<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 March 31, 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
---------------------
Page
-----
Item 1. Financial Statements
Independent Accountant's Report 1
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 10-13
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
[Jamison, Money, Farmer & Co., P.C. Letterhead]
May 1, 1997
Board of Directors
Security Federal Bancorp, Inc., and Subsidiary
Tuscaloosa, Alabama
INDEPENDENT ACCOUNTANT'S REPORT
We have reviewed the accompanying consolidated statement of
financial condition of Security Federal Bancorp, Inc., and
Subsidiary, as of March 31, 1997, and the related statements of
income for the three and six month periods and statement of cash
flows for the six months then ended. 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. The consolidated financial
statements of Security Federal Bancorp, Inc., and Subsidiary as
of March 31, 1996, were reviewed by other accountants whose
report dated May 7, 1996, stated that they were not aware of any
material modifications that needed to be made to the financial
statements in order for them to be in conformity with generally
accepted accounting principles.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements as
of March 31, 1997, 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
1
<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1997 and September 30, 1996
________________________________________________________________
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, September 30,
1997 1996
----------- -------------
<S> <C> <C>
Cash and Cash Equivalents $ 649,826 $ 611,576
Federal Home Loan Bank - Interest-
Bearing Deposits 420,041 426,084
Investment Securities:
Securities available-for-sale,
at fair value 3,021,102 2,984,586
Loans Held for Sale, Net of Deferred Fees 1,211,000 1,514,050
Loans Receivable - Net 67,560,175 68,510,569
Real Estate Owned 79,593 117,217
Office Properties and Equipment 1,124,630 1,155,670
Federal Home Loan Bank Stock - at Cost 620,300 539,000
Accrued Interest and Dividends Receivable 400,064 421,300
Deferred Tax Asset 5,658 258,109
Other Assets 595,248 456,635
----------- -----------
TOTAL ASSETS $75,687,637 $76,994,796
=========== ===========
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.
2<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 1997 and September 30, 1996
______________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
March 31, September 30,
1996 1996
----------- -------------
<S> <C> <C>
Deposits $63,937,529 $61,252,015
Checks Outstanding in Excess of Deposits - 174,177
Advances from Federal Home Loan Bank 1,585,000 2,835,000
Advances from Borrowers for Taxes and Insurance 469,036 662,689
Income and Excise Tax Payable - Current 135,780 338,073
Unremitted Collections on Mortgage Loans Serviced 294,420 299,630
Mortgage Note Payable 38,292 39,597
Accrued Expenses and Other Liabilities 319,311 771,371
----------- -----------
Total Liabilities 66,779,368 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 3,655,434 6,144,956
Net unrealized gain loss on equity securities
available-for-sale, net of deferred tax (35,564) (58,800)
Retained earnings, substantially restricted 5,281,685 4,529,374
----------- -----------
Total Stockholders' Equity 8,908,269 10,622,244
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $75,687,637 $76,994,796
=========== ===========
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.
3<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF INCOME
For the Six and Three Months Ended March 31, 1997 and 1996
_________________________________________________________________________
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Six Months Ended Three Months Ended
March 31, March 31,
------------------------- --------------------------
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 $2,882,370 $2,640,597 $1,448,508 $1,339,349
Consumer and other
loans 17,222 20,085 7,886 10,320
Investment securities,
mortgage backed
securities, and
Federal Home Loan
Bank Deposits 159,869 258,321 74,976 120,784
---------- ---------- ---------- ----------
Total Interest
Income 3,059,461 2,919,003 1,531,370 1,470,453
---------- ---------- ---------- ----------
Interest Expense
- ----------------
Deposits - savings 70,057 65,889 35,579 33,459
Deposits - certificates 1,723,937 1,666,901 856,860 832,112
Mortgage note payable 1,562 1,662 775 825
Borrowed funds 41,756 14,819 15,608 4,340
---------- ---------- ---------- ---------
Total Interest
Expense 1,837,312 1,749,271 908,822 870,736
---------- ---------- ---------- ---------
Net Interest
Income 1,222,149 1,169,732 622,548 599,717
Provision for Losses
on Loans - - - -
---------- ---------- ---------- ---------
Net Interest Income after
Provision for Losses
on loans 1,222,149 1,169,732 622,548 599,717
---------- ---------- ---------- ---------
</TABLE>
(continued)
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.
4<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF INCOME(Continued)
For the Six and Three Months Ended March 31, 1997 and 1996
___________________________________________________________________
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Six Months Ended Three Months Ended
March 31, March 31,
------------------------- --------------------------
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 $ 102,404 $ 117,068 $ 49,705 $ 58,557
Income from late
charges 20,439 17,559 11,098 8,644
Other operating
revenue 4,296 7,383 2,180 4,708
Gain (loss) on sale
of loans 139,320 (21,963) 48,916 (5,128)
Gain on sale of other
assets 54 - 54 -
Gain on sales of
securities - 36,960 - -
--------- --------- --------- ----------
Total Non-
Interest
Income 266,513 157,007 111,953 66,781
--------- --------- --------- ----------
Non-Interest Expenses:
Salaries and employee
benefits 404,862 473,392 177,888 156,431
Net occupancy expenses 48,116 66,990 23,900 24,555
Equipment expenses 48,506 52,393 23,633 24,277
OTS/FDIC premiums 51,363 81,092 33,086 40,689
Net expenses of real
estate owned 378 1,834 - 6,359
Other operating expenses 185,557 176,978 90,267 89,889
--------- --------- --------- ---------
Total Non-Interest
Expenses 738,782 852,679 348,774 342,200
---------- --------- --------- ---------
Income Before Income Taxes 749,880 474,060 385,727 324,298
Income Tax Expense 271,244 175,401 134,926 132,432
---------- --------- --------- ---------
Net Income $ 478,636 $ 298,659 $ 250,801 $ 191,866
========== ========= ========= =========
Net Income Per Share $ .71 $ .44 $ .37 $ .29
========== ========= ========= =========
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.
5<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 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 $ 478,636 $ 298,659
Adjustments to reconcile net income to net
cash provided by operating activities:
(Gain) on sale of assets (139,581) (14,997)
Depreciation expense 33,011 37,044
Amortization of premium/discounts on
investments 192 (871)
Decrease in accrued interest
and dividends receivable 21,236 33,029
Decrease in deferred tax asset 238,979 -
(Increase) decrease in other assets 24,211 (357,468)
Decrease in loans held for sale 303,050 -
Increase (decrease) in accounts payable and
other liabilities (452,060) 90,727
Increase (decrease) in deferred loan fees (13,662) 51,171
Increase (decrease) in income tax payable (202,293) 32,128
----------- -----------
Net Cash Provided by Operating
Activities 291,719 169,422
----------- -----------
Cash Flows from Investing Activities:
Sales of U. S. government treasuries
and agencies - 2,042,436
Proceeds from sales of real estate owned 116,902 79,829
Sales of Federal Home Loan Bank Overnight
Deposits 6,043 59,787
Loan originations, net of repayments (9,006,915) (10,565,376)
Purchases of property, plant and equipment (2,142) -
Proceeds from sales of loans 9,868,397 6,744,613
Purchase of Federal Home Loan Bank stock (81,300) (31,100)
Proceeds from sales of other assets 225 -
----------- -----------
Net Cash Provided by (used in)
Investing Activities 901,210 (1,669,811)
----------- -----------
</TABLE>
(continued)
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.
6<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
CONSOLIDATED STATEMENTS OF CASH FLOWS(Continued)
For the Six Months Ended March 31, 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 $(1,250,000) $1,300,000
Cash dividends and return of capital paid (2,215,848) (335,734)
Net (decrease) in advances from borrowers
for tax and insurance (193,653) (247,105)
(Decrease) in bank overdraft (174,177) -
Repayments of mortgage notes payable (1,305) (1,205)
Net (decrease) from unremitted collections
on mortgage loans serviced (5,210) (276,393)
Net increase (decrease) in savings accounts 312,694 514,327
Net increase in certificates of deposit 2,372,820 733,853
----------- ----------
Net Cash Provided by (Used in)
Financing Activities (1,154,679) 1,687,743
----------- -----------
Net Increase in Cash and Cash Equivalents 38,250 187,354
Cash and Cash Equivalents, Beginning of Period 611,576 813,264
----------- -----------
Cash and Cash Equivalents, End of Period $ 649,826 $1,000,618
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
-------------------------------------------------
1 9 9 7 1 9 9 6
------- -------
<S> <C> <C>
Interest paid $1,865,095 $1,773,067
Income taxes paid 234,133 143,273
Additions to real estate
owned through foreclosure 79,593 34,974
</TABLE>
See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.
7
<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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 December 31, 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 March 31, 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)
8<PAGE>
<PAGE>
SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY
Tuscaloosa, Alabama
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 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 six months ended March 31, 1997, a total of $162,825 of
mortgage servicing rights have been capitalized on loans sold
with servicing retained.
See Independent Accountants Report.
9<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
- -------------------
The company's total assets decreased by $1.31 million, or
1.7%, to $75.7 million at March 31, 1997, from $77.0 million at
September 30, 1996. This decrease was primarily a result of a
decrease in loans receivable of $ .95 million, or 1.4%, from
$68.5 million at September 30, 1996, to $67.6 million at
March 31, 1997, due to the sale of mortgage loans. 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 $138,000 from $457,000 at
September 30, 1996, to $595,000 at March 31, 1997, principally
due to the adoption of SFAS No. 122 relating to the increase in
mortgage servicing rights of $160,000.
Deposits increased by $2.7 million, or 4.4%, from $61.3
million at September 30, 1996, to $63.9 million at March 31,
1997, primarily from increases in short-term certificates of
deposit. The company anticipates that deposits will continue to
increase, as it will begin to offer full service checking
accounts to its customers in the third quarter. The increase in
deposits was partially offset by a decrease in short-term
advances from the Federal Home Loan Bank of $1.25 million, or
44%, from $2.84 million at September 30, 1996, to $1.59 million
at March 31, 1997. Furthermore, accrued expenses and other
liabilities decreased by $452,000 or 58.6%, from $771,000 at
September 30, 1996, to $319,000 at March 31, 1997, due to the
payment of the SAIF assessment.
Stockholder's equity decreased approximately 16% to $8.9
million at March 31, 1997, compared with $10.7 million at March
31, 1996, and $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 $1.2 million and
$623,000 for the six and three month periods ended March 31,
1997, which is an increase of $52,000 and $23,000 over the
respective and six and three month periods ended March 31, 1996.
See Independent Accountants Report.
10
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net Interest Income
- -------------------
The increase in net interest income for the three and six
months ended March 31, 1997, was primarily caused by an increase
in interest earning assets. Total interest income for the second
quarter of 1997 increased by $61,000, or 4.1%, to $1.53 million,
as compared to $1.47 million earned in the second quarter of
1996. This is primarily due to an increase in interest income on
mortgage loans of $109,000, or 8.2%, partially offset by a
decrease in interest income on investments of $46,000, or 37.9%.
Total interest income for the first six months of 1997 increased
by $140,000, or 4.8%, compared to the same period in the prior
year.
Total interest expense increased by $38,000, or 4.4%, from
$871,000 for the three month period ended March 31, 1996, to
$909,000 for the three month period ended March 31, 1997. This
is primarily due to an increase in interest expense on deposits
of $27,000, or 3.1%. The increase in interest expense on
deposits generally reflects the growth of deposits from the same
period in the prior year. For the first six months of 1997,
interest expense increased by $88,000, or 5.0%, to $1.84 million
as compared with $1.75 million for the first six months of 1996.
This results from both an increase in interest on deposits of
$61,000, or 3.5%, and an increase in interest on borrowed funds
of $27,000, or 163%, when compared to the first six months of
1996.
Provision for Losses
- --------------------
There were no additions made to the provision for loan
losses for the three month or six month periods ended March 31,
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 $534,000 and $720,000 at March 31,
1997 and 1996, which represents .71% and .99% 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 second quarter of 1997 increased
by $45,000, or 67.6%, compared to the second quarter of 1996.
Non-interest income for the first six months of 1997 increased by
$110,000, or 69.8%, from the first six months of 1996. These
increases are the result of increases in gains on sale of loans
of $54,000 for the second quarter of 1997 and $161,000 for the
first six 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 in
the first quarter of 1997. This statement requires that the
Company capitalizes the rights to service all mortgage loans,
including those obtained through origination. The increase in
non-interest income for the six months ended March 31, 1997, was
partially offset by a decrease in gains on sales of investments
of $37,000, or 100%, for the six month period ended March 31,
1997, compared to the same period in the prior year.
See Independent Accountants Report.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Non-Interest Expense
- --------------------
Non-interest expense decreased by $114,000 or 13.3%, to
$739,000 for the six month period ended March 31, 1997, from
$853,000 for the six month period ended March 31, 1996. This
resulted from a decrease in salaries and employee benefits
related to accrued benefits for the directors 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 second quarter of
1997 increased $7,000, or 1.9%, from the second quarter of 1996.
Income Taxes
- ------------
Income tax provisions for three and six month periods ended
March 31, 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 6.14% for the period ended March
31, 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 six months ended March 31, 1997, the company's
cash and cash equivalents (cash and short-term investments with
maturities less than 90 days) increased by $38,000. Cash was
provided by operating activities of $292,000, net proceeds from
sales of loans of $9.87 million, net increases in deposit
accounts of $2.69 million, and proceeds from sales of real estate
owned of $117,000. These were offset by an increase in loan
originations, net of repayments of $9.0 million, decreases in
advances from borrowers for tax and insurance of $194,000, a
decrease in advances from FHLB of $1.25 million, and cash
dividends and return of capital paid of $2.22 million.
See Independent Accountants Report.
12
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 March 31, 1997, including loans-in-process,
were $3.6 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 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 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 March 31, 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 $8,361,000 11.05 $1,136,000 1.50 $7,225,000 9.55
Core 8,361,000 11.05 2,272,000 3.00 6,089,000 8.05
Risk-weighted 8,690,000 21.42 3,246,000 8.00 5,444,000 13.42
</TABLE>
See Independent Accountants Report.
13<PAGE>
<PAGE>
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
Exhibits:
Exhibit 27 Financial Data Schedule
Reports on Form 8-K:
None
14<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: May 15, 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>
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<S> <C>
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 649,826
<INT-BEARING-DEPOSITS> 420,041
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
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<LOANS> 69,101,178
<ALLOWANCE> 330,003
<TOTAL-ASSETS> 75,687,637
<DEPOSITS> 63,951,529
<SHORT-TERM> 1,000,000
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<LONG-TERM> 623,292
0
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<INTEREST-TOTAL> 1,531,370
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