638,000 for the same period in 1996. Earnings per share were $1.16 for the
first six months, a 5% increase over last year's $1.10.
Total assets were $838,251,000 at June 30, 1997 compared to 1996's assets of
$662,936,000. For the first six months of 1997, return on average equity was
13.74% and return on average assets was 1.69%.
Net interest income on a fully taxable equivalent basis for the first six months
of 1997 was $19,012,000 compared to the $16,280,000 realized in the same period
of 1996.
The allowance for loan losses was $6,852,000 in the first six months of 1997 and
$5,609,000 in the first six months of 1996. The allowance for losses as a
percent of loans and leases outstanding was 1.23% at June 30, 1997 and l.38% at
June 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
June 30, --------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Non-accrual loans $3,659 $4,123 $2,772 $2,598 $2,229
Accruing loans past due
90 days or more 1,802 1,709 1,543 561 245
</TABLE>
Total other operating income was $3,200,000 and $3,027,000 during the first six
months of 1997 and 1996 respectively. Trust income increased 14%. There was a 2%
increase in service charges on deposits, and a 43% increase in other charges,
rents and fees. Total securities gains for the first six months of 1997 were
$106,000 or $69,000 after tax. Total securities gains for the same period of
1996 were $358,000 or $233,000 after tax.
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<PAGE> 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 three months, 28% over the
similar period of 1996. Salaries, wages and employee benefits increased 22% over
1996. Equipment and net occupancy expenses during the first six months were
$1,364,000 and $1,170.000 for 1997 and 1996 respectively, which reflects a 17%
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>
June 30, Dec 31,
1997 1996 $+/- %+/-
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash and due from banks $39,510 $36,527 2,983 8
Interest bearing deposits with other banks 1,500 1,500 0 0
Securities 201,527 190,983 10,544 6
Federal funds sold 2,200 13,300 (11,100) (83)
Loans and leases 555,166 540,768 14,398 3
Funds purchased and repos 31,776 32,183 (407) (1)
Demand Deposits
Non interest bearing 111,439 107,913 3,526 3
Interest bearing 145,121 122,996 22,125 18
Savings Deposits 157,444 154,153 3,291 2
Time Deposits 272,894 281,973 (9,079) (3)
FHLB Advances 9,956 11,574 (1,618) (14)
</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 ($27,371,000) at the one year interval
or a cumulative gap ratio of .91.
CAPITAL RESOURCES
The table below illustrates the Company's subsidiary banks regulatory
capital ratios at June 30,1997 under the year end 1992 requirements: (000s)
<TABLE>
<CAPTION>
<S> <C>
Tier 1 Capital $ 90,568
Tier 2 Capital 6,600
-------------- --------
TOTAL QUALIFYING CAPITAL $ 97,168
--------
Risk Adjusted Total Assets (including off balance exposures) $527,738
========
Tier 1 Risk-Based Capital Ratio 17.16%
Total Risk-Based Capital Ratio 18.41%
Tier 1 Leverage Ratio 10.95%
</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 entered into an
agreement to purchase The Fifth Third
Bank Jeffersonville Ohio office. The
Fayette County site, 2 S. Main St.,
will add approximately $10,500,000 of
deposits. This purchase is contingent
upon regulatory approval.
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
Aug 8, 1997
-11-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 39,510
<INT-BEARING-DEPOSITS> 1,500
<FED-FUNDS-SOLD> 2,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 177,027
<INVESTMENTS-CARRYING> 24,499
<INVESTMENTS-MARKET> 25,026
<LOANS> 555,166
<ALLOWANCE> 6,852
<TOTAL-ASSETS> 838,251
<DEPOSITS> 686,898
<SHORT-TERM> 41,732
<LIABILITIES-OTHER> 5,706
<LONG-TERM> 0
<COMMON> 19,685
0
0
<OTHER-SE> 84,230
<TOTAL-LIABILITIES-AND-EQUITY> 838,251
<INTEREST-LOAN> 24,548
<INTEREST-INVEST> 5,772
<INTEREST-OTHER> 670
<INTEREST-TOTAL> 30,990
<INTEREST-DEPOSIT> 11,492
<INTEREST-EXPENSE> 12,493
<INTEREST-INCOME-NET> 18,497
<LOAN-LOSSES> 400
<SECURITIES-GAINS> 106
<EXPENSE-OTHER> 11,214
<INCOME-PRETAX> 10,083
<INCOME-PRE-EXTRAORDINARY> 10,083
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,000
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 8.23
<LOANS-NON> 3,659
<LOANS-PAST> 1,802
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,827
<CHARGE-OFFS> 549
<RECOVERIES> 175
<ALLOWANCE-CLOSE> 6,853
<ALLOWANCE-DOMESTIC> 3,489
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,364
</TABLE>
