<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-22588
SECURITY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1766807
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
184 WEST WISCONSIN AVENUE
P.O. BOX 3097
MILWAUKEE, WISCONSIN 53201-3097
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(414) 273-8090
-------------------------------
(Registrant's telephone number)
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.
(1) YES X NO
--- ---
(2) YES X NO
--- ---
THE NUMBER OF VOTING SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK, $1.00 PAR
VALUE PER SHARE, WAS 9,202,432 AT FEBRUARY 12, 1997.
<PAGE> 2
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Statements of Financial Condition
at December 31, 1996 (unaudited) and June 30, 1996 ............... 1
Consolidated Statements of Income for the six and three
months ended December 31, 1996 and 1995 (unaudited) .............. 2
Consolidated Statements of Changes in Stockholders' Equity
for the six months ended December 31, 1996 and 1995 (unaudited) .. 3
Consolidated Statements of Cash Flows for the six months ended
December 31, 1996 and 1995 (unaudited) ........................... 4
Notes to Consolidated Financial Statements (unaudited) ............ 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 12
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings ................................................. 22
ITEM 2. Changes in Securities ............................................. 22
ITEM 3. Defaults Upon Senior Securities ................................... 23
ITEM 4. Submission of Matters to a Vote of Security Holders ............... 23
ITEM 5. Other Information ................................................. 23
ITEM 6. Exhibits and Reports on Form 8-K .................................. 23
SIGNATURES ................................................................. 25
<PAGE> 3
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1996
-------------- --------------
(Unaudited)
(In thousands, except share data)
<S> <C> <C>
ASSETS
Cash and non-interest-bearing deposits............................... $ 32,696 $ 42,880
Interest-bearing deposits with banks................................. 50,100 ---
Federal Home Loan Bank deposits...................................... 877 905
-------------- --------------
Cash and cash equivalents.......................................... 83,673 43,785
-------------- --------------
Loans held-for-sale.................................................. 33,052 40,303
Securities available-for-sale, at market:
Investment securities.............................................. 270,812 352,187
Mortgage-backed and related securities............................. 414,370 332,448
Loans and leases, net................................................ 2,698,331 2,533,534
Foreclosed properties................................................ 122 289
Premises and equipment, net.......................................... 23,730 24,399
Federal Home Loan Bank stock, at cost................................ 22,951 22,624
Accrued interest receivable.......................................... 19,988 19,903
Bank-owned life insurance............................................ 52,461 25,988
Other assets......................................................... 38,469 41,857
-------------- --------------
Total assets......................................................... $ 3,657,959 $ 3,437,317
============== ==============
LIABILITIES
Deposits............................................................. $ 2,284,158 $ 2,200,411
Borrowings........................................................... 700,025 564,927
Advances from borrowers for taxes and insurance...................... 9,396 33,244
Other liabilities.................................................... 96,167 79,687
-------------- --------------
Total liabilities.................................................... 3,089,746 2,878,269
-------------- --------------
STOCKHOLDERS' EQUITY
Common stock, $1.00 par value, 50,000,000 shares authorized,
10,810,000 shares issued and 9,202,665 and 9,314,365 voting shares
outstanding, respectively.......................................... 10,810 10,810
Additional paid-in capital........................................... 259,928 259,007
Retained earnings, substantially restricted.......................... 391,308 377,836
Unrealized gain (loss) on securities available-for-sale, net of tax.. 7,665 6,269
Less:
Common stock held for deferred compensation........................ (3,441) (3,415)
Unearned ESOP compensation......................................... (14,502) (15,132)
Unearned restricted stock.......................................... (2,817) (2,817)
Treasury stock (1,607,335 shares and 1,495,635 shares at cost,
respectively)..................................................... (80,738) (73,510)
-------------- --------------
Total stockholders' equity........................................... 568,213 559,048
-------------- --------------
Total liabilities and stockholders' equity........................... $ 3,657,959 $ 3,437,317
============== ==============
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
1
<PAGE> 4
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- ---------------------------
1996 1995 1996 1995
--------- --------- ---------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Loans and leases:
Held for investment........................................ $ 55,520 $ 49,690 $ 108,762 $ 97,303
Held for sale.............................................. 431 503 862 1,166
--------- --------- ---------- ----------
Total.................................................... 55,951 50,193 109,624 98,469
--------- --------- ---------- ----------
Investments:
Taxable income on securities................................ 4,177 4,304 8,755 11,265
Tax-exempt income on securities............................. 434 883 964 1,892
Mortgage-backed securities.................................. 6,063 4,771 11,686 6,355
Dividends on FHLB and FHLMC stock........................... 398 351 783 689
FHLB deposits and other interest income..................... 210 81 270 146
--------- --------- ---------- ----------
Total interest and dividend income............................ 67,233 60,583 132,082 118,816
--------- --------- ---------- ----------
INTEREST EXPENSE:
Deposits.................................................... 26,703 25,956 52,655 50,880
Advances from borrowers for taxes and insurance............. 314 292 574 568
Borrowings.................................................. 8,218 5,745 16,120 11,221
--------- --------- ---------- ----------
Total interest expense........................................ 35,235 31,993 69,349 62,669
--------- --------- ---------- ----------
Net interest income........................................... 31,998 28,590 62,733 56,147
Provision for loan and lease losses........................... 250 1,329 1,247 3,006
--------- --------- ---------- ----------
Net interest income after provision for loan and lease losses. 31,748 27,261 61,486 53,141
--------- --------- ---------- ----------
NON-INTEREST INCOME:
Loan servicing fees and service charges..................... 1,774 1,889 3,590 3,718
Deposit service charges..................................... 307 300 593 599
Gain on sale of loans held for sale......................... 160 652 487 1,140
Gain (loss) on sale of securities........................... 20 (44) 13 (18)
Insurance, mutual fund and annuity commissions.............. 1,338 1,186 2,634 2,350
Income from bank-owned life insurance....................... 734 299 1,472 299
Net (loss) income from operation of foreclosed properties... 24 (5) (34) (37)
Other income, net........................................... 1,174 1,130 2,427 1,994
--------- --------- ---------- ----------
Total non-interest income..................................... 5,531 5,407 11,182 10,045
--------- --------- ---------- ----------
NON-INTEREST EXPENSE:
Compensation and employee benefits.......................... 8,978 9,519 17,856 19,334
Occupancy and premises, including depreciation.............. 1,217 1,265 2,448 2,502
Data processing............................................. 714 627 1,359 1,252
Marketing................................................... 1,048 1,839 2,496 2,972
Federal deposit insurance premiums.......................... 0 1,221 14,495 2,378
Furniture and equipment, including depreciation............. 678 651 1,311 1,290
Professional fees........................................... 602 679 1,262 1,592
Other expenses.............................................. 3,040 3,635 6,256 6,836
--------- --------- ---------- ----------
Total non-interest expense.................................... 16,277 19,436 47,483 38,156
--------- --------- ---------- ----------
Income before income tax expense.............................. 21,002 13,232 25,185 25,030
Income tax expense............................................ 7,023 4,981 8,333 9,676
--------- --------- ---------- ----------
NET INCOME.................................................. $ 13,979 $ 8,251 $ 16,852 $ 15,354
========= ========= ========== ==========
EARNINGS PER SHARE............................................ $ 1.51 $ 0.86 $ 1.82 $ 1.60
========= ========= ========== ==========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
2
<PAGE> 5
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common
Stock Unrealized
Held Gain on
Add'l. for Unearned Unearned Securities
Common Paid-in Deferred ESOP Restricted Treasury Available- Retained
Stock Capital Comp. Comp. Stock Stock for-Sale Earnings Total
-------- --------- --------- ----------- --------- ----------- -------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED
DECEMBER 31, 1995
Balance at June 30,
1995.................... $ 10,810 $ 257,377 $ (3,144) $ (16,393) $ (4,600) $ (47,732) $ 5,086 $ 349,432 $ 550,836
Net income................ --- --- --- --- --- --- --- 15,354 15,354
Dividends paid $0.15 per
share................... --- (18) --- --- --- --- --- (1,338) (1,356)
Purchased 83,500 shares
of treasury stock....... --- --- --- --- --- (4,363) --- --- (4,363)
Amortization of unearned
compensation............ --- 727 --- 630 1,782 --- --- --- 3,139
Issued 1,400 shares of
treasury stock for
options exercised....... --- --- --- --- --- 53 --- (18) 35
Unrealized gains on
securities available-for-
sale.................... --- --- --- --- --- --- 4,426 --- 4,426
-------- --------- --------- ----------- -------- ----------- -------- ---------- ----------
Balance at Dec. 31,
1995.................... $ 10,810 $ 258,086 $ (3,144) $ (15,763) $ (2,818) $ (52,042) $ 9,512 $ 363,430 $ 568,071
======== ========= ========= =========== ======== =========== ======== ========== ==========
SIX MONTHS ENDED
DECEMBER 31, 1996
Balance at June 30,
1996 $ 10,810 $ 259,007 $ (3,415) $ (15,132) $ (2,817) $ (73,510) $ 6,269 $ 377,836 $ 559,048
Net income................ --- --- --- --- --- --- --- 16,852 16,852
Dividends paid $0.375 per
share................... --- (49) --- --- --- --- --- (3,188) (3,237)
Purchased 125,500 shares
of treasury stock....... --- --- --- --- --- (7,769) --- --- (7,769)
Amortization of unearned
compensation............ --- 970 --- 630 --- --- --- --- 1,600
Purchase of common
stock for deferred
compensation............ --- --- (26) --- --- --- --- --- (26)
Issued 13,800 shares of
treasury stock for
options exercised....... --- --- --- --- --- 541 --- (192) 349
Unrealized gains on
securities
available-for-
sale.................... --- --- --- --- --- --- 1,396 --- 1,396
Balance at Dec. 31, -------- --------- --------- ----------- -------- ----------- -------- ---------- ----------
1996.................... $ 10,810 $ 259,928 $ (3,441) $ (14,502) $ (2,817) $ (80,738) $ 7,665 $ 391,308 $ 568,213
======== ========= ========= =========== ======== =========== ======== ========== ==========
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
3
<PAGE> 6
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended December 31,
1996 1995
---------- ----------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................... $ 16,852 $ 15,354
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 2,099 3,248
Provisions for loan and lease losses................................. 1,247 3,006
Stock-based compensation expense..................................... 1,600 3,139
Net decrease (increase) in loans held for sale....................... 7,251 (2,086)
Gain on sale of loans held-for-sale.................................. (487) (899)
Increase in deferred income taxes.................................... (704) (4,821)
Decrease (increase) in other assets.................................. 3,387 (6,460)
(Decrease) increase in other liabilities............................. 16,480 28,435
Other, net........................................................... 1,106 $ 1,502
---------- ----------
Net cash provided by operating activities.............................. $ 48,831 40,418
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of securities available-for-sale.......................... $ 75,200 $ 120,051
Maturities of securities held-to-maturity............................ --- 40,000
Sale of securities available-for-sale................................ 89,203 17,253
Sale of securities held-to-maturity.................................. --- 35,760
Purchase of securities available-for-sale............................ (81,596) (211,736)
Maturities and repayments of mortgage-backed and related securities
available-for-sale.................................................. 5,535 3,800
Maturities and repayments of mortgage-backed and related securities
held-to-maturity.................................................... --- 2,858
Purchase of mortgage-backed and related securities available-for-sale (127,736) (43,062)
Sale of mortgage-backed and related securities available-for-sale.... 40,413 ---
Net increase in loans and leases..................................... (166,531) (110,780)
Net decrease in foreclosed properties................................ 167 389
Net purchases of premises and equipment.............................. (873) (1,227)
Funding of bank-owned life insurance................................. (25,000) (25,000)
Funding of benefit plan trusts....................................... (2,065) (175)
---------- ----------
Net cash used in investing activities.................................. $ (193,283) $ (171,869)
---------- ----------
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements
4
<PAGE> 7
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
-------------------------
1996 1995
----------- -----------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits.............................................. 83,747 88,285
Net decrease in advance payments by borrowers for taxes and
insurance........................................................... (23,848) (25,737)
Net increase in borrowings............................................ 135,098 76,601
Treasury stock purchased net of shares reissued for options exercised (7,420) (4,328)
Cash dividends........................................................ (3,237) (1,356)
----------- -----------
Net cash provided by financing activities............................... 184,340 133,465
----------- -----------
Net increase in cash and cash equivalents............................... 39,888 2,014
Cash and cash equivalents:
Beginning of period................................................... 43,785 35,725
----------- -----------
End of period......................................................... $ 83,673 $ 37,739
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................................ 71,777 65,283
Income taxes........................................................ 6,166 11,838
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCIAL ACTIVITIES:
Transfer from loans to foreclosed properties.......................... 500 203
Mortgage loans securitized as mortgage-backed securities.............. 8,689 24,197
Financing of sales of foreclosed properties........................... 37 78
Transfer of loans to held-for-sale.................................... 1,323 2,329
Unrealized gain (loss) on available-for-sale securities, net of tax... 1,396 4,426
Transfer of securities from held-to-maturity to available-for-sale.... --- 157,715
</TABLE>
See accompanying Notes to Unaudited Consolidated Financial Statements.
5
<PAGE> 8
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Principles of Consolidation
The consolidated financial statements include the accounts and balances of
Security Capital Corporation (the "Company"), and its wholly-owned
subsidiaries, Security Bank S.S.B. and SECP Investment Corporation.
Security Bank S.S.B. and its subsidiaries are collectively referred to as
the "Bank." All significant intercompany accounts and transactions have
been eliminated in consolidation.
(2) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by GAAP
for complete financial statements. In the opinion of management, all
adjustments of a normal recurring nature necessary for a fair presentation
of the consolidated financial statements have been included. Operating
results for the three and six month periods ended December 31, 1996 are not
necessarily indicative of the results which may be expected for the entire
year ending June 30, 1997. Certain amounts in prior periods have been
reclassified to conform with the fiscal 1997 presentation.
(3) Stock Options
The following table represents a summary of stock option activity since June
30, 1996:
<TABLE>
Number of Shares Option Price
---------------- ------------------
<S> <C> <C>
Options outstanding at June 30, 1996 1,201,900 $ 25.00 to 61.00
Granted..................................... 10,000 $ 59.25
Exercised................................... (13,800) $ 25.00 to 61.00
Forfeited................................... (400) $ 61.00
---------------- ------------------
Options outstanding at December 31, 1996...... 1,197,700 $ 25.00 to 61.00
Options exercisable on December 31, 1996...... 1,128,700
</TABLE>
At December 31, 1996, there were options to purchase 71,100 shares
available for future grant.
(4) Commitments and Contingencies
The Company is a party to financial instruments with off-balance sheet risk
occurring in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit and
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amounts recognized in the consolidated financial statements.
The contract amounts of those instruments reflect the extent of involvement
the Company has in particular classes of financial instruments.
<TABLE>
<CAPTION>
Contractual or Notional Amounts
-------------------------------
December 31, June 30,
1996 1996
----------- --------
(In thousands)
<S> <C> <C>
Financial instruments whose contractual amounts represent
credit risk are as follows:
Commitments to extend credit................................ $ 76,495 $ 78,253
Commitments to sell loans under:
Mandatory commitments..................................... 24,149 18,533
Standby commitments....................................... 42,449 44,841
Unused and open-ended consumer lines of credit.............. 190,256 183,588
</TABLE>
6
<PAGE> 9
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(5) Loans and Leases
Loans and leases, net of participation interests sold, are summarized as
follows:
<TABLE>
December 31, 1996 June 30, 1996
--------------------- --------------------
Percent Percent Increase
Amount of Total Amount of Total (Decrease)
----------- -------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
MORTGAGE LOANS:
Residential one-to-four family....... $ 1,363,024 48.97% $1,282,271 49.01% $ 80,753
Residential multi-family............. 600,109 21.56 542,778 20.75 57,331
Home equity.......................... 481,336 17.29 433,897 16.58 47,439
Commercial real estate............... 143,152 5.15 138,498 5.29 4,654
Residential construction (1)......... 58,309 2.09 66,171 2.53 (7,862)
Commercial construction.............. 12,211 0.44 8,324 0.32 3,887
----------- -------- --------- -------- ---------
TOTAL MORTGAGE LOANS............... 2,658,141 95.50 2,471,939 94.48 186,202
----------- -------- --------- -------- ---------
COMMERCIAL LOANS, NOT SECURED BY
REAL ESTATE.......................... 71,541 2.57 77,258 2.95 (5,717)
CONSUMER LOANS (2)..................... 30,303 1.09 41,115 1.57 (10,812)
LEASES RECEIVABLE...................... 23,498 0.84 26,095 1.00 (2,597)
----------- -------- --------- -------- ---------
GROSS LOANS AND LEASES................. 2,783,483 100.00% 2,616,407 100.00% 167,076
======== ========
LESS:
Loans in process..................... 35,430 33,041 2,389
Allowance for loan and lease losses.. 40,786 39,804 982
Unearned income...................... 8,776 9,837 (1,061)
Net deferred loan origination fees... 160 191 (31)
----------- --------- ---------
TOTAL LOANS AND LEASES, NET............ $ 2,698,331 $2,533,534 $ 164,797
=========== ========= =========
</TABLE>
(1) Residential construction includes both one-to-four family and
multi-family construction loans.
(2) For purposes of this table, consumer loans do not include home equity
loans.
The Company serviced approximately 25,000 and 26,000 mortgage loans at
December 31, 1996 and June 30, 1996, respectively, which are owned by certain
institutional investors and other entities and are not included in the
Company's loan balances. The interest of institutional investors and others in
such loans aggregated approximately $1.5 billion at both December 31, 1996 and
June 30, 1996. Related escrow balances maintained in connection with the loan
servicing were $8.4 million and $26.5 million at December 31, 1996 and June 30,
1996, respectively. These funds were on deposit in special bank accounts, the
majority of which are maintained at the Bank.
Activity in the allowance for loan and lease losses is summarized as
follows:
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, December 31,
1996 1995 1996 1995
--------- --------- --------- ---------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Beginning balance............. $ 40,669 $ 35,751 $ 39,804 $ 33,724
Provision for loan losses... 250 1,329 1,247 3,006
Recoveries.................. 138 202 221 617
Charge-offs................. (271) (69) (486) (134)
--------- --------- --------- ---------
Ending balance................ $ 40,786 $ 37,213 $ 40,786 $ 37,213
========= ========= ========= =========
</TABLE>
7
<PAGE> 10
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Non-performing loans include troubled debt restructurings and loans on which
accrual of interest, amortization of deferred net fees or costs and accretion
of discount has ceased. The following table summarizes non-performing
loans and assets:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
---------- -------
<S> <C> <C>
Nonaccrual loans and leases:
Mortgage loans........................... $ 3,701 $ 3,516
Commercial loans......................... --- ---
Consumer loans........................... 153 130
Leases receivable........................ 60 ---
-------- -------
Total non-performing loans................. $ 3,914 $ 3,646
Foreclosed properties and real estate owned 122 289
-------- -------
Total non-performing assets................ $ 4,036 $ 3,935
======== =======
Non-performing loans to gross loans........ 0.14% 0.14%
Non-performing assets to total assets...... 0.11 0.11
</TABLE>
(6) Earnings per Share
Earnings per share of common stock for each of the three and six months
ended December 31, 1996 and 1995 have been determined by dividing net
income for the period by the weighted average number of shares of common
stock and common stock equivalents outstanding. Stock options are regarded
as common stock equivalents and are therefore considered in both primary
and fully diluted earnings per share calculations. Common stock
equivalents are computed using the treasury stock method.
The computation of earnings per share on net income is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
--------------------------------------------------------------------------
1996 1995
---------------------------------- ----------------------------------
Fully FULLY
Primary Diluted Primary DILUTED
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income $ 13,979,000 $ 13,979,000 $ 8,251,325 $ 8,251,325
============== ============= ============== ==============
Common shares issued.................. 10,810,000 10,810,000 10,810,000 10,810,000
Unallocated ESOP shares............... (586,389) (586,389) (636,830) (636,830)
Net treasury shares................... (1,605,377) (1,605,377) (1,111,976) (1,111,976)
Ungranted shares in Bank Incentive
Plan................................ (112,700) (112,700) (112,700) (112,700)
-------------- ------------- -------------- --------------
Weighted average common shares
outstanding......................... 8,505,534 8,505,534 8,948,494 8,948,494
Common stock equivalents based
on the treasury stock method........ 754,004 784,835 673,527 702,335
============== ============= ============== ==============
Total weighted average common
shares and equivalents outstanding.. 9,259,538 9,290,369 9,622,021 9,650,829
============== ============= ============== ==============
Earnings per share on net income...... $ 1.51 $ 1.50 $ 0.86 $ 0.85
============== ============= ============== ==============
</TABLE>
8
<PAGE> 11
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended December 31,
--------------------------------------------------------------------------
1996 1995
---------------------------------- ----------------------------------
Fully Fully
Primary Diluted Primary Diluted
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income $ 16,852,000 $ 16,852,000 $ 15,354,523 $ 15,354,523
============== ============== ============== ==============
Common shares issued................... 10,810,000 10,810,000 10,810,000 10,810,000
Unallocated ESOP shares................ (592,712) (592,712) (643,155) (643,155)
Net treasury shares.................... (1,575,463) (1,575,463) (1,099,916) (1,099,916)
Ungranted shares in Bank Incentive
Plan.................................. (112,700) (112,700) (112,700) (112,700)
-------------- -------------- -------------- --------------
Weighted average common shares
outstanding........................... 8,529,125 8,529,125 8,954,229 8,924,229
Common stock equivalents based
on the treasury stock method.......... 729,934 787,060 648,615 702,529
-------------- -------------- -------------- --------------
Total weighted average common
shares and equivalents outstanding.... 9,259,059 9,316,185 9,602,844 9,656,758
============== ============== ============== ==============
Earnings per share on net income....... $ 1.82 $ 1.81 $ 1.60 $ 1.59
============== ============== ============== ==============
</TABLE>
(7) Borrowings
Borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------
(In thousands)
Weighted
Variable Total Average
BORROWINGS MATURE: Fixed (Monthly) Amount Rate
- ------------------ ---------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Less than 12 months.. $ 348,767 $ --- $ 348,767 5.92%
13-24 months......... 175 100,000 100,175 5.69
25-36 months......... 102 100,000 100,102 5.69
37-48 months......... 104 50,000 50,104 5.67
49-60 months......... 105 100,000 100,105 5.67
After 60 months...... 772 --- 772 6.91
---------- ------------ ---------- --------
$ 350,025 $ 350,000 $ 700,025 5.80%
========== ============ ========== ========
June 30, 1996
--------------------------------------------------
(In thousands)
Weighted
Variable Total Average
BORROWINGS MATURE: Fixed (Monthly) Amount Rate
- ------------------ ---------- ------------ ---------- --------
Less than 12 months.. $ 263,663 $ --- $ 263,663 5.56%
13-24 months......... 50,175 150,000 200,175 5.63
25-36 months......... 102 --- 102 6.30
37-48 months......... 104 50,000 50,104 5.53
49-60 months......... 105 50,000 50,105 5.47
After 60 months...... 778 --- 778 6.92
---------- ------------ ---------- --------
$ 314,927 $ 250,000 $ 564,927 5.58%
========== ============ ========== ========
</TABLE>
9
<PAGE> 12
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Borrowings consist of funds borrowed in the federal funds market through
brokers on an overnight basis, or for a term not to exceed one year, and from
the Federal Home Loan Bank (FHLB). Federal funds purchased totaled
$243,000,000 and $255,000,000 at December 31, 1996 and June 30, 1996,
respectively, and are due within 12 months. FHLB advances accounted for the
remaining borrowings. The Company is required to maintain as collateral
unencumbered first mortgage loans in its portfolio such that the outstanding
balance of FHLB advances does not exceed 60% of the book value of this
collateral. At December 31, 1996, the Company estimates that potential
borrowings from the FHLB totaling approximately $833,844,000 would be
supportable with the Company's current asset base. This amount available is
reduced by existing FHLB borrowings which limit the potential incremental
amount available from the FHLB to $376,819,000. The Company also has other
sources of borrowings which would further add to its borrowing capacity.
The maximum amount of borrowings at any month-end during the six months ended
December 31, 1996 and the year ended June 30, 1996 was approximately $700.0
million and $564.9 million, respectively. The approximate average amount
outstanding was $570.1 million and $419.8 million over those same periods. The
weighted average interest rate paid was 5.65% and 5.79% during the six months
ended December 31, 1996 and the year ended June 30, 1996, respectively. None
of the borrowings may be prepaid. FHLB advances totaling $50 million due in
37-48 months are callable at the discretion of the FHLB every six months
beginning November 20, 1996.
(8) Securities Available-for-Sale
The amortized cost and estimated market values are as follows:
<TABLE>
December 31, 1996
-----------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-----------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
INVESTMENT SECURITIES:
US Treasury securities and obligations of
government corporations and agencies........ $ 108,620 $ 3,814 $ (448) $ 111,986
Corporate debt securities................... 115,502 475 --- 115,977
Municipal securities........................ 42,671 50 (22) 42,699
Other securities............................ 150 --- --- 150
---------- -------- ------- ----------
TOTAL INVESTMENT SECURITIES.................. $ 266,943 $ 4,339 $ (470) $ 270,812
========== ======== ======= ==========
MORTGAGE-BACKED & RELATED SECURITIES:
Federal Home Loan Mortgage Corporation...... $ 54,003 $ 1,348 $ --- $ 55,351
Government National Mortgage Association.... 2,369 131 (1) 2,499
Federal National Mortgage Association....... 24 1 --- 25
Collateralized Mortgage Obligations:
Federal Home Loan Mortgage Corporation...... 117,622 1,323 (92) 118,853
Federal National Mortgage Association....... 232,381 5,261 --- 237,642
---------- -------- ------- ----------
TOTAL MORTGAGE-BACKED AND RELATED
SECURITIES.................................. $ 406,399 $ 8,064 $ (93) $ 414,370
========== ======== ======= ==========
</TABLE>
10
<PAGE> 13
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The amortized cost and estimated market value of investment securities
available-for-sale by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Contractual maturities are as follows: December 31, 1996
-------------------------------
Estimated
Amortized Market
Cost Value
------------ ------------
(In thousands)
<S> <C> <C>
AVAILABLE-FOR-SALE INVESTMENT SECURITIES:
Due in one year or less.................... $ 83,706 $ 83,882
Due after one year through five years...... 129,328 129,303
Due after five years through ten years..... 10,505 10,518
Due after ten years........................ 43,404 47,109
------------ ------------
$ 266,943 $ 270,812
============ ============
</TABLE>
11
<PAGE> 14
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
When used in this Quarterly Report on Form 10-Q or future filings by the
Company with the Securities and Exchange Commission, in annual reports or press
releases or other public or shareholder communications, or in oral statements
made with the approval of an authorized executive officer, various words or
phrases are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. SUCH
FORWARD-LOOKING STATEMENTS INCLUDE WORDS AND PHRASES SUCH AS, "WILL LIKELY
RESULT," "ARE EXPECTED TO," "WILL CONTINUE," "IS ANTICIPATED," "ESTIMATE,"
"PROJECT" OR SIMILAR EXPRESSIONS AND VARIOUS OTHER STATEMENTS INDICATED HEREIN
WITH AN ASTERISK AFTER SUCH STATEMENTS. The Company wishes to caution readers
not to place undue reliance on any such forward-looking statements, which speak
only as of the date made, and to advise readers that various factors could
affect the Company's financial performance and could cause actual results for
future periods to differ materially from those anticipated or projected. Such
factors include, but are not limited to: (i) general market rates, (ii) general
economic conditions, (iii) legislative/regulatory changes, (iv) monetary and
fiscal policies of the U.S. Treasury and the Federal Reserve, (v) changes in
the quality or composition of the Company's loan and investment portfolios,
(vi) demand for loan products, (vii) deposit flows, (viii) competition, (ix)
demand for financial services in the Company's markets, and (x) changes in
accounting principles, policies or guidelines.
The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.
RESULTS OF OPERATIONS
NET INCOME. Net income for the three months ended December 31, 1996 increased
$5.7 million or 69.4% to $14.0 million, compared to $8.3 million for the three
months ended December 31, 1995. Earnings per share increased from $0.86 to
$1.51 over the same periods. Net income for the six months ended December 31,
1996, before a first quarter one-time after-tax charge of $7.9 million or 86
cents per share for an FDIC special assessment, increased $9.4 million or 61.3%
to $24.8 million from $15.4 million compared to the six months ended December
31, 1995. Earnings per share without the special assessment increased from
$1.60 to $2.68 per share over the same six month periods. Including the
after-tax effect of the non-recurring charge for the FDIC special assessment of
$7.9 million, net income was $16.9 million and earnings per share was $1.82 for
the six months ended December 31, 1996. See "Recent Regulatory Developments"
for a further discussion of the industry-wide FDIC special assessment.
The major components of these increases in earnings for the three and six month
periods, excluding the effects of the FDIC special assessment, are discussed in
the following paragraphs and generally include: (i) increases of $3.4 million
and $6.6 million, respectively, in net interest income; (ii) decreases of $1.1
million and $1.8 million, respectively, in the provision for loan and lease
losses; (iii) increases of $0.1 million and $1.1 million, respectively, in
non-interest income; (iv) decreases of $3.2 million and $3.9 million in
non-interest expenses, due to a pre-tax FDIC insurance premium refund of $1.3
million recognized in the quarter ended December 31, 1996; partially offset by
(v) increases of $2.0 million and $3.9 million in income tax expense.
NET INTEREST INCOME. Net interest income increased $3.4 million and $6.6
million, respectively, for the three and six months ended December 31, 1996
compared to the same periods in the prior year. The net interest margin
increased to 3.79% from 3.69% and to 3.77% from 3.69%, respectively, for the
periods. The interest rate spread increased to 2.94% from 2.70%, and to 2.92%
from 2.69% during the same periods. The increases in margin and spread were
due primarily to 19 and 18 basis point increases in the average yield on loans
and 7 and 5 basis point decreases in the average cost of interest-bearing
liabilities. The increase in margin and spread was partially offset by the
Bank's purchase of two Bank-owned life insurance policies in October 1995 and
July 1996 for $25.0 million each. The Company sold securities
available-for-sale to fund such purchases, thereby, effectively transferring
the amount of the purchase price of such policies out of interest-earning
assets. Growth in the average balances from the three and six months ended
December 31, 1995 to the three and six months ended December 31, 1996 were
$259.4 million and $256.9 million, respectively, for interest-earning assets
and $295.9 and $293.3 million, respectively, for interest-bearing liabilities.
12
<PAGE> 15
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Total interest income increased $6.7 million and $13.3 million for the three
and six months ended December 31, 1996, respectively. The increases were
primarily the result of increases in interest income on loans and leases and,
to a lesser extent, mortgage-backed and related securities. The increases in
average interest-earning assets combined with 17 and 18 basis point increases
in the yield on interest-earning assets due to adjustments in adjustable rate
mortgage loans and additions to longer-term fixed rate loan portfolios,
resulted in the overall increases in interest income.
Total interest expense increased $3.2 million and $6.7 million, respectively,
for the three and six months ended December 31, 1996 compared to the same
periods last year. The increases were attributable to $295.9 million and
$293.3 million increases in average interest-bearing liabilities for the three
and six months ended December 31, 1996, respectively, partially offset by 7
and 5 basis point decreases in the cost of interest-bearing liabilities. The
increase in average interest-bearing liabilities for the three and six month
periods included growth in borrowings of $196.3 million and $197.2 million,
respectively, and increases in deposits of $100.9 million and $98.1 million,
respectively. Brokered deposits accounted for $55.4 million and $41.7 million,
respectively, of the deposit increases. Borrowings and brokered deposits have
been used to facilitate the Company's growth, and are part of a longer-term
plan to leverage the Company's capital to facilitate an increase in net income
and return on equity.* For the three and six month periods, the average cost of
borrowings decreased 31 and 37 basis points, respectively, and the average
cost of deposits decreased 9 and 6 basis points, respectively, in accordance
with market rate declines over those same periods.
For further information on average balances, rates, spreads and the net
interest margin see the "Average Balance Sheet".
PROVISION FOR LOAN AND LEASE LOSSES. The provision for loan and lease losses
decreased $1.1 million and $1.8 million, respectively, for the three and six
months ended December 31, 1996, compared to the similar periods the previous
year, reflecting continued low net charge-offs and non-performing loan ratios.
Charge-offs exceeded recoveries by only $133,000 for each of the first two
quarters of the current fiscal year. The allowance for loan and lease losses
represented 1.47% of gross loans and leases receivable at both December 31,
1996 and December 31, 1995, and 1041.92% and 987.52% of non-performing loans,
respectively, for the same periods.
NON-INTEREST INCOME. Non-interest income increased $0.1 million and $1.1
million for the three and six month periods ended December 31, 1996,
respectively, as compared to the same periods the previous year. Both
increases were primarily the result of increases of $0.4 million and $1.2
million, respectively, in income from the increase in cash surrender values on
$50.0 million of single premium bank-owned life insurance policies purchased in
October 1995 and July 1996. Insurance and annuity commissions increased $0.2
million and $0.3 million, respectively, from the comparable three and six
month periods the prior year. Other income increased $0.4 million for the six
month period due to gains on disposals of fixed assets of $0.2 million and $0.2
million of increased lease rental income. Partially offsetting those increases
for the three and six month periods were decreases of $0.5 million and $0.7
million, respectively, in gains on sales of loans held-for-sale. Loan sales
decreased almost 50% from the same periods in the previous year as the Bank
retained more fixed rate loans in the current fiscal year to facilitate
portfolio growth.
NON-INTEREST EXPENSE. Non-interest expense, excluding the $13.2 million
pre-tax non-recurring charge for the FDIC special assessment expensed in
September 1996, decreased $3.2 million and $3.9 million for the three and six
months ended December 31, 1996 compared to the same periods the prior year.
The primary reasons for the decreases for the three and six month periods
include: (i) a decrease of $1.2 million to $0 in FDIC premiums for the second
quarter, due to an FDIC refund recognized in the quarter ended December 31,
1996; (ii) decreases of $0.5 million and $1.5 million, respectively, in
compensation and employee benefits; (iii) decreases in professional fees and
other expenses combined of $0.7 million and $0.9 million, respectively, mostly
for accruals and expenses related to litigation, and (iv) decreases of $0.8
million and $0.5 million, respectively, in marketing expense. The decrease in
compensation and employee benefits was due to the elimination of $0.9 million
in quarterly expense from the amortization of the Bank Incentive Plan (BIP)
which was completed in December 1995. Marketing expenses were higher in the
prior year due to the kick-off of a new "Lifetime Bank" campaign.
The FDIC special assessment was a $13.2 million pre-tax, or $7.9 million
after-tax, non-recurring expense recognized in the quarter ended September 30,
1996 to recapitalize the Savings Association Insurance Fund ("SAIF") of the
FDIC. As a result of the recapitalization, the Bank also received a refund of
its FDIC premium in the amount of $1.3 million pre-tax, for the three months
ended December 31, 1996. For a further discussion see "Recent Regulatory
Developments."
13
<PAGE> 16
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
INCOME TAX EXPENSE. Income tax expense, excluding the benefit for the FDIC
special assessment charge, increased $2.0 million and $3.9 million for the
three and six months ended December 31, 1996 compared to the same periods the
previous year. Including the non-recurring charge for the FDIC special
assessment, income tax expense decreased $1.3 million for the six month period
ended December 31, 1996. The increase for the three month period was mostly
due to the higher pre-tax income and the decrease for the six month period was
largely the result of lower pre-tax income due to the FDIC special assessment
expensed in the first quarter. Income tax expense for both periods also was
offset by higher non-taxable income than the previous year and the recognition
of certain deferred state income tax benefits.
AVERAGE BALANCE SHEET
The following tables set forth certain information relating to the Company's
unaudited consolidated statements of financial condition and the unaudited
consolidated statements of income for the three and six months ended December
31, 1996 and 1995 and reflect the average yield on assets and average cost of
liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balance of interest-bearing assets or
liabilities, respectively, for the periods shown. Average balances are derived
principally from average daily balances and include non-accruing loans. The
yields and costs include fees which are considered adjustments to yields.
Interest income on non-accruing loans is reflected in the period it is
collected and not in the period it is earned. Such amounts are not material to
net interest income or net change in net interest income in any period.
Interest income and average yield on tax-exempt securities available-for-sale
and held-to-maturity are presented on a before tax-equivalent basis, applying a
federal income tax rate of 35%.
14
<PAGE> 17
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET THREE MONTHS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1996 1995
-------------------------------------- -----------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------ ----------- ---------- ------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
FHLB deposits and other interest
bearing deposits.................... $ 14,500 $ 210 5.79% $ 5,561 $ 80 5.78%
Loans held-for-sale..................... 25,155 439 6.98 32,972 503 6.10
Securities available-for-sale:
Securities-taxable..................... 255,721 4,177 6.53 213,358 3,309 6.20
Securities-tax-exempt.................. 42,831 668 6.24 64,574 983 6.09
Mortgage-backed and related
securities............................ 348,103 6,063 6.97 232,894 4,353 7.48
Securities held-to-maturity:
Securities-taxable..................... --- --- --- 65,760 996 6.06
Securities-tax-exempt.................. --- --- --- 25,035 377 6.03
Mortgage-backed and related
securities............................ --- --- --- 23,219 418 7.20
Loans and leases........................ 2,712,103 55,735 8.22 2,478,386 49,783 8.03
FHLB stock.............................. 22,631 398 7.03 19,881 351 7.06
------------ ----------- ----- ------------ ----------- -----
Total interest-earning assets........... $ 3,421,044 $ 67,690 7.91% $ 3,161,640 $ 61,153 7.74%
Cash and non-interest-bearing deposits.. 31,758 31,229
Bank-owned life insurance............... 51,976 21,822
Allowance for loan losses............... (40,983) (36,238)
Deferred fees and other................. (220) (316)
Other non-interest-earning assets....... 95,939 96,914
------------ ------------
Total assets........................... $ 3,559,514 $ 3,275,051
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits................................ $ 2,207,252 $ 26,703 4.84% $ 2,106,336 $ 25,956 4.93%
Borrowings.............................. 581,163 8,218 5.66 384,868 5,745 5.97
Advances from borrowers for taxes and
insurance.............................. 44,936 314 2.80 46,290 292 2.52
------------ ----------- ----- ------------ ------------ -----
Total interest-bearing liabilities..... $ 2,833,351 $ 35,235 4.97% $ 2,537,494 $ 31,993 5.04%
Non-interest-bearing demand account..... 71,060 74,863
Other liabilities....................... 91,771 95,558
Stockholders' equity.................... 563,332 567,136
------------ ------------
Total liabilities and stockholders'
equity................................. $ 3,559,514 $ 3,275,051
============ ============
Interest spread......................... 2.94% 2.70%
===== =====
Net interest income..................... $ 32,455 $ 29,160
Net interest margin (net yield on ============ ============
interest-earning assets)............... $3.79%(1) 3.69%(1)
Average interest-earning assets to ======= =======
average interest-bearing liabilities... 120.74% 124.60%
======= =======
</TABLE>
- ---------------
(1) If single premium Bank-owned life insurance was considered an
interest-earning asset, net interest margins would have been 3.87% and 3.72%
for the three months ended December 31, 1996 and 1995, respectively.
15
<PAGE> 18
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEET SIX MONTHS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995
-------------------------------------- ------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST YIELD/COST BALANCE INTEREST YIELD/COST
------- -------- ----------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
FHLB deposits and other interest
bearing deposits....................... $ 9,514 $ 270 5.68% $ 5,064 $ 146 5.78%
Loans held-for-sale..................... 26,415 870 6.59 36,436 1,166 6.40
Securities available-for-sale:
Securities-taxable..................... 262,753 8,756 6.66 173,879 5,591 6.43
Securities-tax-exempt.................. 48,009 1,483 6.18 65,204 1,970 6.04
Mortgage-backed and related
securities............................. 335,619 11,685 6.96 215,399 8,101 7.52
Securities held-to-maturity:
Securities-taxable..................... --- --- --- 101,837 2,898 5.69
Securities-tax-exempt.................. --- --- --- 31,818 939 5.90
Mortgage-backed and related
securities............................. --- --- --- 29,986 1,029 6.86
Loans and leases........................ 2,664,254 109,057 8.19 2,432,742 97,489 8.01
FHLB stock.............................. 22,628 783 6.92 19,881 689 6.93
------------ ---------- ------- ------------ ----------- -------
Total interest-earning assets........... $ 3,369,192 $ 132,904 7.89% $ 3,112,246 $ 120,018 7.71%
Cash and non-interest-bearing deposits.. 31,251 30,090
Bank-owned life insurance............... 51,062 10,911
Allowance for loan losses............... (40,565) (35,356)
Deferred fees and other................. (227) (404)
Other non-interest-earning assets....... 95,036 95,955
------------ ------------
Total assets........................... $ 3,505,749 $ 3,213,442
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits................................ $ 2,176,746 $ 52,655 4.84% $ 2,078,602 $ 50,882 4.90%
Borrowings.............................. 570,123 16,120 5.65 372,958 11,221 6.02
Advances from borrowers for taxes and
insurance.............................. 42,916 574 2.68 44,949 569 2.53
------------ ---------- ------- ------------ ----------- -------
Total interest-bearing liabilities..... $ 2,789,785 $ 69,349 4.97% $ 2,496,509 $ 62,672 5.02%
Non-interest-bearing demand account..... 69,774 71,807
Other liabilities....................... 82,739 83,211
Stockholders' equity.................... 563,451 561,915
------------ -------------
Total liabilities and stockholders'
equity................................. $ 3,505,749 $ 3,213,442
============ ============
Interest spread......................... 2.92% 2.69%
======= =======
Net interest income..................... $ 63,555 $ 57,346
========== ===========
Net interest margin (net yield on
interest-earning assets)............... 3.77%(1) 3.69%(1)
======= =======
Average interest-earning assets to......
average interest-bearing liabilities... 120.77% 124.66%
======= =======
</TABLE>
- -----------------------------
(1) If single premium Bank-owned life insurance was considered an
interest-earning asset, the net interest margins would have been 3.85% and
3.70% for the six months ended December 31, 1996 and 1995, respectively.
16
<PAGE> 19
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION. The Company's total assets increased $220.6 million to
$3.658 billion at December 31, 1996 from $3.437 billion at June 30, 1996. The
Company's ratio of stockholders' equity to total assets was 15.53% at December
31, 1996 compared to 16.26% at June 30, 1996.
Securities available-for-sale are reflected at market value. While securities
available-for-sale increased only $547,000 to $685.2 million at December 31,
1996 from $684.6 million at June 30, 1996, the portfolio mix changed
significantly with an increase of $82.0 million of Collateralized Mortgage
Obligations (CMOs) and a similar decrease in investment securities.
The Company held approximately $356.5 million in CMOs at December 31, 1996
compared to $269.9 million at June 30, 1996. This growth is part of a long-term
plan to leverage the Company's capital to facilitate an increase in net
income.* In accordance with Company policy, each individual CMO security
represents less than 1% of the Company's total assets and, prior to purchase,
was determined not to be a "high risk" mortgage security as defined by the
FDIC. The Company's CMOs are issued by government agencies and are tested
quarterly to ensure they continue not to be high risk.
Loans and leases, net, increased $164.8 million to $2.698 billion at December
31, 1996 from $2.534 billion at June 30, 1996. The increase was primarily in
residential one-to-four-family, multi-family and home equity mortgage loans,
and was funded with increased deposits and borrowings.
The Company emphasizes high asset quality in both its investment portfolio and
its lending activities. Non-performing assets were 0.11% of total assets at
both December 31, 1996 and June 30, 1996. There were net loan charge-offs of
$0.3 million during the six months ended December 31, 1996. None of the
Company's investment or mortgage-backed and related securities were categorized
as non-performing assets at December 31, 1996.
In July 1996, the Company sold securities to fund the purchase of a second
$25.0 million of single premium Bank-owned life insurance on its officers.
Increases in the cash surrender value are reported in non-interest income. The
Company is utilizing this vehicle because of its attractive tax-equivalent
return and intends to use proceeds from the policy benefits to fund and offset
future employee benefit costs.*
Deposits increased $83.7 million to $2.284 billion at December 31, 1996 from
$2.200 billion at June 30, 1996. The increase was primarily due to brokered
money market deposits which increased $78.2 million. Total deposits include
$434.8 million of brokered money market deposits, representing 19.0% of total
deposits at December 31, 1996 compared to 16.2% of total deposits at June 30,
1996.
Borrowings increased $135.1 million to $700.0 million at December 31, 1996 from
$564.9 million at June 30, 1996. As of December 31, 1996 and June 30, 1996,
FHLB advances accounted for $457.0 million and $309.9 million and federal funds
purchased accounted for $243.0 million and $255.0 million of total borrowings,
respectively. Borrowings are used to supplement deposits to fund growth in
investments and loans. This growth is part of a long-term plan to leverage the
Company's capital to facilitate an increase in net income.*
ASSET/LIABILITY MANAGEMENT
To manage vulnerability to interest rate changes, management closely monitors
the Company's interest rate risk position. The Company seeks to enhance its
income while managing its interest rate risk primarily through the structuring
of its balance sheet in order to reduce its vulnerability to changes in
interest rates. Although the Company's assets and liabilities maturing and
repricing within one year are relatively well-matched with a cumulative
negative gap ratio as of December 31, 1996 of 6.29%, a cumulative negative gap
ratio of 23.43% and 15.67% existed at three and six months as of December 31,
1996, respectively.
The following Asset/Liability Management Schedule sets forth the amounts of
interest-earning assets and interest-bearing liabilities outstanding at
December 31, 1996, which are anticipated by the Company to mature or reprice in
each of the periods shown, based on the information and assumptions set forth
in the notes below. This table does not reflect the impact of any hedging
activity or financial techniques utilized by the Company to mitigate interest
rate risk, because it would not have a material effect on the Company's "gap"
position.* Certain shortcomings are inherent in the method of analysis
presented in the following table. For
17
<PAGE> 20
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in varying degrees to changes in market
interest rates.* The interest rates on certain types of assets and liabilities
may fluctuate in advance of changes in market interest rates, while interest
rates on other assets or liabilities may lag behind changes in market rates.*
Additionally, certain assets, such as ARM loans and mortgage-backed and related
securities, have features which restrict changes in interest rates on a
short-term basis and over the life of the asset such as 1% annual caps and
lifetime caps. Also, the proportion of ARM loans and mortgage-backed and
related securities in the Company's portfolios could decrease in future periods
if market interest rates remain at or decrease below current levels due to the
exercise of conversion options and refinancing activity.* While prepayments of
loans have been estimated based on current market interest rates, in the event
of a change in interest rates, prepayment and early withdrawal levels would
likely deviate significantly from those assumed in the table.*
At December 31, 1996, total interest-bearing liabilities maturing or repricing
within three months exceeded total interest-earning assets maturing or
repricing in the same period by $856.9 million, representing a negative
cumulative three month gap ratio of 23.43%, compared to a negative $866.5
million and a negative 25.21%, respectively, as of June 30, 1996. The six
month cumulative gap and gap ratio are, respectively, a negative $573.3 million
and a negative 15.67% at December 31, 1996, compared to a negative $620.6
million and a negative 18.06% at June 30, 1996. The one year cumulative gap
and gap ratio are, respectively, a negative $230.2 million and a negative
6.29% at December 31, 1996, compared to a negative $251.6 million and a
negative 7.32% at June 30, 1996. The Company extends the maturities of its
borrowed funds and deposits as opportunities arise.* These efforts, as well as
increases in the variable rate home equity loans portfolio have offset the
effect on the one year gap of brokered insured money market deposit account
increases, thereby causing a decrease in the one year cumulative negative gap.*
The Company's negative gap position indicates more liabilities will reprice
within one year than assets and the Company may generally benefit in the
short-term from a decline in interest rates.* When interest rates first
decline, the lag in the downward adjustment in the ARM loan yields will have a
short-term positive effect; however, should the decline in interest rates
accelerate or such rate environment be prolonged, the Company's loan and
mortgage-backed securities portfolios may experience an increase in prepayments
which would result in lower yields or a decrease in balances.* During periods
of rising interest rates, not only will liabilities reprice more quickly, based
on the "gap," but increases in the yield on interest-earning assets may occur
with a lag and to a lesser extent than may be anticipated from the gap ratio
due to the structuring of the Company's one-year ARM loans utilizing "Cost of
Funds Indices" and 1% annual caps.* Accordingly, the Company may be adversely
affected by rising interest rates as the lag effect of the "Cost of Funds
Indices" causes the yields on the ARM loans to not increase even though general
interest rates begin to rise.* In addition, rising interest rates may cause
the Company to experience a decrease in prepayments on loans and
mortgage-backed securities from that used in calculating the "gap" which would
result in fewer funds available to reinvest at the higher rates.*
18
<PAGE> 21
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
ASSET/LIABILITY MANAGEMENT SCHEDULE
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
----------------------------------------------------------------------------------
REPRICING OR MATURING
----------------------------------------------------------------------------------
MORE THAN MORE THAN
THREE SIX MORE THAN
WITHIN MONTHS TO MONTHS ONE YEAR OVER
THREE SIX TO ONE TO FIVE FIVE
MONTHS MONTHS YEAR YEARS YEARS TOTAL
---------- ---------- -------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
(In thousands) (In thousands)
INTEREST-EARNING ASSETS: (1)
Mortgage loans: (2)
Fixed.................................... $ 22,217 $ 24,536 $ 50,511 $ 210,668 $ 146,925 $ 454,857
Adjustable............................... 325,717 417,123 566,430 346,562 --- 1,655,832
Home equity.............................. 222,701 21,454 40,223 146,266 43,071 473,715
Commercial loans (2) ...................... 34,163 3,119 6,395 22,068 --- 65,745
Consumer loans (2) ........................ 10,155 4,571 5,572 9,638 29 29,965
Leases receivable (2) ..................... 1,504 1,181 1,948 6,418 7,166 18,217
Loans held-for-sale ....................... 33,052 --- --- --- --- 33,052
Investment securities available-for-sale:
Mutual Funds ............................. 18,534 --- --- --- --- 18,534
U.S. Treasury securities and
obligations of U.S. Gov't
corporations and agencies............... 3,435 --- --- 78,674 11,343 93,452
Municipal bonds........................... 5,100 --- 5,248 32,351 --- 42,699
Corporate debt securities................. 35,018 20,154 10,175 50,630 --- 115,977
Mortgage-backed and related
securities................................ 384,729 1,326 2,488 13,746 12,081 414,370
Other..................................... --- --- --- --- 150 150
Other assets:
Interest-bearing deposits................. 50,977 --- --- --- --- 50,977
FHLB stock................................ --- --- --- --- 22,951 22,951
---------- ---------- ------------ --------- ---------- ------------
TOTAL INTEREST-EARNING ASSETS........... $1,147,302 $ 493,464 $ 688,990 $ 917,021 $ 243,716 $ 3,490,493
========== ========== ============ ========= ========== ============
INTEREST-BEARING LIABILITIES: (1)
Deposits: (3)
Interest-bearing demand accounts ....... $ 92,313 $ --- $ --- $ --- $ --- $ 92,313
Money market accounts................... 701,873 --- --- --- --- 701,873
Passbook accounts....................... 278,720 --- --- --- --- 278,720
Certificates of deposit................. 273,324 209,639 295,874 379,955 324 1,159,116
Borrowings:
Advances and other borrowings............ 648,605 163 50,000 485 772 700,025
Advances from borrowers for taxes
and insurance .......................... 9,396 --- --- --- --- 9,396
---------- ---------- ------------ --------- ---------- ------------
TOTAL INTEREST-BEARING LIABILITIES $2,004,231 $ 209,802 $ 345,874 $ 380,440 $ 1,096 $ 2,941,443
========== ========== ============ ========= ========== ============
Excess (deficiency) of interest-earning
assets over interest-bearing liabilities $ (856,929) $ 283,662 $ 343,116 $ 536,581 $ 242,620 $ 549,050
========== ========== ============ ========= ========== ============
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities..................... $ (856,929) $ (573,267) $ (230,151) $ 306,430 $ 549,050
========== ========== ============ ========= ==========
Cumulative excess (deficiency) of
interest-earning assets over interest-
bearing liabilities as a percent of total
assets .................................. (23.43)% (15.67)% (6.29)% 8.38% 15.01%
========== ========== ============ ========== ==========
Total assets for above ratios.............. $3,657,959 $ 3,657,959 $ 3,657,959 $3,657,959 $3,657,959
========== ========== ============ ========== ==========
</TABLE>
(Notes on following page)
19
<PAGE> 22
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Notes to Asset/Liability Management Schedule
(1) Adjustable and floating-rate assets and liabilities are included in the
period in which interest rates are next scheduled to adjust rather than in
the period in which they are due. Fixed-rate assets are included in the
periods in which they are scheduled to be repaid based on scheduled
amortization, in each case adjusted to take into account estimated
prepayments based on the Company's historical prepayment statistics. For
home equity and mortgage loans and mortgage-backed securities, annual
prepayment rates ranging from 5% to 28% were used.
(2) Balances have been reduced for undisbursed loan proceeds, unearned
discounts, deferred loan fees and allowances for loan losses, which
aggregated $85.2 million at December 31, 1996.
(3) Although the Company's interest-bearing demand accounts, money market
accounts and passbook accounts generally are subject to immediate
withdrawal, management considers a certain amount of such accounts to be
core deposits having significantly longer effective maturities based on
the Company's retention of such deposits in changing interest rate
environments. However, in managing the Company's interest rate risk,
management considers these deposits to be interest rate sensitive because
the rates paid may vary with market conditions.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management for the Company is both a daily and long-term component of
the Company's management strategy. The Company maintains liquidity levels
sufficient to accommodate normal deposit fluctuations, the payment of dividends
and various other funding needs, and to meet its asset and liability management
objectives. Excess funds generally are invested in short-term investments such
as overnight deposits at the FHLB-Chicago. In the event that the Company
should require funds in excess of those generated through its primary sources,
additional funds are available through the use of FHLB-Chicago advances,
reverse repurchase agreements, and the purchase of federal funds.
The Company's most liquid assets are cash, interest-bearing and
non-interest-bearing bank balances, loans held for sale and securities
available-for-sale. The levels of these assets are dependent on the Company's
operating, financing, lending and investing activities during any given period.
These assets totaled $801.9 million and $768.7 million at December 31, 1996
and June 30, 1996, respectively. The Company's ratio of these assets to total
deposits was 35.1% and 34.9% at December 31, 1996 and June 30, 1996,
respectively.
The primary investing activity of the Company is the origination of loans. The
Company originates fixed- and adjustable-rate residential, multi-family and
commercial mortgage loans, non-mortgage commercial loans and consumer loans.
During the six months ended December 31, 1996 and 1995, the Company originated
loans and leases totaling $530.8 million and $545.2 million, respectively,
purchased loans totaling $22.1 million and $20.9 million, respectively, and
sold loans totaling $89.9 million and $174.2 million, respectively. Loan sales
decreased significantly during the six months ended December 31, 1996 compared
to the same period the previous year as the Company retained more fixed rate
loans in the current fiscal year to facilitate portfolio growth.
During the six months ended December 31, 1996 and 1995, the Company received
principal repayments on loans and leases totaling $310.5 million and $282.1
million, respectively, and principal repayments on mortgage-backed and related
securities of $5.5 million and $6.7 million, respectively.
The Company experienced net increases in deposits of $83.7 million and $88.3
million for the six months ended December 31, 1996 and 1995, respectively.
Brokered money market deposits represented $78.2 million of the increase for
the six months ended December 31, 1996 and $29.9 million of the increase for
the six months ended December 31, 1995. All of the Company's brokered deposits
are in money market accounts. The level of deposit inflows during any given
period is heavily influenced by factors such as the general level of short- and
long-term interest rates in the economy, as well as alternative yields that
investors may obtain on competing investment instruments such as money market
mutual funds. Deposits continue to be the Company's primary funding source
supplemented by borrowings.*
Certificates of deposit which are scheduled to mature in one year or less at
December 31, 1996 totaled $778.8 million. Based on historical experience,
management believes that a significant portion of such deposits will remain
with the Company.*
20
<PAGE> 23
SECURITY CAPITAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
contains provisions for capital standards that require banks to have a minimum
3% leverage ratio (Tier I capital to adjusted total assets), a minimum 4% Tier
I capital to risk-weighted assets ratio and a minimum 8% qualifying total
capital to risk-weighted assets ratio. The Bank's regulatory capital exceeds
all minimum standards required under FDICIA.
A summary of the Bank's regulatory capital amounts are as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
------------- -------------
(Dollars in thousands)
<S> <C> <C>
Risk-based capital:
Equity.......................................................................... $ 436,986 $ 419,660
Less goodwill and other intangibles............................................. --- ---
Less unrealized gain on available-for-sale securities, net of tax............... (7,738) (6,767)
------------- -------------
Total Tier I capital............................................................. 429,248 412,893
Allowable allowance for loan and lease losses (Tier II capital).................. 31,952 30,264
------------- -------------
Qualifying total capital......................................................... $ 461,200 $ 443,157
============= =============
Risk-weighted assets............................................................. $ 2,547,339 $ 2,411,582
============= =============
Tier I leverage ratio........................................................... 12.38% 12.72%
============= =============
Tier I capital to risk-weighted assets.......................................... 16.85% 17.12%
============= =============
Qualifying total capital to risk-weighted assets................................ 18.11% 18.38%
============= =============
</TABLE>
RECENT REGULATORY DEVELOPMENTS
Deposits of the Bank currently are insured to applicable limits by the FDIC
under the Savings Associations Insurance Fund ("SAIF"). The FDIC also insures
commercial bank deposits under the Bank Insurance Fund ("BIF"). Premium levels
are set in order to permit the funds to be capitalized at a level equal to
1.25% of total fund deposits. Assessment rate changes made in 1995 created a
deposit insurance premium disparity between the two funds. While most BIF
members were paying only a nominal $2,000 annual premium, SAIF members were
paying average rates of 23.4 basis points of deposits.
On September 30, 1996, Congress passed legislation to address the deposit
insurance premium disparity. The "Deposit Insurance Funds Act of 1996" (the
"DIF Act") included as part of an Omnibus Appropriations Bill, directed the
FDIC to impose a special assessment on SAIF-assessable deposits at a rate that
would cause the SAIF to achieve its designated reserve ratio of 1.25% of
SAIF-insured deposits as of October 1, 1996. The DIF Act required that the
special assessment be applied against the SAIF-assessable deposits held by
institutions as of March 31, 1995. Pursuant to a final rule issued by the FDIC
on October 16, 1996, the special assessment rate was determined to be 65.7
basis points. This one-time special assessment fully capitalized the SAIF and
was collected on November 27, 1996.
The amount of the assessment to the Bank was $13.2 million dollars. The
special assessment was recorded on September 30, 1996 and had the effect of
reducing the Bank's earnings and capital by the after-tax amount of the
assessment as of the date of enactment, which was $7.9 million or 86 cents per
share. As described below, with the recapitalization of the SAIF, it is
currently anticipated that BIF and SAIF regular deposit insurance premiums will
be comparable and FDIC premium expense is expected
21
<PAGE> 24
to therefore be reduced in future periods.* The DIF Act also imposes a
separate assessment on both BIF and SAIF member institutions related to the
retirement of certain bond obligations, which such assessments, as explained
below, will be imposed at a greater rate on SAIF institutions for a three year
period beginning January 1, 1997.
The FDIC published a final rule on December 24, 1996, establishing a permanent
base assessment schedule for the SAIF and setting assessment rates at a range
of 4 to 31 basis points. The rule provides for an adjusted assessment schedule
reducing these rates by 4 basis points to reflect current conditions, producing
an effective SAIF assessment range of 0 to 27 basis points beginning October 1,
1996. This assessment range is comparable to the current schedule for
BIF-institutions. A special interim rate schedule ranging from 18 to 27 basis
points applied to SAIF member savings associations for the last quarter of
calendar year 1996, reflecting the fact that assessments related to certain
bond obligations of the Financial Corporation ("FICO"), which were issued to
resolve the savings and loan crisis in the 1980's, was included in the SAIF
rates for these institutions during that period. Because the Bank is a "Sasser
bank" (a bank that converted its charter from a savings association to a
savings bank, yet remained a SAIF member in accordance with the so-called
"Sasser Amendment"), it was not assessed this interim rate and received a
one-time credit in the amount of $0.8 million after-tax or $0.08 per share,
for its entire FDIC premium for the quarter ended December 31, 1996.
The DIF Act addresses other matters which will affect the Bank. The FICO
obligations will be shared by all insured depository institutions beginning
after December 31, 1996. This obligation had previously been the sole
responsibility of SAIF-insured institutions and had been funded through SAIF
assessments. The DIF Act eliminated the statutory link between FICO's
assessments and amounts authorized to be assessed by the SAIF, effective
January 1, 1997. All insured institutions will pay an annual assessment to
fund interest payments on the FICO bonds. Beginning in 1997, BIF-member
institutions will pay one-fifth the rate to be paid by SAIF members, for the
first three years. The annual FICO assessment is 1.3 and 6.5 basis points of
deposits for BIF and SAIF members, respectively. After January 1, 2000, BIF
and SAIF members will share the FICO payments on a pro-rata basis, which is
assessed at 2.4 basis points, until the bonds mature in 2017.
In addition, the DIF Act provides for the merger of BIF and SAIF into a single
Deposit Insurance Fund. This provision will be effective January 1, 1999,
assuming that no insured depository institution is a savings association on
that date. This legislation contemplates that the savings association charter
will be phased out over that period of time. The DIF Act also calls for the
Secretary of the Treasury to undertake a study concerning the development of a
common charter for all insured depository institutions and the abolition of
separate and distinct charters for banks and savings associations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In fiscal 1996, the Company entered into a settlement agreement with
plaintiffs who filed a purported class action lawsuit against the
Company, the Bank and the members of the Boards of Directors of the
Company and the Bank. The settlement agreement was approved by the
court on October 8, 1996, with the court also at that time certifying
the plaintiff class for purposes of the settlement and ordering that
all members of the class who had not excluded themselves were to
receive settlement payments in accordance with the terms of the
agreement. The action was filed in Cook County, Illinois in 1994 by two
Illinois residents seeking to act as named plaintiffs for a plaintiff
class and alleging fraud, misrepresentation and breach of fiduciary
duties in connection with the Bank's 1992 charter conversion, the
Bank's 1993 mutual to stock conversion, and the Company's 1994 proxy
solicitation. Plaintiffs alleged that the purported class of
depositors were prevented by the acts complained of from receiving all
of the stock they subscribed for in the 1993 public offering. The
defendants have vigorously contested the charges and the settlement
agreement recognizes that defendants deny any wrong doing or liability.
A $12.0 million settlement fund was established by or on behalf of the
defendants and was divided (net of attorneys' fees and administrative
expenses) among participating members of the class in accordance with
the settlement agreement. The financial statement effects of the
settlement have been taken for the fiscal year ended June 30, 1996.
Due to the legal-related expense provisions taken in prior periods and
$6.0 million in insurance coverage, the impact of the settlement on
net income for the fiscal year ended June 30, 1996 was $2.7 million
after tax or 28 cents per share.
ITEM 2. CHANGES IN SECURITIES
None
22
<PAGE> 25
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on October 23,
1996. There were 9,239,131 shares of Common Stock which could be
voted and 8,161,927 shares present at the meeting by the holders
thereof in person or by proxy, which constituted a quorum. The
following is a summary of the results of the votes.
<TABLE>
<CAPTION>
Number of Votes
----------------------------
For Withheld
--------- --------
<S> <C> <C> <C>
Nominees for Director for Three-Year Term Expiring in 1999
Robert A. Schaefer 8,057,984 103,943
Gustav J. Dreyer, Jr. 8,046,541 115,386
Arthur C. Meyer 8,041,992 119,935
For Against Abstain
--------- ------- --------
Ratification of appointment of KPMG Peat Marwick L.L.P. as
independent auditor for fiscal year ending June 30, 1997 8,083,287 44,630 34,010
</TABLE>
ITEM 5. OTHER INFORMATION
On January 22, 1997, the Board of Directors declared a quarterly
cash dividend of 30 cents per share of Common Stock to be paid February
28, 1997, to shareholders of record as of February 14, 1997. The
Company anticipates regular quarterly dividends will be paid.* The
amount and appropriateness of future dividends will be based on
earnings and market conditions, and will be reviewed quarterly by the
Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: There are no exhibits to this report, other than
the Financial Data Schedule attached hereto as Exhibit
27. See Note (6) to the Notes to the Consolidated
Financial Statements (unaudited) for the information
required by Exhibit 11 - Computation of Earnings per
share.
(b) No reports on Form 8-K were filed during the quarter for
which this report was filed.
23
<PAGE> 26
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
24
<PAGE> 27
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.
SECURITY CAPITAL CORPORATION
Dated: February 12, 1997 By: /s/ Wm. G. Schuett Sr.
----------------- -------------------------------------
Wm. G. Schuett, Sr., President and
Chief Executive Officer
Dated: February 12, 1997 By: /s/ Roger D. Kamin
----------------- --------------------------------------
Roger D. Kamin, Senior Vice President,
CFO and Secretary/Treasurer
25
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 32,696
<INT-BEARING-DEPOSITS> 50,977
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 685,182
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,739,117
<ALLOWANCE> 40,786
<TOTAL-ASSETS> 3,657,959
<DEPOSITS> 2,284,158
<SHORT-TERM> 348,767
<LIABILITIES-OTHER> 105,563
<LONG-TERM> 351,258
0
0
<COMMON> 10,810
<OTHER-SE> 557,403
<TOTAL-LIABILITIES-AND-EQUITY> 3,657,959
<INTEREST-LOAN> 109,624
<INTEREST-INVEST> 22,188
<INTEREST-OTHER> 270
<INTEREST-TOTAL> 132,082
<INTEREST-DEPOSIT> 52,655
<INTEREST-EXPENSE> 69,349
<INTEREST-INCOME-NET> 62,733
<LOAN-LOSSES> 1,247
<SECURITIES-GAINS> 13
<EXPENSE-OTHER> 47,483
<INCOME-PRETAX> 25,185
<INCOME-PRE-EXTRAORDINARY> 16,852
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,852
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.81
<YIELD-ACTUAL> 3.77
<LOANS-NON> 3,914
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 39,804
<CHARGE-OFFS> 486
<RECOVERIES> 221
<ALLOWANCE-CLOSE> 40,786
<ALLOWANCE-DOMESTIC> 40,786
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
