<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
(MARK ONE)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the quarterly period ended June 30, 1998 or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from to .
Commission file number 0-27590
SECURITY BANK HOLDING COMPANY
(Exact name of small business issuer as specified in its charter)
Oregon 93-0800253.
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
170 S. Second St., Coos Bay, Oregon 97420.
(Address of Principal Executive Offices) (Zip Code)
(541) 267-5356
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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. YES X NO
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at July 30, 1998
Common Stock, $5.00 par value 4,451,041
Transitional Small Business Disclosure Format (check one): YES NO X
<PAGE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
ASSETS June 30, 1998 Dec. 31, 1997
- ------- ------------- -------------
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks $8,391 $10,087
Federal funds sold 31,052 19,165
------- ------
Total cash and cash equivalents 39,443 29,252
Investment securities available for sale 80,430 86,130
Loans, net 135,533 136,035
Mortgage loans held for sale, at cost which approximates market 2,678 2,208
Net investment in direct financing leases 3,088 3,056
Premises and equipment, net 8,138 7,111
Federal Home Loan Bank stock, at cost 1,933 1,840
Other assets 4,631 4,600
----- -----
Total assets $275,874 $270,232
======== ========
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------
Liabilities:
Deposits:
Demand $39,544 $31,550
NOW accounts 33,577 36,597
Money market accounts 35,759 37,074
Savings accounts 20,600 20,079
Time deposit 91,429 88,541
------ ------
Total deposits 220,909 213,841
Securities sold under agreements to repurchase 7,093 7,945
Short term borrowings 571 583
Federal Home Loan Bank borrowings 14,000 16,000
Other liabilities 3,116 2,532
----- -----
Total liabilities 245,689 240,901
------- -------
Minority interest in subsidiary 929 908
Shareholders' equity:
Nonvoting preferred stock, $5 par value.
Authorized 5,000,000 shares; none issued -- --
Voting preferred stock, $5 par value.
Authorized 5,000,000 shares; none issued -- --
Common stock, $5 par value.
Authorized 10,000,000 shares - issued and outstanding
4,451,041 shares in 1998(4,431,013 shares in 1997) 22,255 22,210
Surplus 1,941 1,596
Retained earnings 5,967 5,629
Unearned ESOP shares at cost (1,332) (1,469)
Accumulated other comprehensive income 425 457
--- ---
Total shareholders' equity 29,256 28,423
------ ------
Total liabilities, minority interest and shareholders' equity $275,874 $270,232
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $3,344 $3,218 $6,638 $6,187
Interest and dividends on securities:
Taxable 1,005 1,384 2,094 2,660
Exempt from Federal income tax 201 291 387 511
Interest on time deposits-domestic financial institutions -- -- -- 5
Dividend income on Federal Home Loan Bank stock 36 56 76 96
Interest on Federal funds sold 331 24 569 64
Income on direct financing leases 70 71 140 144
-- -- --- ---
Total interest income 4,987 5,044 9,904 9,667
----- ----- ----- -----
Interest expense:
Deposits
NOW 121 82 235 162
Money market 311 307 624 598
Savings 126 127 243 250
Time 1,187 1,091 2,342 2,166
Securities sold under agreements to repurchase 78 71 161 128
Short term borrowings 5 6 11 12
Federal Home Loan Bank borrowings 216 428 439 679
--- --- --- ---
Total interest expense 2,044 2,112 4,055 3,995
----- ----- ----- -----
Net interest income 2,943 2,932 5,849 5,672
Provision for loan losses 63 105 124 181
-- --- --- ---
Net interest income after provision for loan losses 2,880 2,827 5,725 5,491
----- ----- ----- -----
Other income:
Service charges on deposit accounts 290 278 571 571
Gain(loss) on sale/call of investments available for sale, net 3 (1) 5 2
Loan servicing fees 62 59 123 127
Sold real estate loan fees 628 332 1,237 587
Other 213 217 392 381
--- --- --- ---
Total other income 1,196 885 2,328 1,668
----- --- ----- -----
Other expense:
Salaries and employee benefits 1,690 1,498 3,436 2,941
Occupancy of bank premises 204 166 395 325
Furniture and equipment 224 211 459 431
Professional fees 183 151 397 296
FDIC assessment 5 5 13 11
Supplies 79 94 169 188
ESOP compensation 168 70 335 140
Other 497 445 1,029 873
--- --- ----- ---
Total other expense 3,050 2,640 6,233 5,205
----- ----- ----- -----
Income before provision for income taxes 1,026 1,072 1,820 1,954
Provision for income taxes 365 357 649 642
--- --- --- ---
Net income before minority interest 661 715 1,171 1,312
Net (income) loss attributable to minority interest (12) 9 (21) 17
---- - ---- --
Net income $649 $724 $1,150 $1,329
==== ==== ====== ======
Net income per share - basic $.16 $.18 $.28 $.33
==== ==== ==== ====
Net income per share - diluted $.16 $.18 $.28 $.33
==== ==== ==== ====
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED - DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $649 $724 $1,150 $1,329
Other comprehensive income, net of income tax:
Unrealized (loss) gain on investment securities (1) 554 (32) 116
--- --- ---- ---
Comprehensive income $648 $1,278 $1,118 $1,445
==== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended June 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows provided by operating activities:
Net income $1,150 $1,329
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 403 314
Provision for loan losses 124 180
Origination of mortgage loans held for sale (58,546) (24,320)
Proceeds from mortgage loans sold 58,076 24,915
Net loss on sale of fixed assets -- --
Net gain on call of investment securities available for sale (1) (2)
Net gain on sale of investment securities available for sale (4) --
Federal Home Loan Bank stock dividend (72) (96)
ESOP related compensation expense 454 203
Increase in other assets (31) (186)
(Decrease) increase in other liabilities 605 (99)
--- ----
Net cash provided by operating activities 2,158 2,436
----- -----
Cash flows from investing activities:
Net decrease in time deposits-domestic financial institutions -- 270
Purchase of investment securities available for sale (17,302) (18,584)
Proceeds from sale of investment securities available for sale 5,015 --
Proceeds from maturities and call of investment securities available for sale 17,890 8,596
Net loan payments (originations) 378 (13,261)
Purchase of participations -- (496)
Additions to premises and equipment (1,381) (1,061)
Purchase of Federal Home Loan Bank stock (21) (2,194)
Redemption of Federal Home Loan Bank stock -- 1,275
Proceeds from sale of premises and equipment -- --
Originations of direct financing leases (483) (1,253)
Gross payments on direct financing leases 451 1,112
Minority interest in subsidiary 21 (17)
-- ----
Net cash (used in) provided by investing activities 4,568 (25,613)
----- --------
Cash flows from financing activities:
Net increase in deposits 7,068 7,167
(Decrease) increase in securities sold with agreements to repurchase (852) 1,232
(Decrease) increase of Federal Home Loan Bank borrowings (2,000) 14,252
Proceeds from issuance of common stock 73 --
Payment of dividends (812) (527)
Other (12) 73
---- --
Net cash provided by financing activities 3,465 22,197
----- ------
Net increase in cash and cash equivalents 10,191 (980)
Cash and cash equivalents at beginning of period 29,252 12,609
------ ------
Cash and cash equivalents at end of period $39,443 $11,629
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $4,026 $2,802
Income taxes $638 $673
Supplemental disclosures of investing activities:
Unrealized gain (loss) on investment
Securities available for sale, net of tax $32 $116
Loans transferred to other real estate owned $-- $22
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Financial Statement Preparation
The accompanying consolidated financial statements have been prepared by the
Company without audit and in conformity with generally accepted accounting
principles for interim financial information. Accordingly, certain financial
information and footnotes have been omitted or condensed. In the opinion of
management, the consolidated financial statements include all necessary
adjustments (which are of a normal and recurring nature) for the fair
presentation of the results of the interim periods presented. These financial
statements should be read in conjunction with the Company's audited consolidated
financial statements for the year ended December 31, 1997 included as part of
the Company's 1997 annual report to shareholders. The results of operations for
the interim period shown in this report are not necessarily indicative of
results for any future interim period or the entire fiscal year.
(b) Net Income Per Share
Basic and diluted net income per share are based on the weighted average number
of common shares outstanding during each period, with diluted including the
effect of potentially dilutive common shares. For the quarter and six months
ended June 30, 1998 and 1997, the weighted average number of common shares
outstanding did not include 384,784 and 455,824 shares respectively, held by the
Company's ESOP as these shares have not been allocated to participant accounts,
nor have they been committed to be released. The following table presents
information relating to the weighted average number of common shares outstanding
for all periods presented for both basic and diluted net income per share
calculations:
Three months Six months
ended June 30, ended June 30,
-------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
Weighted average shares - basic 4,063,441 3,975,118 4,061,797 3,975,118
Potential dilution of stock options 33,569 45,168 34,476 45,168
------ ------ ------ ------
Weighted average shares - diluted 4,097,010 4,020,286 4,096,273 4,020,286
========= ========= ========= =========
(c) Comprehensive Income
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 (SFAS No. 130), Reporting Comprehensive Income. SFAS No. 130 establishes
standards for reporting and displaying comprehensive income and its components
in general-purpose financial statements. Comprehensive income includes net
income and several other items that current accounting standards require to be
recognized outside of net income. SFAS No. 130 is effective for fiscal years and
interim periods beginning after December 15, 1997. The Company adopted SFAS No.
130 in 1998.
(d) Reclassifications
Certain amounts previously recorded on the December 31, 1997 and June 30, 1997
consolidated financial statements have been reclassified to conform to the
classifications on the June 30, 1998 consolidated financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
GENERAL. Net income decreased to $649,000 for the three months ended June 30,
1998 from $724,000 for the same period in 1997, a 10% decrease. The decrease in
net income is mostly attributable to an increase in other expense incurred in
conjunction with the Company's expansion strategy.
NET INTEREST INCOME. Net interest income before the provision for loan loss
increased $11,000 or .4% for the three months ended June 30, 1998 over the same
period in 1997. Of the net increase of $11,000, an increase in volume accounted
for an increase in net interest income of $199,000, while a decrease in rates
earned accounted for a decrease in net interest income of $188,000. Average
interest earning assets increased $3.1 million, while average costing
liabilities increased $4.2 million.
PROVISION FOR LOAN LOSSES. The loan loss provision during the three month
period ended June 30, 1998, was $63,000 and $105,000 for the same period in
1997. Net charge-offs during the three month periods were $119,000 and $77,000
for 1998 and 1997, respectively.
Management believes the loan loss provision maintains the reserve for loan
losses at an appropriate level. The reserve for loan losses was $1,389,000 at
June 30 1998, as compared to $1,402,000 at June 30 1997. The Company's ratio of
reserve for loan losses to total loans was .97% at June 30, 1998, compared to
1.02% at June 30, 1997.
Non-performing assets (defined as loans on non-accrual status, 90 days or more
past due, and other real estate owned) were $886,000 and $940,000 at June 30,
1998 and 1997, respectively. Management believes the loans are adequately
secured and that no significant losses will be incurred.
OTHER INCOME. Other income increased 35.1% to $1,196,000 for the three months
ended June 30 1998 as compared to $885,000 for the same period in 1997. The
increase in other income is due primarily to an increase in sold real estate
loan fees. The Company has experienced strong sold loan activity, resulting
from the low interest rate environment and the increase in refinance activity.
OTHER EXPENSE. Other expense (including ESOP Compensation expense as discussed
below) increased 15.5% to $3,050,000 for the three months ended June 30, 1998
compared to $2,640,000 for the same period in 1997. Salaries and employee
benefits, the largest non-interest expense, increased $192,000 or 12.8%.
Approximately $113,000 of the increase in salaries is related to increased
mortgage operations, which resulted in $296,000 increased sold loan fee income.
In addition, deferred compensation plan expense increased $70,000.
The increase in professional fees resulted primarily from an increase in
directors fees, attributed to the formation of separate boards for each of the
corporate entities within the expanding Holding Company.
Given the increase in refinance activity as discussed above, the Company
experienced a $42,000 increase in early payoffs on mortgage servicing rights,
which is reflected as a component of other expense.
ESOP COMPENSATION EXPENSE. The Company sponsors an Employee Stock Ownership
Plan (ESOP), a leveraged employee-retirement benefit plan which owns
approximately 22% of the common stock of the Company.
The ESOP owns 964,504 shares of the Company's common stock, of which 579,720 are
allocated to plan participants. The remaining 384,784 shares are unallocated,
and will be allocated over the remaining debt service period. The current ESOP
debt of $1,858,000 is to be extinguished over the next six years, ending in
2003. As the debt is paid, shares are released for allocation. The release of
shares is comprised of shares released through dividends on allocated shares,
and shares released through compensation expense (a non-cash charge to the
income statement). Compensation expense is calculated by multiplying the shares
released as compensation by the average share price of the Company's common
<PAGE>
stock for the year. Two components of shareholders' equity are also affected.
There is a reduction in unearned ESOP shares at cost, and an increase in surplus
at the difference between the fair market value and the cost of the shares,
thereby off-setting the compensation expense and resulting in no impact on
shareholders' equity. As shares are released, they are considered outstanding
for the purposes of calculating earnings per share and book value per share.
In 1997, the average share price was $12.14, a 47% increase over the average
price in 1996 of $8.24. This significant price appreciation has caused the
compensation charge to increase proportionately, well beyond the originally
planned 7% of eligible salaries. The resulting non-cash charge to earnings for
the fiscal year 1997 of $716 represented 22% of eligible salaries, and the
charge in 1996 of $459 was 17% of eligible salaries.
Because of the growing impact on the Company's earnings, in 1997, the Company
requested a Private Letter Ruling (PLR) from the Internal Revenue Service (IRS)
to extend the repayment of the debt, thereby reducing the number of shares being
released each year. This would return the retirement benefit to the originally
planned levels. In the second quarter of 1997, the Company had accrued ESOP
compensation expense assuming the PLR would be received, at $70,000 for the
second quarter of 1997.
In December 1997, the Company received a preliminary response from the IRS
indicating that it would not be ruling in favor of the PLR request. After
further discussion with the IRS in January 1998, the IRS removed the preliminary
decline status pending development of guidelines concerning debt extension
requests. The IRS has indicated a six month time frame to draft these
guidelines. As such, the Company has accrued ESOP compensation expense for the
second quarter of 1998 in accordance with the existing ESOP debt structure.
At this time, the Company is aware of three possible scenarios regarding the
timing of the release of the remaining unallocated shares, as follows:
Option 1. Follow the current debt amortization, the remaining unallocated
shares will be released over the next six years,
Option 2. Upon notification of a favorable PLR, extend the debt four years
and release the remaining unallocated shares over the next ten years.
Note the actual extension period and number of shares released would
be dependent upon the provisions allowed by the IRS, or
Option 3. Shorten the ESOP tax year, permitting the Company to accelerate
the debt and release all remaining unallocated shares during 1998.
The following table presents the release of the remaining unallocated shares
under the three possible options under consideration by the Company:
<TABLE>
<CAPTION>
Year Option 1 Option 2 Option 3
---- -------- -------- --------
<S> <C> <C> <C>
1998 .. 71,910 47,520 384,784
1999 .. 74,675 41,839 ---
2000 .. 53,823 40,766 ---
2001 .. 57,334 40,359 ---
2002 .. 61,489 39,117 ---
2003 .. 65,553 37,821 ---
2004 .. --- 35,024 ---
2005 .. --- 35,891 ---
2006 .. --- 35,090 ---
2007 .. --- 31,357 ---
------- ------- -------
Total .. 384,784 384,784 384,784
======= ======= =======
</TABLE>
If the PLR is approved by the IRS, the Company would likely revise the debt
repayment schedule as described in Option 2. The Company may consider Option 3
to lower the burden of compensation expense for future years. Option 3 may be
considered regardless of the outcome of the PLR request and regardless of any
subsequent debt extension. If Option 3 were selected, a non-recurring non-cash
<PAGE>
charge would be incurred in 1998, which would substantially lower earnings and
may result in a loss for the year. Because the expense is based on the average
market value of the Company's common stock for the year, it is not possible to
accurately determine the final amount of charge if Option 3 were followed.
However, no final response has been received regarding the PLR and the Company
has made no determination other than to currently accrue compensation expense in
accordance with Option 1, resulting in an expense for the quarter of $168,000.
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
GENERAL. Net income decreased to $1,150,000 for the six months ended June 30,
1998 from $1,329,000 for the same period of 1997, a 13.5% decrease. The decrease
in net income is mostly attributable to an increase in other expense incurred in
conjunction with the Company's expansion strategy.
NET INTEREST INCOME. Net interest income before the provision for loan loss
increased $177,000 or 3.1% for the six months ended June 30, 1998 over the same
period in 1997. Of the net increase of $177,000, an increase in volume accounted
for an increase in net interest income of $477,000, while a decrease in rates
earned accounted for a decrease in net interest income of $300,000. Average
interest earning assets increased $12.1 million, while average costing
liabilities increased $12.1 million.
PROVISION FOR LOAN LOSSES. The loan loss provision during the six month period
ended June 30, 1998, was $124,000 and $181,000 for the same period in 1997.
Net charge-offs during the six month periods were $164,000 and $114,000 for
1998 and 1997, respectively.
OTHER INCOME. Other income increased 39.6% to $2,328,000 for the six months
ended June 30 1998 as compared to $1,668,000 for the same period in 1997. The
increase in other income is due primarily to an increase in sold real estate
loan fees. The Company has experienced strong sold loan activity, resulting
from the low interest rate environment and the increase in refinance activity.
OTHER EXPENSE. Other expense (including ESOP Compensation expense as discussed
previously) increased 19.8% to $6,233,000 for the six months ended June 30, 1998
compared to $5,205,000 for the same period in 1997. Salaries and employee
benefits, the largest non interest expense, increased $495,000 or 16.8%.
Approximately $287,000 of the increase in salaries is related to increased
mortgage operations, which resulted in $650,000 increased sold loan fee income.
In addition, deferred compensation plan expense increased $140,000.
The increase in professional fees resulted primarily from an increase in
directors fees, attorney fees and accountant counseling, of which all are
attributed to the expansion strategy of the Company.
Given the increase in refinance activity as discussed above, the Company
experienced a $91,000 increase in early payoffs on mortgage servicing rights,
which is reflected as a component of other expense.
ESOP COMPENSATION EXPENSE. In the first six months of 1997, the Company had
accrued ESOP compensation expense assuming the PLR (discussed previously) would
be received, at $140,000 for the first six months of 1997. The Company has
accrued ESOP compensation expense for the six months ended June 30, 1998 in
accordance with the existing ESOP debt structure, resulting in expense of
$335,000.
FINANCIAL CONDITION
Total assets have increased $5.6 million to $275.9 million at June 30, 1998,
from $270.2 million at December 31, 1997.
Net loans and leases remained constant at $141.3 million at June 30, 1998. The
Company normally experiences a cyclical lack of growth during this period, as
commercial borrowers are less active this time of the year in the use of their
lines of credit. An additional factor contributing to the constant level of
loans was the active residential real estate market. As loans held in the
portfolio were refinanced due to lower interest rates, the Company chose to sell
<PAGE>
these loans into the secondary market. This choice was necessitated due to the
inherent interest rate risk associated with these loans and the historically
lower yields they provide.
The low interest rate environment has resulted in increased calls on callable
agency investment securities, and has accelerated repayments on mortgage backed
investment securities. Due to the flat yield curve, the Company has taken a
defensive posture and retained the majority of these funds in Federal funds
sold, resulting in the increase of $11.9 million from December 31, 1997. At the
time a more typical positive slope to the yield curve occurs, the Company will
increase the maturities. Until that time, the Company does not believe
extending maturities is adequately rewarding.
The increase in premises and equipment during the first six months of 1998
results from expansion activities underway by the Company. An increase of
$375,000 represents a land purchase for the planned de novo expansion of a new
community bank in Springfield, Oregon. The remaining additions represent costs
incurred for the construction of two new branches of Security Bank in Coos
County.
Deposit growth has continued for the first six months of 1998, increasing $7.1
million to $220.9 million at June 30, 1998, compared to $213.8 million at
December 31, 1997. The growth in 1998 has been predominantly in non-interest
bearing demand deposits. The ratio of interest-bearing deposits to total
deposits decreased from 85.2% at December 31, 1997, to 82.1% at June 30, 1998.
The Company is a member of the Federal Home Loan Bank of Seattle. This
membership allows the Company access to low cost, long-term funding otherwise
unavailable. Since December 31, 1997, the Company has not utilized this
funding, and repaid a $2.0 million advance in the first quarter of 1998, leaving
the balance at $14 million as of June 30, 1998.
LIQUIDITY
Liquidity enables the Company to meet the withdrawals of its depositors and the
borrowing needs of its loan customers. The Company maintains its liquidity
position through maintenance of cash resources and a stable core deposit base.
A further source of liquidity is the Company's ability to borrow funds. The
Company maintains three unsecured lines of credit totaling $11.0 million for the
purchase of funds on an overnight basis. As discussed above, the Company is
also a member of the Federal Home loan Bank which provides a secured line of
credit in the amount of $55.4 million, and other funding opportunities for
liquidity and asset/liability matching. Over the past four years these lines
have been used periodically. As of June 30, 1998 no funds were borrowed under
the Company's unsecured lines of credit and $14 million was borrowed from the
Federal Home Loan Bank. Interest rates charged on the lines are determined by
market factors. The Company's liquidity has been stable and adequate over the
past several years. Short-term deposits have continued to grow and excess
investable cash is invested on a short term basis into Federal funds sold. The
Company's primary source of funds is consumer deposits and commercial accounts.
These funds are not subject to significant movements as a result of changing
interest rates and other economic factors, and therefore enhance the Company's
long term liquidity.
CAPITAL RESOURCES
Beginning in 1990, federal regulators required the calculation of Risk-based
Capital. This is an analysis that weights balance sheet and off-balance sheet
items for their inherent risk. It requires minimum standards for Risk-based
Capital by Capital Tier. Full implementation of this analysis was required in
1992, requiring a minimum total Risk-based Capital ratio of 8.00%, a minimum
Tier 1 Capital Ratio of 4.00% and a minimum Leverage Capital Ratio of 3.00%.
At June 30, 1998, the Company's estimated regulatory capital ratios were as
follows: Total Risk-based Capital Ratio of 17.42%, Tier 1 Capital Ratio of
16.63% and Leverage Capital Ratio of 10.65%. This was compared to 17.40%,
16.56% and 10.11% for total Risk-based Capital Ratio, Tier 1 Capital Ratio and
Leverage Capital Ratio, respectively, at December 31, 1997. If the Company were
fully leveraged, further growth would be restricted to the level attainable
through generation and retention of net income unless the Company were to seek
additional capital from outside sources.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
The following exhibit is being filed herewith:
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
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.
DATED: July 30, 1998.
SECURITY BANK HOLDING COMPANY
By: /s/ Charles D. Brummel
--------------------------------
Charles D. Brummel
President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS OF THE
COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE; AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,391
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 31,052
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 80,430
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 136,922
<ALLOWANCE> 1,389
<TOTAL-ASSETS> 275,874
<DEPOSITS> 220,909
<SHORT-TERM> 7,664
<LIABILITIES-OTHER> 3,116
<LONG-TERM> 14,000
0
0
<COMMON> 22,255
<OTHER-SE> 7,001
<TOTAL-LIABILITIES-AND-EQUITY> 275,874
<INTEREST-LOAN> 6,638
<INTEREST-INVEST> 2,481
<INTEREST-OTHER> 785
<INTEREST-TOTAL> 9,904
<INTEREST-DEPOSIT> 3,444
<INTEREST-EXPENSE> 4,055
<INTEREST-INCOME-NET> 5,849
<LOAN-LOSSES> 124
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 6,233
<INCOME-PRETAX> 1,820
<INCOME-PRE-EXTRAORDINARY> 1,150
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,150
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
<YIELD-ACTUAL> 4.43
<LOANS-NON> 825
<LOANS-PAST> 61
<LOANS-TROUBLED> 0<F1>
<LOANS-PROBLEM> 0<F1>
<ALLOWANCE-OPEN> 1,429
<CHARGE-OFFS> 180
<RECOVERIES> 16
<ALLOWANCE-CLOSE> 1,389
<ALLOWANCE-DOMESTIC> 0<F1>
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0<F1>
<FN>
<F1>THESE ITEMS NOT REQUIRED BY REGULATION SB.
</FN>
</TABLE>
