<PAGE>
<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-25728
-------
Security Federal Bancorp, Inc.
- -----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-1134627
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2301 University Boulevard, Tuscaloosa, Alabama 35401
- ---------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (205) 345-8800
--------------
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 ninety days. Yes X No
---- ------
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date. 671,469
-----------<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
September 30, 1997
- -----------------------------------------------------------------
CONTENTS
--------
Page
----
INDEPENDENT ACCOUNTANTS REPORT 1
FINANCIAL INFORMATION:
Consolidated Statements of Financial Condition 2-3
Consolidated Statements of Income 4-5
Consolidated Statements of Cash Flows 6-7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-14
See Independent Accountant's Report.<PAGE>
<PAGE>
1
[LETTERHEAD OF JAMISON, MONEY, FARMER & CO., P.C.]
November 4, 1997
Board of Directors
Security Federal Bancorp, Inc., and Subsidiary
Tuscaloosa, Alabama
INDEPENDENT ACCOUNTANT'S REPORT
-------------------------------
We have reviewed the accompanying condensed consolidated
statement of financial condition of Security Federal Bancorp,
Inc., and Subsidiary, as of September 30, 1997, and December 31,
1996, and the related condensed statements of income for the
three and nine month periods and statement of cash flows for the
nine months ended September 30, 1997 and 1996. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements referred to above, in order for
them to be in conformity with generally accepted accounting
principles.
/s/ Jamison, Money, Farmer & Co., P.C.
Certified Public Accountants
Tuscaloosa, Alabama
<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 2
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1997, and December 31, 1996
- -----------------------------------------------------------------
ASSETS
------
<TABLE>
<CAPTION> (Unaudited)
September 30, December 31,
1 9 9 7 1 9 9 6
------------- ------------
<S> <C> <C>
Cash and Cash Equivalents $ 1,535,835 $ 740,553
Federal Home Loan Bank -
Interest-Bearing Deposits 1,951,946 256,079
Investment Securities: Securities
available-for-sale, at fair value 3,069,148 3,052,813
Loans Held for Sale, Net of Deferred Fees 1,826,000 1,247,000
Loans Receivable - Net 66,294,421 66,442,284
Real Estate Owned 128,000 -
Office Properties and Equipment -
Net of Depreciation 1,145,893 1,139,355
Federal Home Loan Bank Stock - at Cost 620,300 539,000
Accrued Interest and Dividends Receivable 424,714 331,476
Deferred Tax Asset - 629
Other Assets 707,403 549,636
------------ ------------
TOTAL ASSETS $ 77,703,660 $ 74,298,825
============ ============
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements. <PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 3
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1997, and December 31, 1996
- ----------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION> (Unaudited)
September 30, December 31,
1 9 9 7 1 9 9 6
------------- ------------
<S> <C> <C>
Deposits $ 65,813,437 $ 62,728,807
Advances from Federal Home Loan Bank 585,000 1,585,000
Advances from Borrowers for Taxes
and Insurance 554,237 327,923
Income and Excise Tax Payable - Current 174,177 208,485
Unremitted Collections on Mortgage Loans
Serviced 1,024,917 203,226
Mortgage Note Payable 36,934 38,951
Accrued Expenses and Other Liabilities 351,648 327,512
Deferred Income Tax Liability 24,782 -
------------- -------------
Total Liabilities 68,565,132 65,419,904
============= =============
Stockholders' Equity:
Common stock, $.01 par value, 1,900,000
shares authorized, 671,469 shares
issued and outstanding 6,714 6,714
Additional paid-in capital 3,453,993 6,144,956
Net unrealized (loss) on equity
securities available-for-sale,
net of deferred tax (5,028) (15,551)
Retained earnings, substantially
restricted 5,682,849 2,742,802
------------- -------------
Total Stockholders' Equity 9,138,528 8,878,921
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 77,703,660 $ 74,298,825
============= =============
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements. <PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 4
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF INCOME
For the Nine and Three Months Ended September 30, 1997 and 1996
- ----------------------------------------------------------------
<TABLE>
<CAPTION> (Unaudited) (Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1 9 9 7 1 9 9 6 1 9 9 7 1 9 9 6
--------- --------- --------- ---------
Interest Income
- ---------------
<S> <C> <C> <C> <C>
Loans:
Mortgage loans $ 4,408,907 $ 4,193,179 $ 1,488,070 $ 1,429,040
Consumer and other loans 25,596 31,887 9,307 10,513
Investment Securities, Mortgage
Backed Securities and Federal
Home Loan Bank Deposits 242,839 337,737 89,724 101,788
----------- ----------- ----------- -----------
Total Interest Income 4,677,342 4,562,803 1,587,101 1,541,341
----------- ----------- ----------- -----------
Interest Expense
- ----------------
Deposits - savings 108,572 101,967 36,970 33,875
Deposits - certificates 2,631,931 2,558,662 893,777 888,068
Demand deposits 2,824 - 2,082 -
Mortgage note payable 2,284 2,438 748 800
Borrowed funds 46,259 68,725 10,583 31,854
----------- ----------- ----------- -----------
Total Interest Expense 2,791,870 2,731,792 944,160 954,597
----------- ----------- ----------- -----------
Net Interest Income 1,885,472 1,831,011 642,941 586,744
Provision for Losses on Loans - - - -
----------- ----------- ----------- -----------
Net Interest Income After
Provision for Losses
on Loans 1,885,472 1,831,011 642,941 586,744
----------- ----------- ----------- -----------
</TABLE>
(continued)
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 5
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF INCOME (Continued)
For the Nine and Three Months Ended September 30, 1997 and 1996
- ----------------------------------------------------------------
<TABLE>
<CAPTION> (Unaudited) (Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1 9 9 7 1 9 9 6 1 9 9 7 1 9 9 6
--------- --------- --------- ---------
Non-Interest Income
- -------------------
<S> <C> <C> <C> <C>
Servicing fees $ 144,557 $ 161,123 $ 50,162 $ 32,075
Income from late charges 29,104 24,115 9,290 7,869
Other operating revenue 3,026 5,894 1,739 314
Gain on sale of real estate owned 5,927 848 - -
Gain (loss) on sales of loans 63,381 (79,667) 20,470 (26,528)
Gain on sales of other assets 54 4,375 - 4,375
----------- ----------- ----------- -----------
Total Non-Interest Income 246,049 116,688 81,661 18,105
----------- ----------- ----------- -----------
Non-Interest Expenses
- ---------------------
Salaries and employee benefits 582,912 588,412 202,777 183,444
Net occupancy expenses 73,303 74,816 25,349 25,663
Equipment expenses 78,713 69,873 29,950 23,528
OTS/FDIC premiums 66,340 503,596 16,504 422,390
Net expenses of real estate owned 5,839 7,903 2,454 (514)
Other operating expenses 309,689 305,295 109,971 114,302
----------- ----------- ----------- -----------
Total Non-Interest Expenses 1,116,796 1,549,895 387,005 768,813
----------- ----------- ----------- -----------
Income (Loss) Before Income
Taxes 1,014,725 397,804 337,597 (163,964)
Income Tax Expense (Benefit) 362,759 131,604 125,115 (61,805)
----------- ----------- ----------- -----------
Net Income (Loss) $ 651,966 $ 266,200 $ 212,482 $ (102,159)
=========== =========== =========== ===========
Net Income (Loss) Per Share 0.97 0.40 0.32 (0.15)
=========== =========== =========== ===========
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 6
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
- ----------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
------------------------------------------------
<TABLE>
<CAPTION> (Unaudited)
1 9 9 7 1 9 9 6
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 651,966 $ 257,062
Adjustments to reconcile net income
to net cash provided by operating
activities:
(Gain) loss on sale of assets (69,362) 75,292
Depreciation expense 51,461 50,023
Amortization of premiums/discounts
on investments 289 2,328
(Increase) in accrued interest and
dividends receivable (93,238) ( 69,031)
(Increase) decrease in deferred tax asset 629 (192,891)
(Increase) decrease in other assets 15,154 (411,193)
(Increase) in loans held for sale (579,000) (1,339,050)
Increase in accounts payable and other
liabilities 24,136 572,492
Increase in deferred loan fees 9,061 116,928
Increase (decrease) in income tax payable (34,308) 281,412
Increase in deferred tax liability 18,681 -
------------- -------------
Net Cash (Used in) Operating Activities (4,531) (656,628)
------------- -------------
Cash Flows from Investing Activities:
Sales of U. S. Government treasuries
and agencies - 1,980,016
Proceeds from sales of real estate owned 205,004 79,829
Purchases of Federal Home Loan Bank
Overnight Deposits (1,695,867) (380,834)
Loan originations, net of repayments (14,304,558) (19,000,705)
Purchases of property, plant and equipment (58,443) (6,136)
Proceeds from sales of loans 14,007,015 10,320,782
Purchases of Federal Home Loan Bank stock (81,300) (31,100)
Proceeds from sale of other assets 225 -
Maturities/redemptions of treasuries
and agencies - 1,000,000
------------- -------------
Net Cash (Used in) Investing Activities (1,927,924) (6,038,148)
------------- -------------
</TABLE>
(continued)
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 7
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
- ----------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Continued)
------------------------------------------------
<TABLE>
<CAPTION> (Unaudited)
1 9 9 7 1 9 9 6
------------- -------------
<S> <C> <C>
Cash Flows from Financing Activities:
Net increase (decrease) in advances
from Federal Home Loan Bank $ (1,000,000) $ 2,250,000
Cash dividends and return of capital paid (402,881) (402,881)
Net increase in advances from borrowers
for taxes and insurance 226,314 224,914
Increase in bank overdraft - 174,177
Repayments of mortgage notes payable (2,017) (1,862)
Net increase from unremitted collections
on mortgage loans serviced 821,691 119,772
Net increase in savings accounts 16,267 143,468
Net increase in certificates of deposit 2,646,271 4,168,306
Net increase in demand deposits 422,092 -
------------ ------------
Net Cash Provided by Financing Activities 2,727,737 6,675,894
------------ ------------
Net Increase (Decrease) in Cash and Cash
Equivalents 795,282 (18,882)
Cash and Cash Equivalents, Beginning of
Period 740,553 630,458
------------ ------------
Cash and Cash Equivalents, End of Period $ 1,535,835 $ 611,576
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
-------------------------------------------------
<CAPTION>
1 9 9 7 1 9 9 6
------- -------
<S> <C> <C>
Interest paid $ 2,805,609 $ 2,740,277
Income taxes paid 391,957 30,277
Additions to real estate owned
through foreclosure 128,000 -
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 8
Tuscaloosa, Alabama
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
- ----------------------------------------------------------------
1. Organization
------------
Security Federal Bancorp, Inc. (the "Company"), a Delaware
corporation, was incorporated in June, 1994, for the purpose of
acting as a savings and loan holding company with the Bank as
its sole subsidiary. On March 31, 1995, the Company acquired
all of the common stock of the Bank upon its conversion from
mutual to stock form. The Company's principal business is the
business of the Bank. The Bank is a federally chartered stock
savings bank and a member of the Federal Home Loan Bank System.
2. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial
statements were prepared in accordance with instructions for
Form 10QSB and, therefore, do not include information or notes
necessary for a complete presentation of financial position,
results of operations, retained earnings, and cash flows in
conformity with generally accepted accounting principles. These
financial statements should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in
the Company's annual report on Form 10-K for the year ended
September 30, 1996. The accounting policies shown in Note 1 to
the Consolidated Financial Statements for September 30, 1996,
have been consistently followed. It is management's opinion
that all adjustments necessary for a fair presentation of the
consolidated financial statements presented have been recorded.
Such adjustments were of a normal recurring nature. The results
of operations for the interim period are not necessarily
indicative of the results that may be expected for the full
fiscal year.
3. Principles of Consolidation
---------------------------
The accompanying unaudited consolidated financial
statements include the accounts of Security Federal Bancorp,
Inc., and Security Bank. All significant intercompany items
have been eliminated.
4. Retained Earnings
-----------------
The Bank is required to maintain certain levels of
regulatory capital. At September 30, 1997, the Bank was in
compliance with all regulatory capital requirements. In
addition to these requirements, the Bank must maintain
sufficient capital for the "liquidation account" for the benefit
of eligible account holders. In the event of a complete
liquidation of the Bank, eligible depositors would have an
interest in the account.
(continued)
See Independent Accountant's Report.<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 9
Tuscaloosa, Alabama
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 1997
- ----------------------------------------------------------------
5. Change of Fiscal Year-End
-------------------------
During the quarter ending September 30, 1997, the Company
changed its fiscal year-end from September 30 to December 31.
Thus, the Company's next audit will be as of December 31, 1997.
The Company filed a current report on Form 8-K dated
September 15, 1997, to report this change.
See Independent Accountant's Report. <PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 10
Tuscaloosa, Alabama
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 1997
- ----------------------------------------------------------------
Financial Condition
- -------------------
The company's total assets increased by $3.4 million, or
4.6%, to $77.7 million at September 30, 1997, from $74.3 million
at December 31, 1996. This increase was primarily a result of
an increase in Federal Home Loan Bank overnight deposits of
$1.69 million, from $256,000 at December 31, 1996 to $1.95
million at September 30, 1997. The increase in these deposits
was generated from the sale of loans receivable in the third
quarter of 1997. In addition, cash and cash equivalents
increased by $800,000, or 108%, from $.74 million at December
31, 1996 to $1.54 million at September 30, 1997, due to an
increase in the amount of unremitted collections on mortgage
loans serviced. Loans receivable and loans held for sale
increased by $430,000, or 1.1%, from $67.7 million at December
31, 1996, to $68.1 million at September 30, 1997.
The company's deposits increased by $3.1 million, or 4.9%,
from $62.7 million at December 31, 1996, to $65.8 million at
September 30, 1997, primarily from increases in short-term
certificates of deposit. In addition, demand deposits increased
by $420,000, or 100% from the prior year, after the Bank began
offering full service checking accounts to its customers in the
second quarter of 1997. Unremitted collections on mortgage
loans serviced increased by $800,000, or 400%, from $200,000 at
December 31, 1997, to $1 million at September 30, 1997. This
increase was caused by an increase in the number of loans
serviced and the timing of the remittance of these collections.
The increase in deposits and unremitted collections was
partially offset by a decrease in short-term advances from the
Federal Home Loan Bank of $1 million, or 63.1%, from $1.59
million at December 31, 1996, to $585,000 at September 30, 1997.
Stockholder's equity increased approximately 2.9% to $9.14
million at September 30, 1997, compared with $8.88 million at
December 31, 1996.
Results of Operations
- ---------------------
The earnings of the company depend primarily on its level
of net interest income, which is the difference between interest
earned on the company's interest-earning assets, consisting
primarily of mortgage loans, consumer loans, and investment
securities, and the interest paid on interest-bearing
liabilities. Net interest income totaled $1.88 million and
$640,000 for the nine and three month periods ended September
30, 1997, which is an increase of $54,000 and $56,000 over the
respective nine and three month periods ended September 30,
1996.
See Independent Accountant's Report.<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 11
Tuscaloosa, Alabama
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
September 30, 1997
- ----------------------------------------------------------------
Net Interest Income
- -------------------
The increase in net interest income for nine months ended
September 30, 1997, was primarily caused by an increase in
interest earning assets in comparison to the nine months ended
September 30, 1996. Total interest income for the third quarter
of 1997 increased by $46,000, or 3.0%, as compared to the third
quarter of 1996. Total interest income for the first nine
months of 1997 increased by $114,000, or 2.6%, to $4.68 million
from $4.56 million from the same period in the prior year.
Total interest expense decreased by $10,000, or 1.05%, from
$955,000 for the three month period ended September 30, 1996, to
$944,000 for the three month period ended September 30, 1997.
This is primarily due to a decrease in interest on borrowed
funds of $21,000 for the three months ended September 30, 1997
as compared with the three months ended September 30, 1996
caused by the decreased use of borrowed funds. This was
partially offset by an increase in interest expense on deposits
of $9,000 for the three months ended September 30, 1997. For the
first nine months of 1997, interest expense increased by
$60,000, or 2.2%, to $2.79 million as compared with $2.73
million for the first nine months of 1996. This is due to an
increase in interest on deposits of $80,000, or 3.0%, and a
decrease in interest on borrowed funds of $22,000, or 31.8%,
when compared to the first nine months of 1996.
Provision for Losses
- --------------------
There were no additions made to the provision for loan
losses for the three months or nine month periods ended
September 30, 1997. Management periodically reviews the need to
increase the provision for loan losses based upon their
evaluation of known and inherent risk characteristics of the
loan portfolio. Total non-performing assets were $212,000 and
$694,000 at September 30, 1997 and 1996, which represents .27%
and .90% of total assets as of these dates. Management believes
that the existing provision for loan losses is adequate based on
their evaluation of known and inherent risk characteristics of
the loan portfolio.
Non-Interest Income
- -------------------
Non-interest income for the third quarter of 1997 increased
by $64,000, or 351.0%, compared to the third quarter of 1996.
Non-interest income for the first nine months of 1997 increased
by $129,000, or 110.9%, from the first nine months of 1996.
These increases are the result of increases in gains on sale of
loans of $47,000 for the third quarter of 1997 and $143,000 for
the first nine months of 1997 when compared to the same periods
in the previous year. The increase was principally caused by
the adoption of Statement of Financial Accounting Standards #122
which requires that the Company capitalizes the rights to
service all mortgage loans.
See Independent Accountant's Report.<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 12
Tuscaloosa, Alabama
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
September 30, 1997
- ----------------------------------------------------------------
Non-Interest Expense
- --------------------
Non-interest expense decreased by $430,000 or 27.9%, to
$1.1 million for the nine month period ended September 30, 1997,
from $1.55 million for the nine month period ended September 30,
1996. This was caused by a decrease in the deposit insurance
liability due to the one-time assessment to recapitalize the
Savings Association Insurance Fund. The assessment resulted in
a pre-tax charge of $381,000 in the third quarter of 1996.
Due to this assessment, non-interest expense for the third
quarter of 1997 decreased $380,000, or 49.7%, from the third
quarter of 1996.
Income Taxes
- ------------
Income tax provisions for three and nine month periods
ended September 30, 1997 and 1996, are generally reflective of
the amounts of the company's pre-tax income and the effective
income tax rate then in effect.
Liquidity and Capital Resources
- -------------------------------
The Bank is required to maintain minimum levels of liquid
assets as defined by OTS regulations. This requirement, which
varies from time to time depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and
short-term borrowings. The required ratio currently is 5.0%.
The Bank's liquidity ratio averaged 8.58% for the period ended
September 30, 1997. The Bank adjusts its liquidity levels in
order to meet funding needs of deposit outflows, payment of real
estate taxes on mortgage loans and repayment of borrowings and
loan commitments. The Bank also adjusts liquidity as
appropriate to meet its asset and liability management
objectives.
The Bank's primary sources of funds are deposits, sale of
mortgage loans, amortization and prepayment of loans, maturities
of investment securities and other investments, borrowings
through advances from the FHLB, and earnings and funds provided
from operations. While scheduled principal repayments on loans
are a relatively predictable source of funds, deposit flows and
loan prepayments are greatly influenced by interest rates,
economic conditions, and competition. The Bank manages the
pricing of its deposits to maintain a desired deposit balance.
In addition, the Bank invests in short-term interest-earning
assets, which provide liquidity to meet lending requirements.
The Bank periodically uses advances from the FHLB of Atlanta for
liquidity purposes.
During the nine months ended September 30, 1997, the
company's cash and cash equivalents (cash and short-term
investments with maturities less than 90 days) increased by
$795,000. Cash was provided from the net proceeds from sales of
loans of $14.0 million, net increases in deposit accounts of
$3.08 million, and increases in unremitted collections of
mortgage loans serviced of $820,000. These were offset by an
increase in loan originations, net of repayments of $14.3
million, a decrease in advances from FHLB of $1.0 million, and
purchases of overnight deposits of $1.69 million.
See Independent Accountant's Report. <PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY 13
Tuscaloosa, Alabama
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
September 30, 1997
- ----------------------------------------------------------------
Liquidity and Capital Resources (Continued)
- -------------------------------
Management monitors projected liquidity needs and
determines the level desirable based in part on commitments to
make loans and management's assessments of their ability to
generate funds. Loan commitments at September 30, 1997,
including loans-in-process, were $2.8 million. These
commitments are expected to be funded from liquid assets, cash
flow from loan repayments, and, if needed, advances from FHLB of
Atlanta.
Under the regulatory capital requirements of the OTS, the
Bank is required to maintain minimal capital requirements by
satisfying three capital standards: a tangible capital
requirement, a leverage ratio requirement, and a risk-based
capital requirement. Under the tangible capital requirement,
the Bank's tangible capital (the amount of capital computed
under generally accepted accounting principles) must be equal to
1.5% of adjusted total assets. Under the leverage ratio
requirement, the Bank's core capital must be equal to 3.0% of
adjusted total assets. In addition, under the risk-based
capital requirement, the Bank must maintain core and
supplemental capital (core capital plus any general loss
reserves) equal to 8% of risk-weighted assets (total assets,
plus off-balance-sheet items multiplied by the appropriate risk
weight).
The following table presents the Bank's capital position
based on the September 30, 1997, financial statements:
<TABLE>
<CAPTION> Percent Percent Percent
Actual of Required of Excess of
Amount Assets Amount Assets Amount Assets
----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Tangible $ 8,763,000 11.28 $ 1,165,000 1.50 $ 7,598,000 9.78
Core 8,763,000 11.28 2,331,000 3.00 6,432,000 8.28
Risk-weighted 9,092,000 22.03 3,301,000 8.00 5,791,000 14.03
</TABLE>
See Independent Accountant's Report.<PAGE>
<PAGE>
14
SIGNATURES
----------
In accordance with the requirements of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Security Federal Bancorp, Inc.
Registrant
Date: November 14, 1997 /s/ Marlin D. Moore, Jr.
----------------- ------------------------------------
Marlin D. Moore, Jr.
Chairman and Chief Executive Officer
(The Duly Authorized Representative)
Date: November 14, 1997 /s/ John F. Harvard
----------------- -------------------------------------
John F. Harvard
President and Chief Financial Officer
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