<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 June 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
FORM 10-QSB
March 31, 1997
- --------------------------------------------------------------
CONTENTS
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Independent Accountant's Report
Consolidated Statements of Financial Condition
June 30, 19997 (Unaudited) and September 30, 1996
Consolidated Statements of Income (Unaudited)
Nine and Three Months Ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of
Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<PAGE>
August 5, 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 June 30, 1997 and the related
condensed statements of income for the three and nine month
periods and statement of cash flows for the nine months ended
June 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.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet of
Security Federal Bancorp., Inc., and Subsidiary, as of September
30, 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for the year then ended, not
presented herein, and in our report dated December 10, 1996, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying balance sheet as of September 30, 1996, is fairly
stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ Jamison, Money, Farmer & Co. P.C.
Certified Public Accountants
Tuscaloosa, Alabama
<PAGE>
<PAGE>
2
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 1997, and September 30, 1996
ASSETS
------
<TABLE>
<CAPTION>
(Unaudited)
June 30, September 30,
1997 1996
----------- -------------
<S> <C> <C>
Cash and Cash Equivalents $ 580,950 $ 611,576
Federal Home Loan Bank - Interest-
Bearing Deposits 58,090 426,084
Investment Securities:
Securities available-for-sale,
at fair value 3,042,242 2,984,586
Loans Held for Sale, Net of Deferred Fees 1,154,000 1,514,050
Loans Receivable - Net 68,128,351 68,510,569
Real Estate Owned 128,709 117,217
Office Properties and Equipment -
Net of Depreciation 1,146,725 1,155,670
Federal Home Loan Bank Stock - at Cost 620,300 539,000
Accrued Interest and Dividends Receivable 382,965 421,300
Deferred Tax Asset 5,528 258,109
Other Assets 609,857 456,635
----------- -----------
TOTAL ASSETS $75,857,717 $76,994,796
=========== ===========
</TABLE>
<PAGE>
<PAGE>
3
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 1997, and September 30, 1996
ASSETS
------
<TABLE>
<CAPTION>
(Unaudited)
June 30, September 30,
1997 1996
----------- -------------
<S> <C> <C>
Deposits $64,710,798 $61,252,015
Checks Outstanding in Excess of Deposits - 174,177
Advances from Federal Home Loan Bank 585,000 2,835,000
Advances from Borrowers for Taxes and Insurance 577,385 662,689
Income and Excise Tax Payable - Current 128,362 338,073
Unremitted Collections on Mortgage Loans
Serviced 405,132 299,630
Mortgage Note Payable 37,620 39,597
Accrued Expenses and Other Liabilities 303,026 771,371
----------- ------------
Total Liabilities 66,747,323 66,372,552
----------- ------------
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 3,655,433 6,144,956
Net unrealized gain loss on equity
securities available-for-sale,
net of deferred tax (22,121) (58,800)
Retained earnings, substantially
restricted 5,470,367 4,529,374
----------- ------------
Total Stockholders' Equity 9,110,394 10,622,244
----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $75,857,717 $ 76,994,796
=========== ============
</TABLE>
See Independent Account's Report.
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
4
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF INCOME
For the Nine and Three Months Ended June 30, 1997 and 1996
_________________________________________________________________________
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Nine Months Ended Three Months Ended
June 30, June 30,
------------------------- --------------------------
1 9 9 7 1 9 9 6 1 9 9 7 1 9 9 6
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income
- ---------------
Loans:
Mortgage loans $4,354,699 $4,065,386 $1,472,329 $1,424,789
Consumer and other loans 25,625 31,139 8,403 11,054
Investment Securities, Mortgage
Backed Securities and Federal
Home Loan Bank Deposits 238,008 373,486 78,139 115,165
---------- ---------- ---------- ----------
Total Interest Income 4,618,332 4,470,011 1,558,871 1,551,008
---------- ---------- ---------- ----------
Interest Expense
- ----------------
Deposits - savings 106,080 100,522 36,023 34,633
Deposits - certificates 2,605,231 2,505,383 881,294 838,482
Demand deposits 742 - 742 -
Mortgage note payable 2,324 2,475 761 813
Borrowed funds 61,823 47,351 20,068 32,532
---------- ---------- ---------- ----------
Total Interest Expense 2,776,200 2,655,731 938,888 906,460
---------- ---------- ---------- ----------
Net Interest Income 1,842,132 1,814,280 619,983 644,548
Provision for Losses on Loans - - - -
---------- ---------- ---------- ----------
Net Interest Income After
Provision for Losses on
Loans 1,842,132 1,814,280 619,983 644,548
---------- ---------- ---------- ----------
</TABLE>
(continued)
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
5
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF INCOME (Continued)
For the Nine and Three Months Ended June 30, 1997 and 1996
_________________________________________________________________________
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Nine Months Ended Three Months Ended
June 30, June 30,
------------------------- --------------------------
1 9 9 7 1 9 9 6 1 9 9 7 1 9 9 6
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Non-Interest Income
- -------------------
Servicing fees $ 147,095 $ 187,559 $ 44,691 $ 70,491
Income from late charges 29,155 25,161 8,716 7,602
Other operating revenue 3,402 8,275 (894) 892
Gain (loss) on sale of real
estate owned 5,927 829 (6,005) 828
Gain (loss) on sales of loans 133,315 (69,974) 5,927 (48,011)
Gain on sales of other assets 54 36,960 - -
---------- ---------- ---------- ---------
Total Non-Interest Income 318,948 188,810 52,435 31,803
---------- ---------- ---------- ---------
Non-Interest Expenses
- ---------------------
Salaries and employee benefits 607,109 646,164 202,247 172,772
Net occupancy expenses 72,170 91,587 24,054 24,600
Equipment expenses 73,636 74,461 25,130 22,068
OTS/FDIC premiums 68,113 121,609 16,750 40,517
Net expenses of real
estate owned 3,763 3,892 3,385 2,058
Other operating expenses 295,008 278,084 109,451 101,103
---------- ---------- ---------- ----------
Total Non-Interest Expenses 1,119,799 1,215,797 381,017 363,118
---------- ---------- ---------- ----------
Income Before Income Taxes 1,041,281 787,293 291,401 313,233
Income Tax Expense 373,962 270,409 102,718 95,005
---------- ---------- ---------- ----------
Net Income $ 667,319 $ 516,884 $ 188,683 $ 218,228
========== ========== ========== ==========
Net Income Per Share 0.99 0.77 0.28 0.33
========== ========== ========== ==========
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
6
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 1997 and 1996
__________________________________________________________________
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
1997 1996
----------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 667,319 $ 516,884
Adjustments to reconcile net income to net
cash provided by operating activities:
(Gain) on sale of assets (139,296) 32,564
Depreciation expense 49,248 53,641
Amortization of premiums/discounts on
investments 289 (1,400)
Decrease in accrued interest and dividends
receivable 38,335 92,737
Decrease in deferred tax asset 231,315 -
(Increase) decrease in other assets 35,555 (360,562)
Decrease in loans held for sale 360,050 -
Increase (decrease) in accounts payable and
other liabilities (468,345) 146,405
Increase (decrease) in deferred loan fees (11,839) 82,713
Increase (decrease) in income tax payable (209,711) 161,640
------------ ------------
Net Cash Provided by Operating
Activities 552,920 724,622
------------ ------------
Cash Flows from Investing Activities:
Sales of U. S. Government treasuries
and agencies - 2,029,008
Proceeds from sales of real estate owned 321,906 79,829
Sales of Federal Home Loan Bank Overnight
Deposits 367,994 (170,396)
Loan originations, net of repayments (13,176,269) (18,784,835)
Purchases of property, plant and equipment (40,473) -
Proceeds from sales of loans 13,187,393 11,504,532
Purchase of Federal Home Loan Bank stock (81,300) (31,100)
Proceeds from sale of other assets 225 -
------------ ------------
Net Cash Provided by (Used in)
Investing Activities 579,476 (5,372,962)
------------ ------------
</TABLE>
(continued)
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
7
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 1997 and 1996
__________________________________________________________________
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Continued)
------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
1997 1996
----------- ------------
<S> <C> <C>
Cash Flows from Financing Activities:
Net increase (decrease) in advances from Federal
Home Loan Bank $(2,250,000) $1,800,000)
Cash dividends and return of capital paid (2,215,848) (335,734)
insurance (85,304) (112,285)
(Decrease) in bank overdraft (174,177) -
Repayments of mortgage notes payable (1,977) (1,825)
Net increase (decrease) from unremitted collections
on mortgage loans serviced 105,502 1,129,676
Net increase (decrease) in savings accounts 403,883 222,073
Net increase in certificates of deposit 2,783,299 3,028,004
Net increase in demand deposits 271,600 -
------------ -----------
Net Cash Provided by (Used in)
Financing Activities (1,163,022) 5,729,909
------------ -----------
Net Increase in Cash and Cash Equivalents (30,626) 1,081,569
Cash and Cash Equivalents, Beginning of Period 611,576 813,264
------------ -----------
Cash and Cash Equivalents, End of Period $ 580,950 $ 1,894,833
============ ===========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
-------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Interest paid $2,792,604 $2,665,805
Income taxes paid 366,557 169,302
Additions to real estate owned
through foreclosure 128,709 -
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
8
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 Federal Bank. All significant intercompany items have
been eliminated.
4. Retained Earnings
-----------------
The Bank is required to maintain certain levels of regulatory
capital. At June 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>
9
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
- ----------------------------------------------------------------
5. Mortgage Servicing Rights
-------------------------
In May, 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights, an Amendment of FASB
65," effective for fiscal years beginning after December 15,
1995. When a company has a definitive plan to sell or securitize
mortgage loans it originated and intends to retain the mortgage
servicing rights, Statement No. 122 requires that the cost of
mortgage servicing rights are capitalized separately from the
cost of originating the loan. Under Statement No. 65, only
mortgage servicing rights that are purchased are capitalized.
Statement No. 122 eliminates the disparity between the treatment
of mortgage servicing rights obtained through loan origination
and those that are purchased from other parties. In addition,
Statement No. 122 requires that capitalized mortgage servicing
rights should be amortized in proportion to and over the period
of estimated servicing income and should be evaluated for
impairment based on their fair value. The Company adopted
Statement No. 122 for the quarter ended December 31, 1996. For
the nine months ended June 30, 1997, a total of $188,777 of
mortgage servicing rights have been capitalized on loans sold
with servicing retained.
See Independent Accountant's Report.<PAGE>
<PAGE>
10
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 1997
- ----------------------------------------------------------------
Financial Condition
- -------------------
The company's total assets decreased by $1.14 million, or
1.5%, to $75.9 million at June 30, 1997, from $77.0 million at
September 30, 1996. This decrease was primarily a result of a
decrease in loans receivable and loans held for sale of $740,000,
or 1.1%, from $70 million at September 30, 1996, to $69.3 million
at June 30, 1997. In addition, deferred tax assets decreased
$252,000, or 97.8%, primarily due to the payment of the SAIF
assessment and benefits payable under the director's retirement
plan. These were partially offset by an increase in other assets
of $153,000 from $457,000 at September 30, 1996, to $610,000 at
June 30, 1997, principally due to the adoption of SFAS No. 122
relating to the increase in mortgage servicing rights.
Deposits increased by $3.4 million, or 5.5%, from $61.3
million at September 30, 1996, to $64.7 million at June 30, 1997,
primarily from increases in short-term certificates of deposit.
In addition, in the quarter ending June 30, 1997, the Bank began
offering full service checking accounts to its customers. The
increase in deposits was partially offset by a decrease in short-
term advances from the Federal Home Loan Bank of $2.25 million,
or 79.2%, from $2.84 million at September 30, 1996, to $585,000
at June 30, 1997. Furthermore, accrued expenses and other
liabilities decreased by $468,000 or 60.7%, from $771,000 at
September 30, 1996, to $303,000 at June 30, 1997, primarily due
to the payment of the SAIF assessment.
Stockholder's equity decreased approximately 14.2% to $9.1
million at June 30, 1997, compared with $10.6 million at
September 30, 1996. This decrease was caused by the one-time
cash distribution and return of capital of approximately $2.02
million made during the first quarter of 1997.
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 $1.84 million and
$620,000 for the nine and three month periods ended June 30,
1997, which is an increase of $28,000 and a decrease of $25,000
over the respective nine and three month periods ended June 30,
1996.
See Independent Accountant's Report.<PAGE>
<PAGE>
11
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
June 30, 1997
- ----------------------------------------------------------------
Net Interest Income
- -------------------
The increase in net interest income for nine months ended
June 30, 1997, was primarily caused by an increase in interest
earning assets in comparison to the nine months ended June 30,
1996. Total interest income for the third quarter of 1997
increased by $8,000, or .5%, as compared to the third quarter of
1996. Total interest income for the first nine months of 1997
increased by $148,000, or 3.3%, to $4.62 million from $4.47
million from the same period in the prior year.
Total interest expense increased by $33,000, or 3.6%, from
$906,000 for the three month period ended June 30, 1996, to
$939,000 for the three month period ended June 30, 1997. This is
primarily due to an increase of $45,000, or 5.1%, in interest
expense on deposits. The increase in interest expense on
deposits generally reflects the growth of deposits from the same
period in the prior year. This increase was offset by a decrease
in interest on borrowed funds of $12,000 for the three month
period ended June 30, 1997 as compared with the same period in
the prior year. For the first nine months of 1997, interest
expense increased by $120,000, or 4.5%, to $2.78 million as
compared with $2.66 million for the first nine months of 1996.
This results from both an increase in interest on deposits of
$106,000, or 4.0%, and an increase in interest on borrowed funds
of $14,000, or 29.7%, 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 month or nine month periods ended June 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 $231,000 and $154,000 at June 30, 1997
and 1996, which represents .30% and .20% 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 $21,000, or 64.9%, compared to the third quarter of 1996.
Non-interest income for the first nine months of 1997 increased
by $130,000, or 68.9%, from the first nine months of 1996. These
increases are the result of increases in gains on sale of loans
of $54,000 for the third quarter of 1997 and $203,000 for the
first nine months of 1997 when compared to the same periods in
the previous year. This 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. The increase in non-interest income for the
nine months ended June 30, 1997, was partially offset by a
decrease in gains on sales of investments of $37,000, or 100%,
and a decrease in servicing fees of $40,000, or 21.6%, compared
to the same period in the prior year.
See Independent Accountant's Report.<PAGE>
<PAGE>
12
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
June 30, 1997
- ----------------------------------------------------------------
Non-Interest Expense
- --------------------
Non-interest expense decreased by $96,000 or 7.9%, to $1.1
million for the nine month period ended June 30, 1997, from $1.2
million for the nine month period ended June 30, 1996. This
resulted from a decrease in salaries and employee benefits
related to accrued benefits for the director's retirement plan
and the management recognition plan and a decrease in deposit
insurance due to the restructuring of the Savings Association
Insurance Fund. Non-interest expense for the third quarter of
1997 increased $18,000, or 4.9%, from the third quarter of 1996.
Income Taxes
- ------------
Income tax provisions for three and nine month periods ended
June 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 6.53% for the period ended June
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 June 30, 1997, the company's
cash and cash equivalents (cash and short-term investments with
maturities less than 90 days) decreased by $31,000. Cash was
provided by operating activities of $553,000, net proceeds from
sales of loans of $13.19 million, net increases in deposit
accounts of $3.46 million, and proceeds from sales of real estate
owned of $322,000. These were offset by an increase in loan
originations, net of repayments of $13.18 million, a decrease in
advances from FHLB of $2.25 million, and cash dividends and
return of capital paid of $2.22 million.
See Independent Accountant's Report.<PAGE>
<PAGE>
13
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
June 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 June 30, 1997, including loans-in-process,
were $2.6 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 minimum 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 June 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 $8,530,000 11.25 $1,138,000 1.50 $7,392,000 9.75
Core 8,530,000 11.25 2,276,000 3.00 6,254,000 8.25
Risk-weighted 8,859,000 21.95 3,230,000 8.00 5,629,000 13.95
</TABLE>
See Independent Accountant's Report.<PAGE>
<PAGE>
14
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule
<PAGE>
<PAGE>
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.
Date: August 13, 1997 Security Federal Bancorp, Inc.
(Registrant)
/s/ Marlin D. Moore, Jr.
-----------------------------
Marlin D. Moore, Jr.
Chairman and Chief Executive Officer
(The Duly Authorized Representative)
/s/ John F. Harvard
-------------------------------
John F. Harvard
President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 580,950
<INT-BEARING-DEPOSITS> 58,090
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,042,242
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 69,612,354
<ALLOWANCE> 330,003
<TOTAL-ASSETS> 75,857,717
<DEPOSITS> 64,710,798
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,413,905
<LONG-TERM> 622,620
0
0
<COMMON> 6,714
<OTHER-SE> 9,103,680
<TOTAL-LIABILITIES-AND-EQUITY> 75,857,717
<INTEREST-LOAN> 1,480,732
<INTEREST-INVEST> 78,139
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,558,871
<INTEREST-DEPOSIT> 918,059
<INTEREST-EXPENSE> 938,888
<INTEREST-INCOME-NET> 619,983
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 381,017
<INCOME-PRETAX> 291,401
<INCOME-PRE-EXTRAORDINARY> 291,401
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,683
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
