1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
[ X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For transition period from ______________to______________
Commission File Number 0-13655
SECURITY BANC CORPORATION
State of Incorporation: Ohio
I.R.S. Employer Identification Number: 31-1133284
40 South Limestone Street
Springfield, Ohio 45502 (513) 324-6800
Securities register pursuant to Section 12 (g) of the Act:
Common Stock, $3.125 Par Value
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. Yes X No
--- ---
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $103,133,548.50 as of January 12, 1996.
The number of shares outstanding of the Registrant's common stock, $3.125 par
value per share as of January 16, 1996 was 5,106,634 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Shareholder's Report for the year ended December 31, 1995
are incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the Annual Shareholder's Meeting to be held
April 16, 1996 are incorporated by reference into Part III.
Note 1: In calculating the market value of securities held by
non-affiliates of Registrant as disclosed on the cover page of this
Form 10-K, Registrant has treated as securities held by affiliates
voting stock owned of record by its directors and principal officers
and voting stock held by Registrant's Trust Department in a fiduciary
capacity.
2
SECURITY BANC CORPORATION AND SUBSIDIARIES
INDEX
Page No.
PART I
Item 1. Business............................................................................ 3 thru 21
Item 2. Properties.......................................................................... 22 thru 23
Item 3. Legal Proceedings................................................................... 24
Item 4. Submission of Matters to a Vote of Security Holders................................. 24
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters............................................................................. 24
Item 6. Selected Financial Data............................................................. 24
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................... 24
Item 8. Financial Statements and Supplementary Data......................................... 24
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................................... 24
PART III
Item 10. Directors and Executive Officers of The Registrant.................................. 25
Item 11. Executive Compensation.............................................................. 25
Item 12. Security Ownership of Certain Beneficial Owners and Management ..................... 26
Item 13. Certain Relationships and Related Transactions...................................... 26
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .................... 26
SIGNATURES............................................................................................... 28
3
PART I
ITEM 1. BUSINESS
Security Banc Corp. (Registrant or Company) was organized in 1985 under the
laws of The State of Ohio. The Executive Office of the registrant is
located in Springfield, Ohio. It is a Bank Holding Company as defined in
the Bank Holding Company Act of 1956, as amended, and is registered as such
with the Board of Governors of the Federal Reserve System. Registrant has
one subsidiary, The Security National Bank and Trust Co. (the Bank).
The Security National Bank and Trust Co. was organized under the statutes
of The United States as the result of an agreement to merge The Guardian
Bank of Springfield, Ohio, with and into The New Carlisle National Bank
under the title of The Security National Bank. The agreement to merge was
finalized and given approval by the Office of The Comptroller of the
Currency on October 1, 1969. The Bank was granted the authority to act as a
fiduciary as of May 30, 1978, thereby, changing the name of the Association
to "The Security National Bank and Trust Co." The Bank's main office is
located at 40 South Limestone Street, Springfield, Ohio.
The Bank is subject to primary supervision, examination, and regulation by
The Comptroller of the Currency. The Bank is a member of The Federal
Reserve System and is subject to the applicable provisions of the Federal
Reserve Act and Regulations. Deposits of the Bank are insured by The
Federal Deposit Insurance Corporation (FDIC) to the maximum extent
permitted by law.
The Bank is the parent of the Security Community Urban Redevelopment
Corporation. The subsidiary is an Ohio Corporation organized in 1975. It
was organized solely to own the Bank's main office building. Presently, the
Bank leases the Main Office building from the subsidiary. No changes are
anticipated in the subsidiary's business functions.
The principals of the subsidiary are as follows:
NAME POSITION WITH SUBSIDIARY
---- ------------------------
Harry O. Egger President
J. William Stapleton Vice President/CFO
Margaret A. Horstman Assistant Secretary
The majority of the Bank's banking centers are located in Clark County,
Ohio, with the exception of four in Greene County.
4
BUSINESS--CONTINUED
As of December 31, 1995, the Bank's consolidated total assets rounded to the
nearest thousand, were $535,975,000 including total loans of $314,575,000. On
that date, total deposits were $436,256,000 and capital accounts totaled
$72,786,000.
The Bank provides full service banking to individuals as well as to industry and
governmental subdivisions through each of its fourteen banking centers.
The Bank has made a strong impact on the Clark and Greene County retail banking
market through a great variety of services, including personal checking accounts
and savings programs, certificates of deposit, the Money Market accounts, C/D's
and Individual Retirement Accounts.
A broad range of credit programs for all retail customers includes mortgage
loans, credit card banking under the VISA designation, installment loans, and
secured and unsecured personal loans.
The banking services provided to commercial customers and government include
maintenance of demand and time deposit accounts and certificates of deposit.
Available are all types of commercial loans, including loans under lines of
credit and revolving credit, term loans, real estate mortgage loans and other
specialized loans including accounts receivable financing. The Bank further
serves the requirements of large and small industrial and commercial enterprises
in the Springfield metropolitan area and elsewhere by providing financial
counseling, automated payroll programs, cash management, and other automated
services.
The Bank's Commercial Banking Division is organized to serve the needs of the
Bank's corporate customers by handling business and commercial mortgages,
corporate deposits and other corporate financial services.
The Consumer Banking Division, which encompasses the VISA and Installment Loan
Departments, serves individual as well as corporate customers. The Residential
Mortgage Loan Department provides conventional as well as adjustable rate
mortgage loans to individuals. The Financial Services Division manages the
investment of funds for the Bank using U. S. Government and agency securities,
municipal (tax exempt) securities, as well as Federal Funds and certificates of
deposit of U. S. banks and savings and loans. The Division, in consultation with
others, sets the rates on the Bank's liability products including purchased
federal funds.
Complete fiduciary services are available to individuals, charitable
institutions, commercial customers and government agencies through the Bank's
Trust Division. The Personal Trust Department serves as investment agent and
custodian for securities portfolios of individuals, as trustees for living and
testamentary trusts and as executor and administrator of probate estates. The
Corporate Trust Department serves as Trustee for corporate and municipal bond
issues, and as registrar for securities. The Institutional Services Department
provides employee benefit plan fund management for qualified retirement plans
and investment management and securities custody services for not-for-profit
institutions.
There are over a half dozen commercial banks in Springfield, Clark County and
adjoining counties, furnishing general banking services and thus providing
strong competition to the Bank. The Bank competes for deposits not only with
commercial banks in its area, but also with building and loan associations and
other non-bank competitors, such as brokerage houses. In addition to the
competition described above, the Bank competes in various areas of service
offered to individuals, industry and government with Banks in Southwestern Ohio,
many of which possess greater financial resources than the Bank.
5
BUSINESS--CONTINUED
The earnings of the Bank are affected by general economic conditions as well as,
by the monetary policies of the Federal Reserve Board. Such policies, which have
the effect of regulating the national supply of Bank reserves and Bank credit,
can have a major affect upon the source and cost of loanable and investable
funds and the rates of return earned on loans and investments. Among the means
available to the monetary authorities to influence the size and distribution of
Bank reserves are open market operations by the Board of Governors of the
Federal Reserve System, changes in cash reserve requirements against member bank
deposits, and limitations on interest rates which member banks may pay on most
time and savings deposits.
Material Changes and Developments
There were no material changes or developments during 1995 in the business done
by the Bank.
Regulation and Supervision
The Bank, as a national bank, is subject to regulation by the Comptroller of the
Currency, The Board of Governors of the Federal Reserve System and The Federal
Deposit Insurance Corporation. The company and any subsidiaries which it may
hereafter have will be affiliates of the Bank within the meaning of the Federal
Reserve Act. As affiliates, the Company and any such subsidiaries are subject to
certain restrictions on loans by the Bank, on investments by the Bank in their
stock or securities or on its taking such stock and securities as collateral for
loans to any borrower. The Company and any such subsidiaries, as affiliates of
the Bank are also subject to certain restrictions with respect to engaging in
the underwriting and public sale and distribution of securities. Neither the
Company nor any such subsidiaries may, for example, engage in such transactions
with respect to securities of the company unless such securities are registered
under the Securities Act of 1993 or any exemption from such registration is
available. In addition, any such affiliates of the Bank will be subject to
examination at the discretion of supervisory authorities.
The Company, as a Bank Holding Company, is subject to the restrictions of the
Bank Holding Company Act of 1956 as amended. This Act first provides that the
acquisition of control of a bank is subject to the prior approval of the Board
of Governors of the Federal Reserve System. In the future, the Company will be
required to obtain the prior approval of the Federal Reserve Board before it may
acquire, for its individual account all, or substantially all, of the assets of
any bank, or acquire ownership or control of any voting securities of any Bank,
if after giving effect to such acquisition, the Company would own or control
more than 5% of the voting shares of such bank. The Act does not permit the
Federal Reserve Board to approve the acquisition by the Company or any
subsidiary for their own account, of any voting shares of, or interest in, or
all, or substantially all, of the assets, of any bank located in a state other
than Ohio, unless such acquisition is specifically authorized by the statutes of
the state in which such bank is located.
The Bank Holding Company Act limits the activities which may be engaged in by
the Company and its subsidiaries to ownership of banks and those activities
which the Federal Reserve Board has deemed or may in the future find, by order
of regulations, to be so closely related to the banking or managing or
controlling banks as to be a proper incident thereto.
6
BUSINESS--CONTINUED
Those activities presently authorized by the Federal Reserve Board include the
following general activities: (1) the making or acquiring of loans or other
extensions of credit: (2) operating as an industrial bank, Morris Plan Bank, or
industrial loan company according to state law without the accepting of demand
deposits and without the making of commercial loans: (3) the servicing of loans
for any person: (4) performing certain trust functions: (5) acting with certain
limitations as investment or financial advisor: (6) leasing personal property
and equipment: (7) the making of equity and debt investments in projects or
corporations designated primarily to promote community welfare: (8) providing
bookkeeping and data processing services for the internal operations of the Bank
Holding Company and its Subsidiaries: and providing to others, data processing
and transmission services and facilities for banking, financial or related
economic data: (9) acting as insurance agent or broker under certain
circumstances and with respect to certain types of insurance: (10) acting as
underwriter for credit life insurance and credit accident and health insurance
which is directly related to extensions of credit by the Bank Holding Company
System: (11) providing limited courier services for the internal operations of
the Holding Company, for checks exchanged among banking institutions, and for
audit and accounting media of a banking or financial nature used in processing
such media: (12) providing management consulting advice to non-affiliated banks
under certain limitations; (13) the retail sale of money orders with a face
value of $1,000 or less, of travelers checks and of U. S. Savings Bonds: (14)
performing appraisals of real estate: (15) providing securities brokerage
services, (restricted to buying and selling securities solely as agent for
customers), related securities activities and incidental activities: (16)
underwriting and dealing in government obligations and money market instruments:
(17) foreign exchange advisory and transactional services: and (18) acting as
futures commission merchant. For details and limitations on these activities,
reference should be made to Regulation Y of the Federal Reserve Board, as
amended. Further, under the 1970 amendment of this Act and the regulations of
the Federal Reserve Board, the Company and its subsidiaries will be prohibited
from engaging in certain tie-in arrangements in connection with any extension of
credit or provisions of any property or service.
Employees
As of December 31, 1995, there were no full time employees of the Registrant.
Affiliates of the Registrant employed 260 employees of whom 44 were officers and
55 were part time employees.
Statistical Information
Pages 7 through 21 contain statistical information on the Company and its
subsidiaries.
7
BUSINESS--CONTINUED
The following balance sheets present the distribution of the consolidated
assets, liabilities, and stockholders' equity on a daily average basis.
(000s)
For the Years 1995 1994 1993
---- ---- ----
Assets
Cash and due from Banks $ 19,381 $ 19,664 $ 19,367
Interest Bearing Deposits in banks 107 3,028 2,684
Securities 150,796 168,994 164,429
Federal Funds Sold 22,728 8,965 27,764
Loans and Leases
Commercial Loans 147,647 141,794 130,066
Mortgage Loans 83,820 83,886 82,097
Consumer Loans 83,030 73,838 57,113
Allowance for Loan Losses (3,786) (3,415) (3,274)
-------- -------- --------
Total Loans and Leases 310,711 296,103 266,002
Bank Premises and Equipment 5,311 5,243 5,184
Other Assets 11,617 7,294 6,512
-------- -------- --------
Total Assets $520,651 $509,291 $491,942
======== ======== ========
Liabilities
Deposits
Demand $ 77,301 $ 73,671 $ 66,983
Savings and Interest Bearing 179,976 208,487 216,473
Cert. of deposits $100,000 and over 19,576 14,351 12,345
Other Time 146,205 124,647 117,001
-------- -------- --------
Total Deposits 423,058 421,156 412,802
Funds Borrowed 26,331 24,520 22,441
Accrued Taxes, Interest and Expense 2,554 1,981 2,172
-------- -------- --------
Total Liabilities $451,943 $447,657 $437,415
Shareholders' Equity
Common Stock $ 16,705 $ 16,656 $ 16,550
Capital Surplus 17,871 17,771 17,577
Retained Earnings 37,498 30,362 23,580
Unrealized gain and (losses) (173) 37 --
Less: Treasury Stock 3,193 3,192 3,180
-------- -------- --------
Total Shareholder's Equity $ 68,708 $ 61,634 $ 54,527
Total Liabilities and Shareholders' Equity $520,651 $509,291 $491,942
======== ======== ========
8
BUSINESS--CONTINUED
Investment Portfolio
The following table sets forth the carrying amount of investment securities at
the dates indicated. (000s)
December 31
-----------
Available for Sale Investments: 1995 1994
---- ----
U. S. Treasury $119,710 $122,090
Held to Maturity Investments:
U. S. Treasury and Other U. S. Government Agencies
and Corporations and Mortgage-backed Securities 2,073 3,841
States and Political Subdivisions 27,192 35,317
Other 1,038 1,041
-------- --------
TOTAL $150,013 $162,289
December 31, 1993
-----------------
U. S. Treasury and Other U. S. Government Agencies and
Corporations and Mortgage-backed Securities $133,882
States and Political Subdivisions 38,907
Other 1,032
--------
TOTAL $173,821
The following table sets forth the maturities of investment securities at
December 31, 1995 and the weighted average yields of such securities (calculated
on the basis of the cost and effective yields weighted for the scheduled
maturity of each security). Tax-equivalent adjustments (using a 35% rate) have
been made in calculating yields on obligations of state and political
subdivisions. (000)s
Maturing
- ---------------------------------------------------------------------------------------------------------------------------------
After One After Five
Within Within But Within After
One Year Five Years Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
Available for Sale Investments:
U. S. Treasury $58,876 5.48% $60,834 5.32% 0 0 0 0
Held to Maturity Investments:
U. S. Treasury and Other U. S
Government Agencies and
Corporations 605 7.40% 0 0.00% 0 0 0 0
States and Political Subdivisions 4,844 10.09% 20,853 10.78% 1,495 6.76% 0 0
Mortgage-backed Securities 0 0.00% 0 0.00% 0 0 1,468 7.09%
Other 0 0.00% 0 0.00% 0 0 1,038 6.00%
--------------------------------------------------------------------------------------------
$64,325 5.85% $81,687 6.71% $1,495 6.76% $2,506 6.64%
9
BUSINESS--CONTINUED
Types of Loans
The following table summarizes consolidated loans by major category for the five
years ending December 31. (000s)
December 31
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Type
Real Estate Loans
Secured by Farm Land $ 2,580 $ 895 $ 974 $ 1,311 $ 1,652
Secured by 1-4 Family
Residential Prop 109,173 83,113 79,510 77,510 74,382
Secured by Multi Family
Residential Prop 11,590 137 153 187 265
Secured by Non-Farm
Non-resident Prop 29,783 5,440 6,592 8,448 10,191
Loans to Farmers 6,267 8,097 9,843 8,208 7,027
Comm. and Ind. Loans 68,452 133,583 119,195 107,669 96,037
Consumer Loans to Indiv 84,843 79,050 60,016 50,799 44,817
All Other Loans 2,279 4,308 4,113 8,777 6,995
-------- -------- -------- -------- --------
Total Loans Gross 314,967 314,623 280,396 262,909 241,366
Less: Unearned Income on Loans 392 572 830 566 624
-------- -------- -------- -------- --------
TOTAL LOANS $314,575 $314,051 $279,566 $262,343 $240,742
======== ======== ======== ======== ========
Non-accrual loans totaled $2,516,000 and $2,592,000 as of December 31, 1995 and
1994 respectively.
10
BUSINESS--CONTINUED
The following table shows the maturity of loans (excluding loans secured by real
estate, installment loans and lease financing) outstanding as of December 31,
1995. Also provided are the amounts due after one year classified according to
the sensitivity to changes in interest rates. (000s)
MATURING
- -------------------------------------------------------------------------------------------
Within After One But After
One Year Within Five Years Five Years Total
Commercial, Financial, and
Agriculture $60,961 $14,533 $1,504 $76,998
======= ======= ====== =======
Loans maturing after one year with $13,127 $1,504
Fixed Interest rate 1,406 0
------- ------
Variable Interest $14,533 $1,504
======= ======
RISK ELEMENTS
Interest on loans is normally accrued at the rate agreed upon at the time each
loan was negotiated. It is the Bank's policy to discontinue accrual of interest
on commercial and mortgage loans when there is a clear indication that the
borrower's cash flow may not be sufficient to meet payments as they become due.
The following table presents data concerning loans at risk at the end of each
period. (000s)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Non-accrual loans $2,516 $2,592 $2,035 $1,234 $2,400
Accruing loans past
due 90 days or more 1,445 561 243 280 461
Restructured loans 0 0 0 97 104
11
BUSINESS--CONTINUED
Information with respect to non-accrual and restructured loans at December 31,
1995 and 1994 is as follows: (000s)
December 31
1995 1994
---- ----
Non-accrual loans:
Domestic $2,516 $2,592
Restructured loans:
Domestic 0 0
Interest income that would have been recorded under
original terms:
Domestic 243 188
Interest income recorded during the period:
Domestic 0 0
12
BUSINESS--CONTINUED
Summary of Loan Loss Experience
This table summarized the Company's loan loss experience for each of the five
years ended December 31 (000s)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Balance at Jan. 1: $ 3,546 $ 3,162 $ 3,010 $ 2,779 $ 2,591
Charge-offs
Commercial 222 133 695 639 254
Real Estate 0 15 5 7 5
Consumer 646 460 349 425 455
------- ------- ------- ------- -------
868 608 1,049 1,071 714
Recoveries
Commercial 62 26 140 47 6
Real Estate 0 0 0 0 4
Consumer 201 166 161 155 192
------- ------- ------- ------- -------
263 192 301 202 202
------- ------- ------- ------- -------
Net Charge-offs (605) (416) (748) (869) (512)
Provision for loan losses 800 800 900 1,100 700
------- ------- ------- ------- -------
Balance at Dec. 31: $ 3,741 $ 3,546 $ 3,162 $ 3,010 $ 2,779
======= ======= ======= ======= =======
Ratio of net charge-
offs to average
loans outstanding 0.19% 0.14% 0.28% 0.34% 0.23%
13
BUSINESS--CONTINUED
Allowance for Loan Losses
The allowance for loan losses is established through charges to operations by a
provision for loan losses. Loans which are determined to be uncollectable are
charged against the allowance and subsequent recoveries, if any, are credited to
the allowance. The amount charged to operations is based on several factors.
These include the following:
1. Analytical reviews of the loan loss experience in relationship to
outstanding loans to determine an adequate allowance for loan
losses required for loans at risk.
2. A continuing review of problem or at risk loans and the overall
portfolio quality.
3. Regular examinations and appraisals of the loan portfolio
conducted by the Bank's examination staff and the banking
supervisory authorities.
4. Management's judgement with respect to the current and expected
economic conditions and their impact on the existing loan
portfolio.
The amount provided for loan losses exceeded actual net charge-offs by $195,000
in 1995, $384,000 in 1994 and $152,000 in 1993.
It is management's practice to review the allowance on a quarterly basis to
determine whether additional provisions should be made after considering the
factors noted above. Based on these procedures, management is of the opinion
that the allowance at December 31, 1995 of $3,741,000 is adequate.
14
BUSINESS --CONTINUED
This table shows allocation of the allowance for loan losses as of the end of
the last five years. (000s)
12-31-95 12-31-94 12-31-93 12-31-92 12-31-91
Percent of Percent of Percent of Percent of Percent of
Loans to Loans to Loans to Loans to Loans to
Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
------ ----------- ------ ----------- ------ ----------- ------ ----------- ------ -----------
Commercial, Financial, and
Agriculture $ 936 47% $1,390 47% $1,070 48% $ 452 48% $ 829 46%
Real Estate, Construction 0 0 0 0 0 0 0 0 0 0
Real Estate, Mortgage 52 28% 32 28% 16 30% 22 33% 15 36%
Consumer 771 25% 588 25% 303 22% 223 19% 173 18%
Additional Reserve
Allocated for current loans 879 1,005 694 348 508
Unallocated 1,103 531 1,079 1,965 $1,254
------ ------ ------ ---- ------ ---- ------ ---- ------ ---
$3,741 100% $3,546 100% $3,162 100% $3,010 100% $2,779 100%
====== ===== ====== ==== ====== ==== ====== ===== ====== ===
15
BUSINESS--CONTINUED
Deposits
Maturities of time certificates of deposits and other time deposits of $100,000
or more, outstanding at December 31, are summarized as follows: (000s)
1995 1994
---- ----
Three months or less $ 7,687 $ 5,185
Over three months through twelve months 11,492 8,399
Over one year thru five years 5,695 2,983
------- -------
$24,874 $16,567
======= =======
Return on Equity and Assets
The following table shows consolidated operating and capital ratios of the
company for each of the last three years:
Year Ended December 31
For the Years 1995 1994 1993
- ------------- ---- ---- ----
(%)
Return on Assets (A) 2.13% 2.02% 1.94%
Return on Equity (B) 16.13% 16.72% 17.54%
Dividend Payout Ratio (C) 33.64% 32.59% 31.75%
Equity to Assets Ratio (D) 13.20% 12.10% 11.08%
(A) net income divided by average total assets
(B) net income divided by average equity
(C) dividends declared per share divided by net income per share
(D) average equity divided by average total assets
16
BUSINESS--CONTINUED
Capital Resources
The table below illustrates the Company's regulatory capital ratios at December
31. (000s)
1995 1994
---- ----
Tier 1 Capital $ 72,410 $ 64,926
Tier 2 Capital 3,741 3,546
-------- --------
TOTAL QUALIFYING CAPITAL $ 76,151 $ 68,472
======== ========
Risk Adjusted Total Assets (including
off-balanced exposures) $346,310 $329,664
======== ========
Tier 1 Risk-Based Capital Ratio 20.91% 19.69%
======= =======
Total Risk-Based Capital Ratio 21.99% 20.77%
======= =======
Leverage Ratio 13.55% 12.46%
======= =======
17
INTEREST SENSITIVITY ANALYSIS
000'S
DECEMBER 31, 1995
INTEREST (JAN) (FEB/MAR) (APR/JUN) (JUL/ DEC) (1ST YEAR)
EARNING ASSETS: 1-30 % 31-90 % 91-180 % 181-365 % TOTAL12/96 %
DAYS YIELD DAYS YIELD DAYS YIELD DAYS YIELD YIELD
LOANS......
CONSUMER 3,140 9.3% 3,342 9.7% 5,019 9.7% 9,919 9.7% 21,420 9.6%
COMMERCIAL 69,983 9.3% 16,121 9.1% 10,338 9.3% 10,385 9.2% 106,827 9.3%
REAL ESTATE 496 8.1% 4,581 8.3% 5,326 7.7% 18,245 8.2% 28,648 8.1%
CREDIT LINE 735 8.9% 0 0.0% 0 0.0% 0 0.0% 735 8.9%
SECURITIES 1,689 7.1% 4,477 7.4% 59,134 5.8% 2,434 8.1% 67,734 6.0%
FUNDS SOLD (act) 34,800 5.7% 34,800 5.7%
avg 41078
BANK CD'S 0 0.0% 0
- ------------------------------ -------------------------------------------------------------------------------------------
TOTAL 110,843 8.1% 28,521 8.8% 79,817 6.6% 40,983 8.8% 260,164 7.8%
============================== ===========================================================================================
INTEREST
BEARING LIABILITIES:
CERTIFICATES 17,407 4.9% 16,722 5.3% 36,567 5.3% 37,253 5.2% 107,949 5.2%
REPO'S (act) 24,293 4.6% 24,293 4.6%
avg 25107
MONEY FUND 19,780 2.5% 19,780 2.5%
NOW/SUPER NOW 10,672 1.8% 10,672 1.8%
SAVINGS 20,348 2.5% 20,348 2.5%
- ------------------------------ -------------------------------------------------------------------------------------------
TOTAL 92,500 3.4% 16,722 5.3% 36,567 5.3% 37,253 5.2% 183,042 4.3%
============================== ===========================================================================================
RATE SENSITIVITY GAP $ 18,343 $11,799 $43,250 $ 3,730 $ 77,122
POSITION FOR RATES TO RISE RISE RISE RISE RISE
CUMMULATIVE GAP $ 18,343 $30,142 $73,392 $77,122 $ 77,122
CUMMULATIVE GAP AS A
PERCENTAGE OF ASSETS
(POLICY -10% TO +5%) 3.52% 5.79% 14.10% 14.81% 14.81%
LAST MONTH 2.60% 3.05% 13.67% 13.56%
LAST YEAR 0.39% 8.70% 9.54% 13.46%
RATIO OF I.E.A. to I.B.L
(POLICY .80 to 1.20) 1.20 1.28 1.50 1.65 1.42
LAST MONTH 1.14% 1.14% 1.50% 1.38%
LAST YEAR 1.02% 1.40% 1.35% 1.35%
INCOME IMPACT OF $1,542
INT RATE EXPOSURE 2%
% OF BUDGETED INCOME 13.92%
===========================================================================================================================
INTEREST (2ND YEAR) (3RD YEAR) (4TH YEAR) (5TH YEAR)
EARNING ASSETS: TOTAL12/97 % TOTAL12/98 % TOTAL12/99 % TOTAL 12/00 %
YIELD YIELD YIELD YIELD
LOANS......
CONSUMER 29,821 12.3% 14,599 9.5% 9,247 9.8% 3,329 10.4%
COMMERCIAL 12,563 9.0% 11,101 8.8% 6,429 8.7% 5,393 9.2%
REAL ESTATE 6,920 7.2% 5,616 8.3% 4,298 8.1% 2,935 8.3%
CREDIT LINE 267 9.9% 0 0.0% 0 0.0% 0 0.0%
SECURITIES 74,136 6.2% 5,211 8.6% 1,238 5.6% 200 3.9%
FUNDS SOLD (act)
avg 41078
BANK CD'S
- ------------------------------ --------------------------------------------------------------------------------------
TOTAL 123,707 8.0% 36,527 9.0% 21,212 8.9% 11,857 9.2%
============================== ======================================================================================
INTEREST
BEARING LIABILITIES:
CERTIFICATES 52,578 6.0% 10,229 5.7% 3,680 6.5% 0 0.0%
REPO'S (act)
avg 25107
MONEY FUND
NOW/SUPER NOW 42,688 1.8%
SAVINGS 81,393 2.5% 0 0.0% 0 0.0% 0 0.0%
- ------------------------------ --------------------------------------------------------------------------------------
TOTAL 176,659 3.4% 10,229 5.7% 3,680 6.5% 0 0.0%
============================== ======================================================================================
RATE SENSITIVITY GAP $(52,952) $26,298 $ 17,532 $ 11,857
POSITION FOR RATES TO
CUMMULATIVE GAP $ 24,170 $50,468 $ 68,000 $ 79,857
CUMMULATIVE GAP AS A
PERCENTAGE OF ASSETS
(POLICY -10% TO +5%)
LAST MONTH
LAST YEAR
RATIO OF I.E.A. to I.B.L
(POLICY .80 to 1.20)
LAST MONTH
LAST YEAR
INCOME IMPACT OF
INT RATE EXPOSURE 2%
% OF BUDGETED INCOME
======================================================================================================================
INTEREST (GREATER THAN 5-10 YEAR) (GREATER THAN 10+ YEAR)
EARNING ASSETS: TOTAL % TOTAL % TOTAL %
YIELD YIELD YIELD
LOANS......
CONSUMER 2,527 10.6% 586 10.3% 81,529 10.668%
COMMERCIAL 5,406 8.6% 1,238 8.7% 148,957 9.146%
REAL ESTATE 14,806 8.2% 19,864 8.4% 83,087 8.120%
CREDIT LINE 0 0.0% 0 0.0% 1,002 9.147%
SECURITIES 1,494 6.8% 0 0.0% 150,013 6.201%
FUNDS SOLD (act) 34,800 5.680%
avg 41078
BANK CD'S
- ------------------------------ -----------------------------------------------------------------------------------------
TOTAL 24,233 8.5% 21,688 8.5% 499,388 8.1%
============================== =========================================================================================
INTEREST
BEARING LIABILITIES:
CERTIFICATES 92 6.0% 165 11.8% 174,693 5.509%
REPO'S (act) 24,293 4.560%
avg 25107
MONEY FUND 19,780 2.460%
NOW/SUPER NOW 53,360 1.750%
SAVINGS 0 0.0% 0 0.0% 101,741 2.500%
- ------------------------------ -----------------------------------------------------------------------------------------
TOTAL 92 6.0% 165 11.8% 373,867 3.9%
============================== =========================================================================================
RATE SENSITIVITY GAP $ 24,141 $ 21,523 $125,521
POSITION FOR RATES TO
CUMMULATIVE GAP $103,998 $125,521 $125,521
CUMMULATIVE GAP AS A
PERCENTAGE OF ASSETS
(POLICY -10% TO +5%)
LAST MONTH
LAST YEAR
RATIO OF I.E.A. to I.B.L
(POLICY .80 to 1.20)
LAST MONTH
LAST YEAR
INCOME IMPACT OF
INT RATE EXPOSURE 2%
% OF BUDGETED INCOME
=========================================================================================================================
18
BUSINESS--CONTINUED
Loan Commitments and Standby Letters of Credit
Loan commitments are made to accommodate the financial needs of our customers.
Letters of credit commit Security National Bank to make payments on behalf of
customers when specific future events occur.
Both arrangements have credit risk essentially the same as that involved in
extending loans to customers and are subject to the Bank's normal credit
policies. Collateral (e.g., securities, receivables, inventory, equipment) is
obtained based on Management's credit assessment of the customer.
Off-balance sheet items at December 31, 1995 (000s)
Loan Commitments
Revolving, open-end lines secured by 1-4 family
residential properties $ 4,961
Credit card lines 24,653
Other unused commitments 52,725
Letters of Credit $ 2,562
19
BUSINESS--Continued
SECURITY BANC CORPORATION (Parent Company Only)
STATEMENT OF CONDITION (000s)
December 31
1995 1994
---- ----
ASSETS
Investment in subsidiary $72,786 $64,196
------- -------
TOTAL ASSETS $72,786 $64,196
------- -------
LIABILITIES 0 0
TOTAL LIABILITIES 0 0
SHAREHOLDERS' EQUITY
Common Stock 16,710 16,693
Surplus 17,883 17,842
Retained Earnings 41,178 33,823
Unrealized gains and (losses) 208 (969)
Less: Treasury (3,193) (3,193)
------- -------
72,786 64,196
------- -------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $72,786 $64,196
======= =======
20
BUSINESS--Continued
SECURITY BANC CORPORATION (Parent Company Only)
STATEMENT OF INCOME (000s)
Year Ended December 31
1995 1994 1993
---- ---- ----
Dividends from subsidiary $ 3,779 $ 3,422 $3,073
------- ------- ------
Shareholder expense
(Annual Report, Etc.) 52 63 36
------- ------- ------
TOTAL EXPENSES 52 63 36
------- ------- ------
Income before change in undistributed
earnings of subsidiary 3,727 3,359 3,037
Increase in undistributed earnings
from subsidiary 7,355 6,945 6,528
------- ------- ------
NET INCOME $11,082 $10,304 $9,565
======= ======= ======
21
BUSINESS--Continued
SECURITY BANC CORPORATION (Parent Company Only)
STATEMENT OF CASH FLOWS (000s)
Year Ended December 31
1995 1994 1993
---- ---- ----
Cash Flows from Operating Activities:
Net Income $11,082 $10,304 $ 9,565
Adjustments to reconcile net income to cash provided by
operating activities:
Equity in undistributed earnings of subsidiaries (7,355) (6,932) (6,528)
------- ------- -------
Net cash provided by operating activities 3,727 3,372 3,037
Cash Flows from Investing Activities:
Payments for Investments in Subsidiaries (58) (308) (320)
------- ------- -------
Net cash used by investing activities (58) (308) (320)
Cash Flows from Financing Activities:
Proceeds from Issuance of Common Stock 58 308 320
Payments to repurchase Common Stock 0 (13) 0
Dividends paid (3,727) (3,359) (3,037)
------- ------- -------
Net cash used by Financing Activities (3,669) (3,064) (2,717)
------- ------- -------
Increase (Decrease) in cash 0 0 0
Cash at beginning of year 0 0 0
CASH AT END OF YEAR $ 0 $ 0 $ 0
------- ------- -------
22
ITEM 2. PROPERTIES
MAIN OFFICE:
The land and building, on which the Bank's Main Office is located, is
owned by Security Community Urban Redevelopment Corporation, a wholly
owned subsidiary of The Security National Bank and Trust Co. The cost
of the land and the adjusted basis of the building as of December 31,
1995 were $498,187.00 and $1,350,554.00 respectively. The Main Office
Building comprises four stories and approximately 44,500 square feet.
In 1975, the subsidiary purchased the land on which the Bank is
situated. The building was constructed in 1976. Since November 1, 1977,
the Bank has leased the Main Office from the Subsidiary. The lease term
is twenty years, and expires on October 31, 1996. The Bank pays as
rent, the sum of real estate taxes and assessments levied against the
premises and all premiums for insurance covering the premises. Rent is
paid annually on, or before, December 31.
WESTERN OFFICE:
In 1953, the Bank purchased the property, on which the Western Office
is located, for $27,400.00. Until 1981, the Bank leased a parking lot
adjacent to the Western Office. The Bank purchased the lot in 1981 for
$70,600.00. As of December 31, 1995, the building had an adjusted basis
of $13,936.00. It has approximately 2,860 square feet.
NORTHRIDGE OFFICE:
The property, on which the Northridge Office is located, cost the bank
$50,000.00 in 1974. As of December 31, 1995, the building had an
adjusted basis of $71,947.00. The building has approximately 2,475
square feet.
NEW CARLISLE OFFICE:
The property, on which the New Carlisle Office is located, cost the
Bank $49,020.00 in 1957. The building had an adjusted basis of
$89,811.00 as of December 31, 1994. The building is a two story
structure with approximately 7,284 square feet.
PARK LAYNE OFFICE:
An existing bank building was purchased and opened as the Park Layne
Branch of The Security National Bank and Trust Co. on March 21, 1988.
The property on which Park Layne is located cost the Bank $75,580.00.
The building has an adjusted basis of $245,624.00 as of December 31,
1995. The building is a single story structure with approximately 2,650
square feet.
MEDWAY OFFICE:
The property on which the Medway Office is located, cost the Bank
$7,500.00 in 1959. The building is a single story structure with
approximately 1,550 square feet. The original cost of the Building was
$25,628.00. A new 230 square foot addition was completed in 1979 at an
original cost of $23,152.00. The adjusted basis of the building was
$3,701.00 as of December 31, 1995.
ENON OFFICE:
The property, on which the Enon Office is located, cost the bank
$15,000.00 in 1969. The building is a single story structure with
approximately 2,800 square feet. A new addition was completed in 1979
at the cost of $50,366.00. The original cost of the building (before
the addition) was $47,080.00. The adjusted basis of the building was
$11,584.00. as of December 31, 1995.
23
ITEM 2. PROPERTIES (Cont'd)
SOUTH CHARLESTON OFFICE
The Bank acquired Society Bank's South Charleston Office on June 24,
1991 and approximately $15,000,000.00 in deposits. The acquired office
operations were consolidated with the Bank's existing South Charleston
Office in the building acquired from Society at 102 S. Chillicothe
Street. The property cost $7,920.00. The building is approximately 2500
square feet and had an adjusted basis of $195,239.00 at December 31,
1995.
EAST MAIN OFFICE:
The Bank leases its East Main Office from Main Associates, an Ohio
general partnership. The building was constructed in 1980, according to
the Bank's plans and specifications. It is a single story structure
with approximately 2,100 square feet. The lease term is twenty years,
and the Bank has an option to renew the lease for two additional
five-year terms. The Bank pays monthly rent of $2,000.00.
NORTH LIMESTONE OFFICE:
The property, on which the North Limestone Office is located, cost the
Bank $155,000.00 in 1986. The building is a single story structure with
approximately 2,700 square feet. The original cost of the building was
$303,469.00. The adjusted basis of the building was $118,943.00 as of
December 31, 1995.
XENIA OFFICES:
On April 20, 1994, the Bank acquired two banking offices located in the
city of Xenia, Ohio, with approximately $40 million of deposits. The
Plaza Office is a single story brick building containing approximately
2,772 square feet, located at 82 N. Allison Avenue. This office is
leased at $1,800.00 per month with original term plus options to expire
in October of 1996. Building was erected in 1962.
THE XENIA DOWNTOWN OFFICE is a two story brick building containing
12,641 square feet, located at 161 East Main Street. This building was
erected in 1955 and contains nine teller stations and three drive- ins.
The attached parking lot contains spaces for 60 cars. The cost basis of
this property to Security National is approximately $400,000.00. The
adjusted basis of the building was $151,263.00 as of December 31, 1995.
JAMESTOWN OFFICES:
On February 28, 1993, the Bank acquired the two offices of The Farmers
& Traders Bank of Jamestown, Ohio with approximately $19 million of
deposits. The Shawnee Hills Office is a single story, brick structure
containing approximately 1,624 square feet, located at 3566 Jasper
Road. The adjusted basis of the building at December 31, 1995 was
$121,871.00.
THE JAMESTOWN OFFICE is a two story brick building containing
approximately 5,000 square feet, located at 2 E. Washington Street. The
adjusted basis of the building at December 31, 1995 was $65,535.00.
24
ITEM 3. LEGAL PROCEEDINGS
Registrant and its subsidiaries are not a party to any
material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
1. To elect three directors of Class II to serve until the
Annual Meeting of Shareholders in 1999, or in the case of
each director until his successor is duly elected and
qualified.
2. To transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The common stock of the Corporation is traded on the
over-the-counter market. Transfer agent and registrar is The
Registrar and Transfer Co., 10 Commerce Drive, Cranford, NJ
07016.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by
reference to the registrant's 1995 Annual Report to Shareholders
attached to this filing as Exhibit "C".
ITEM 7. MANAGEMENT'S DISCUSSION AN ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information required by this item is incorporated herein by
reference to the registrant's 1995 Annual Report to Shareholders
attached to this filing as Exhibit "C".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by
reference to the registrant's 1995 Annual Report to Shareholders
attached to this filing as Exhibit "C".
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning Directors is
incorporated herein by reference to the registrant's 1996 Proxy
Statement attached to this filing as Exhibit "D".
Executive Officers and Management Committee
The name, age, and position of the Executive Officers and Management Committee
of the registrant as of March 5, 1996, is listed below along with their business
experience during the past five years. Officers are appointed annually by the
Board of Directors at the meeting of Directors immediately following the Annual
Meeting of Stockholders.
Name, Age, Position Business Experience During Past Five Years
- ------------------- ------------------------------------------
Executive Officers
Harry O. Egger, 56 President since 1981
Chairman, President, CEO
J. William Stapleton, 43 Auditor 9-18-78 to 9-18-84
Vice President/CFO Branch Administrator 9-18-84 to 1-1-89
Vice President since 9-18-84
William C. Fralick, 41 Commercial Loan Officer since 3-79
Vice President Promoted to Vice President 12-31-84
Thomas L. Locke, 46 BancOhio 1969 to 1985
Director of Personnel Director of Personnel at SNB since 11-85
Glenda S. Greenwood, 40 Director of Marketing since 12-29-80
Director of Marketing
Daniel M. O'Keefe, 51 Vice President/Trust Officer since 1-80
Vice President
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the registrant's 1996 Proxy Statement attached to this
filing as Exhibit "D".
26
PART III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated herein by
reference to the registrant's 1996, Proxy Statement attached to the
filing as Exhibit "D".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the registrant's 1996 Proxy Statement attached to the
filing as Exhibit "D".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
a) Document filed as part of the report
1. FINANCIAL STATEMENTS
The following consolidated financial statements and report
of independent auditors of Security Banc Corporation,
included in the 1995 Annual Report to its shareholders for
the year ended December 31, 1995 are incorporated by
reference in Item 8.
Report of Independent Auditors
Consolidated Statement of Condition, December 31, 1995 and
1994
Consolidated Statement of Income for the Years Ending
December 31, 1995, 1994, and 1993
Consolidated Statement of Shareholders' Equity for the
Years Ending December 31, 1995, 1994, and 1993
Consolidated Statement of Cash Flows for the Years Ending
December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
27
PART III
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K (CONT'D)
a) Document filed as part of the report
2. SCHEDULES TO THE CONSOLIDATED FINANCIAL STATEMENTS REQUIRED
BY ARTICLE 9 OF REGULATION S-X ARE NOT REQUIRED UNDER THE
RELATED INSTRUCTIONS OR ARE INAPPLICABLE, AND THEREFORE
HAVE BEEN OMITTED.
(b) Reports on Form 8-K - None
(c) Exhibits
C - Security Banc Corporation 1995 Annual Report
D - Security Banc Corporation 1996 Proxy Statement
23 - Consent of Independent Auditors
(d) Financial Statement Schedules - None
Security Banc Corp. has the following subsidiaries:
1. Security National Bank and Trust Co.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 BANC CORPORATION
--------------------------------------------------------------------------
(Registrant)
By /s/ Harry O. Egger
--------------------------------------
Harry O. Egger, Chairman of the Board
President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Chester L. Walthall /s/ Larry E. Kaffenbarger
- --------------------------------- ---------------------------------
Director Director
/s/ Jane N. Scarff /s/ Harry O. Egger
- --------------------------------- ---------------------------------
Director President/CEO/Chairman
/s/ Richard E. Kramer /s/ Thomas L. Miller
- --------------------------------- ---------------------------------
Director Controller
/s/ W. Dean Sweet
- ---------------------------------
Director
J. William Stapleton
- ---------------------------------
Vice President
29
S E C U R I T Y B A N C C O R P O R A T I O N
1 9 9 5
A N N U A L R E P O R T
30
The Annual Shareholders' Meeting of Security Banc Corporation will be held
April 16, 1996, at 2:00 p.m. on the third floor of the Security National Bank
and Trust Co., 40 South Limestone Street, Springfield, Ohio.
A copy of Security Banc Corporation's Annual Report Form 10-K for the period
ending December 31, 1995, may be obtained without charge upon written
request to Shareholder Relations, Security Banc Corporation, 40 South Limestone
Street, Springfield, Ohio 45502.
Cash Dividends Per Share
1995 1994 1993 1992 1991
$0.73 $0.66 $0.60 $0.54 $0.49
Earnings Per Share
1995 1994 1993 1992 1991
$2.17 $2.03 $1.89 $1.78 $1.62
Stock Performance Per Share
1995 1994 1993 1992 1991
Market Value $28.50 $24.00 $22.00 $19.75 $16.25
Year End Book Value $14.25 $12.59 $11.43 $10.16 $ 8.92
31
STABILITY AND PERFORMANCE
RESULT FROM TAPPING THE
KNOWLEDGE AND
EXPERIENCE OF MANY TO
CREATE A DYNAMIC AND
DIVERSE LEADERSHIP
Fiscal Highlights Compared
1995 1994 1993
Net Income $ 11,082,000 $ 10,304,000 $ 9,565,000
Return on Average Assets 2.13% 2.02% 1.94%
Return on Average Equity 16.13% 16.72% 17.54%
Per Share
Net Income $ 2.17 $ 2.03 $ 1.89
Cash Dividends $ 0.73 $ 0.66 $ 0.60
Book Value $ 14.25 $ 12.59 $ 11.43
Market Last Sale $ 28.50 $ 24.00 $ 22.00
Assets $ 535,975,000 $ 520,981,000 $ 502,424,000
Deposits $ 436,256,000 $ 426,767,000 $ 419,682,000
Loans (Net) $ 310,834,000 $ 310,505,000 $ 276,404,000
Securities $ 150,013,000 $ 162,289,000 $ 173,821,000
Capital Funds $ 72,786,000 $ 64,196,000 $ 57,925,000
Total Capital to
Total Risk Based Assets 21.99% 20.77% 21.23%
Shares of Common
Stock Outstanding 5,106,634 5,101,284 5,068,220
Cash Dividends $ 3,727,000 $ 3,359,000 $ 3,037,000
Shareholders 1,205 1,115 1,063
Bank Offices 14 14 14
Staff Full-Time Equivalent 233 227 233
32
Letter to the Shareholders
[Photo]
Once again, we are pleased to present an annual report to shareholders
which reflects the continuing growth, strength and stability of Security Banc
Corporation. The following pages of facts and figures for 1995 represent
another prosperous year and reflect the economic makeup of our communties. This
year's annual report is dedicated to our Board of Directors. Our goal is for
the composition of our Board of Directors to mirror the diverse interest and
opinions of our shareholders. By achieving this, we live up to our hometown
philosophy. A philosophy which provides our shareholders and our customers with
the advantages and responsiveness of local ownership and local leadership. It
is this mind set which creates a neighborhood atmosphere in every one of our
markets. As we continue on our path of growth--from steps such as opening a new
service or office, to entering new opportunities--we will remain committed to
local community leadership.
33
As partners, presidents or owners of local business ventures, our Board
of Directors bring with them a diversity of information and experience as well
as knowledge of the commitment to the communities and people we serve. This
combined pool of wisdom benefits the Corporation by expanding the base of
information considered during the decision making process. Board members,
active in the business community, are able to create policies which respond to
community needs and benefit shareholders. By establishing effective corporate
policies, the Board empowers the senior management staff of Security Banc
Corporation to function to their highest potential. It is this type of
leadership which creates a thriving work environment and a thriving
institution.
Security Banc Corporation's net income for the year 1995 was $11,082,000,
an increase of 8% over the $10,304,000 for the previous year. This year's
earnings per share increased 7%, from $2.03 to $2.17. Shareholders' equity is
well in excess of regulatory requirements. The national average return on
assets and equity for banks under one billion in assets is 1.26% and 13.64%,
respectively. Security Banc continues to exceed these with a return on assets
of 2.13% and a return on equity of 16.13%.
The cash dividends of $0.73 per share is an increase of 11% over 1994.
Total assets extended to $535,975,000 at December 31, 1995. Deposits increased
$9,489,000 to $436,256,000, while total loans increased $524,000 to
$314,575,000. The stock market value is $28.50, adjusted to reflect the 2 for 1
stock split during the second quarter. Our financial stability continues to
reflect a history of high quality assets and net loan losses of 0.19% of
average loans.
The high performance of Security Banc Corporation continues to receive
industry recognition from Bauer Financial Reports, Inc., Sheshunoff and
VERIBANC, Inc. These recognitions are based on key indicators including market
share, profitability and return to shareholders. This excellent ranking among
our peers points to the leadership provided by our Board of Directors and
management ability of our staff.
In an era of bank mergers and multi-state financial institutions,
Security Banc Corporation continues to shine as a hometown institution. Our
local ownership and emphasis on personal service, positions us ahead of the
competition when it comes to neighbor-to-neighbor service. We created the
"hometown touch," and we continue to provide the real thing.
Last year we reported to you that we had initiated a strategic planning
process in 1994, a process which we said would be ongoing. During 1995 we
reaped many benefits from these efforts. We held our first Annual Employee
Meeting and drafted a new Vision Statement which will keep us focused on
sustained growth, both financially and as an institution which fosters employee
development. We are committed to having an organizational structure which
encourages a free flow of ideas from all levels of staff and management. Just
as we realize the benefits of diversity on our Board, we acknowledge the
benefits of diverse thought among our staff. Security staff will be trained and
empowered to make decisions which will provide the highest quality of customer
service, and the bank's products and delivery system will be continually
evaluated for suitability, location and profitability. We will use
state-of-the-art management information systems to analyze and prioritize our
product and service needs. A major step toward this goal was accomplished this
past year by installing a new data processing system. As we continue to
integrate our strategic plan, we will incorporate our Core Values of integrity,
fairness, social responsibility and fun.
A new director, Larry E. Kaffenbarger, was appointed to the Board last
year. His contributions have added a new dimension to our Board. We are
confident that with the support of our shareholders, the leadership of our
Board and the dedication of our management staff and employees, we will
continue to assess and adjust our operations to meet the needs of our community
and our customers.
We thank our directors and our employees for their contribution in 1995
and look forward to 1996 with the knowledge that your hometown bank, led by
hometown people, will continue to provide returns on shareholder investments
and maintain our legacy of personal service to customers.
/s/ Harry Egger
34
Management's Discussion and Analysis
of Financial Condition and Results of Operations
In the following pages, the analysis of the financial condition and
results of operations in 1995 compared to prior years is discussed by
Management. The data presented in this discussion should be read in conjunction
with the 1995 audited financial statements of the report.
RESULTS OF OPERATIONS SUMMARY
Net income advanced in 1995 to an all time high of $11,082,000. Net income
has steadily increased in each of the previous five (5) years. Net income in
1995 was $11,082,000 compared to net income in 1994 of $10,304,000 and in 1993
of $9,565,000. Net income for 1995 increased $778,000 or eight percent (8%)
over 1994. Income per share was $2.17 in 1995, $2.03 in 1994, and $1.89 in
1993.
Total assets grew three percent (3%) in 1995 to $535,975,000. Security Banc
Corporation continued its record of excellent performance with a 1995 return on
average assets of two point one three percent (2.13%) and a return on average
shareholder equity of sixteen point one three percent (16.13%). The Corporation
has continued to increase cash dividends paid to our shareholders. Cash
dividends paid in 1995 were $.73 per share, compared to $.66 per share in 1994.
Market price per share at December 31, 1995 was $28.50 compared to $24.00 at
December 31, 1994. Financial summary (Table I) recaps these measures.
Table I: Financial Summary
Five Years Ended December 31
(000's, except per share and ratio data) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
Interest and Fee Income............................... $ 39,745 $ 35,419 $ 34,536 $ 34,673 $ 36,516
Interest Expense...................................... 14,194 11,537 12,431 14,068 19,622
------ ------ ------ ------ ------
Net Interest Income................................... 25,551 23,882 22,105 20,605 16,894
Provision for Loan Losses............................. 800 800 900 1,100 700
Other Operating Income
Investment Securities Gains........................... 10 316 714 554 1,552
All Other............................................. 4,328 4,161 3,588 3,283 3,297
Operating Expense..................................... 13,488 13,234 12,848 11,715 11,056
------ ------ ------ ------ ------
Income Before Income Taxes............................ 15,601 14,325 12,659 11,627 9,987
Provision for Income Tax.............................. 4,519 4,021 3,094 2,707 1,889
------ ------ ------ ------ ------
Net Income............................................ $ 11,082 $ 10,304 $ 9,565 $ 8,920 $ 8,098
Per Share
Net Income............................................ $ 2.17 $ 2.03 $ 1.89 $ 1.78 $ 1.62
Cash Dividends Declared and Paid...................... $ 0.73 $ 0.66 $ 0.60 $ 0.54 $ 0.49
Year-End Book Value................................... $ 14.25 $ 12.59 $ 11.43 $ 10.16 $ 8.92
Year-End Market Price................................. $ 28.50 $ 24.00 $ 22.00 $ 19.75 $ 16.25
Selected Year-Ended Information
Total Assets.......................................... $535,975 $520,981 $502,424 $465,191 $447,330
Investment Securities..................................... 150,013 162,289 173,821 144,890 160,577
Loans-Net................................................. 310,834 310,505 276,404 259,333 237,963
Deposits.............................................. 436,256 426,767 419,682 389,671 369,879
Noninterest-Bearing Demand Deposits................... 86,682 79,532 70,639 67,004 56,910
Interest-Bearing Demand Deposits...................... 73,140 79,751 88,989 87,811 86,594
Time Deposits......................................... 174,693 154,788 129,495 116,895 139,281
Savings............................................... 101,741 112,696 130,559 117,961 87,094
Shareholders' Equity.................................. 72,786 64,196 57,925 51,077 44,678
Cash Dividends Paid................................... 3,727 3,359 3,037 2,706 2,442
Net Income............................................ $ 11,082 $ 10,304 $ 9,565 $ 8,920 $ 8,098
Weighted Average Common Shares Outstanding............ 5,105 5,089 5,056 5,010 2,504
Ratios
Return on Average Assets.............................. 2.13% 2.02% 1.94% 1.98% 1.89%
Return on Average Equity.............................. 16.13% 16.72% 17.54% 18.62% 19.41%
Total Capital to Total Risk Based Assets.................. 21.99% 20.77% 21.23% 19.70% 18.08%
Net Interest Margin (Tax Equivalent Basis)................ 5.52% 5.31% 5.17% 5.35% 4.74%
Dwight Hollenbeck, Credit Life
"Every decision made by the Board must
consider the safety of the shareholders' [Photo]
investment. The reward for conservative
management has always been steady growth."
35
NET INTEREST INCOME
A major share of the Corporation's income results from the spread between
income on interest earning assets, such as loans and securities, and the
interest expense on liabilities used to fund those assets. The difference
between interest earned and interest expensed is referred to as net interest
income in the Consolidated Statement of Income. Net interest income is affected
by changes in both interest rates and the amount of interest earning assets and
interest bearing liabilities outstanding. Net interest margin on interest
earning assets is the amount earned on assets, on a taxable equivalent basis,
divided by the average earning assets outstanding.
Table II, entitled Average Balance Sheets and Analysis of Net Interest
Income, compares the changes in revenue and interest earning assets
outstanding, and interest cost and liabilities outstanding for the years ended
December 31, 1995, 1994, and 1993.
The Corporation's net interest income on a taxable equivalent basis was
$26,930,000, $25,536,000 and $24,017,000 in 1995, 1994 and 1993, respectively.
Total average earning assets increased to $488,128,000 in 1995, compared to
$480,505,000 in 1994 and $464,153,000 in 1993. Earning assets are total loans,
total securities, interest bearing deposits with other banks and federal funds
sold. Average total loans increased $14,979,000 to $314,497,000. Average
securities, interest bearing deposits with other banks, and federal funds sold
decreased a combined total of $7,356,000.
Total average interest bearing liabilities increased $83,000 to
$372,088,000 in 1995. Average time deposits attributed to the increase
representing $26,783,000. Average purchased funds increased $1,811,000. Average
NOW, Money Fund and savings decreased $5,762,000, $4,859,000 and $17,890,000,
respectively.
Average earning assets of $488,128,000 in 1995 contributed a tax equivalent
interest income of $41,124,000 with a yield of eight point forty-two percent
(8.42%).
Average interest bearing liabilities of $372,088,000 in 1995 contributed
interest expense of $14,194,000.
Table III, entitled Analysis of Net Interest Income Changes, translates the
dollar changes in taxable equivalent net interest margin into (1) changes due
to volume or (2) changes due to average yields on interest earning assets and
average rates for sources of funds on which interest expense is incurred.
OTHER OPERATING INCOME
Other operating income is comprised of trust income, service charges on
deposit accounts, security gains, and other items of income not directly
resulting from interest earning assets. These items comprise safe deposit box
fees, exchange and collection fees, investor service fees, gain (loss) on the
sale of loans and miscellaneous other income.
Net Income (Thousands)
1995 1994 1993 1992 1991
$11,082 $10,304 $9,565 $8,920 $8,098
Return on Average Assets
1995 1994 1993 1992 1991
2.13% 2.02% 1.94% 1.98% $1.89%
[PHOTO W. DEAN SWEET]
W. Dean Sweet, Sweet Manufacturing
"The right tools are vital to any job. Not only must Security Banc Corporation
remain up-to-date with technological advances, we must also invest in our
people. Training and education for employees are crucial components to overall
success."
36
MANAGEMENT'S DISCUSSION AND ANALYSIS STATISTICAL INFORMATION
Table II: Average Balance Sheets and Analysis of Net Interest Income for the Years Ended December 31.
(Tax equivalent basis)
1995 1994 1993
------------------------ --------------------------- -----------------------------
(000's) Balance Interest Yield Balance Interest Yield Balance Interest Yield
====================================================================================================================================
ASSETS
Earning Assets
Loans 1)
Commercial 2)............. $147,647 $13,614 9.22% $141,794 $ 11,608 8.19% $128,389 $9,959 7.76%
Real estate 3)............ 83,820 7,053 8.41% 83,886 6,927 8.26% 82,097 7,222 8.80%
Consumer 3)............... 83,030 8,495 10.23% 73,838 6,889 9.33% 58,790 6,327 10.76%
------ ----- ------ ------ ----- ----- ------ ----- -----
Total loans.............. 314,497 29,162 9.27% 299,518 25,424 8.49% 269,276 23,508 8.73%
Investment securities
Taxable................... 122,161 7,033 5.76% 132,007 6,629 5.02% 122,696 6,767 5.52%
Tax-exempt 2)............. 28,635 3,597 12.56% 36,987 4,528 12.24% 41,733 5,224 12.52%
------ ----- ------ ------ ----- ---- ------ ----- ------
Total securities......... 150,796 10,630 7.05% 168,994 11,157 6.60% 164,429 11,991 7.29%
Interest-bearing deposits
with other banks.......... 107 5 4.67% 3,028 120 3.96% 2,684 108 4.02%
Federal funds sold and securities
purchased under agreements
to resell................. 22,728 1,327 5.84% 8,965 372 4.15% 27,764 841 3.03%
------ ----- ------ ------ ----- ---- ------ ----- ------
Total earning assets.......... 488,128 41,124 8.42% 480,505 37,073 7.72% 464,153 36,448 7.85%
Nonearning assets
Allowance for loan losses. (3,786) (3,415) (3,274)
Cash and due from banks... 19,381 19,664 19,367
Premises, equipment and
other assets.............. 16,928 12,537 11,696
------ ------ ------
Total assets....................... $520,651 $509,291 $491,942
======= ======= =======
LIABILITIES
Interest-bearing liabilities
Deposits
Now....................... $ 51,531 $ 891 1.73% $ 57,293 $1,034 1.80% $ 59,022 $1,568 2.66%
Money Fund................ 22,144 544 2.46% 27,003 611 2.26% 31,028 837 2.70%
Savings................... 106,301 2,576 2.42% 124,191 3,057 2.46% 126,423 3,987 3.15%
Time deposits
CD's > 100,000............ 19,576 1,066 5.45% 14,351 595 4.15% 12,345 475 3.85%
CD's < 100,000............ 146,205 7,839 5.36% 124,647 5,427 4.35% 117,001 5,100 4.36%
------- ----- ----- ------- ----- ----- ------- ----- -----
Total interest-bearing deposits 345,757 12,916 3.74% 347,485 10,724 3.09% 345,819 11,967 3.46%
Purchased funds
Federal funds purchased and
securities sold under agreements
to repurchase............. 26,331 1,278 4.85% 24,520 813 3.32% 22,441 464 2.07%
------- ----- ----- ------- ----- ----- ------- ----- -----
Total interest-bearing liabilities 372,088 14,194 3.81% 372,005 11,537 3.10% 368,260 12,431 3.38%
Noninterest-bearing demand deposits 77,301 73,671 66,983
Other liabilities............. 2,554 1,981 2,172
Shareholders' equity.......... 68,708 61,634 54,527
------- ------- -------
Total liabilities and shareholders' equity $520,651 $509,291 $491,942
======= ======= =======
Net Interest income and....... 26,930 25,536 24,017
Interest rate spread.......... 4.61% 4.62% 4.47%
Net interest margin
(tax equivalent basis).... 5.52% 5.31% 5.17%
<FN>
Footnote:
1) Nonaccrual loans are included in average loan balances and loan fees are included in interest income.
2) Interest income on tax-exempt investments and on certain tax-exempt commercial loans has been adjusted to a taxable
equivalent basis using a marginal federal income tax rate of thirty-five percent (35%) in 1995 and 1994 and thirty-four
percent (34%) for 1993.
3) For Management Discussion and Analysis, home equity loan averages are included in the consumer loan portfolio as opposed
to the real estate loan portfolio.
37
MANAGEMENT'S DISCUSSION AND ANALYSIS STATISTICAL INFORMATION
Table III: Analysis of Net Interest Income Changes
(Tax equivalent basis)
1995 Compared to 1994 1994 Compared to 1993
------------------------------------- ----------------------------------------
Yield/ Yield/
(000's) Volume Rate Mix Total Volume Rate Mix Total
====================================================================================================================================
Increase (Decrease) in Interest Income
Loans
Commercial....................... $ 479 $1,466 $ 61 $2,006 $1,040 $ 552 $ 58 $ 1,650
Real estate...................... (5) 132 0 127 157 (443) (10) (296)
Consumer......................... 858 666 83 1,607 1,620 (842) (216) 562
--- --- -- ----- ----- ---- ---- ----
Total loans........................ 1,332 2,264 144 3,740 2,817 (733) (168) 1,916
Investment Securities
Taxable...................... (494) 971 (72) 405 514 (606) (46) (138)
Tax-exempt................... (1,022) 118 (27) (931) (594) (115) 13 (696)
------ --- -- ----- ----- ---- ---- ----
Total securities................... (1,516) 1,089 (99) (526) (80) (721) (33) (834)
Interest-bearing deposits
with other banks............... (116) 21 (21) (116) 14 (2) (0) 12
Federal Funds sold and securities
purchased under agreements to resell 571 151 232 954 (569) 311 (211) (469)
--- --- --- --- ---- --- ---- ----
Total Interest Income Change............ 271 3,525 256 4,052 2,182 (1,145) (412) 625
Increase (Decrease) in Interest Expense
Interest-bearing liabilities
Now.............................. (104) (43) 4 (143) (46) (503) 15 (534)
Money Fund....................... (110) 52 (9) (67) (109) (135) 18 (226)
Savings.......................... (441) (47) 7 (481) (70) (875) 15 (930)
Time Deposit
CD's > 100,000............... 217 186 68 471 77 37 6 120
CD's < 100,000............... 939 1,256 217 2,412 333 (6) (0) 327
--- ----- --- ----- ---- --- ---- ----
Total Interest-bearing deposits......... 501 1,404 287 2,192 185 (1,482) 54 (1,243)
Federal Funds purchased and
securities sold under agreements
to repurchase.................... 60 377 28 465 43 280 26 349
--- --- --- --- ---- --- ---- ----
Total Interest Expense Change........... 561 1,781 315 2,657 228 (1,202) 80 (894)
Increase (Decrease) in Net Interest
Income on a Taxable Equivalent Basis $ (290) $1,744 $ (59) $1,395 $1,954 $ 57 $ (492) $1,519
Decrease in Taxable Equivalent Basis.... 274 258
--- ---
Net Interest Income Change.............. $1,669 $1,777
OPERATING EXPENSE
Total operating expense increased $254,000 in 1995 to $13,488,000 compared
to $13,234,000 for 1994. Salaries and employee benefits were $6,773,000 in
1995, compared to $6,275,000 in 1994. Equipment and occupancy expenses were
$1,439,000, up $112,000 from the previous year. Amortization of intangibles
decreased to $71,000 as compared to $234,000 for the previous year. Other
operating expense decreased three point six percent (3.6%) to $5,205,000.
Footnote thirteen (13) provides data on the significant changes in the
individual items making up this category.
LOANS
Total average commercial loans increased four point one percent (4.1%) to
$147,647,000 in 1995 yielding an average rate of nine point twenty-two percent
(9.22%). Average real estate loans decreased point one percent (0.1%) to
$83,820,000, yielding an average rate of eight point forty-one percent (8.41%).
Average consumer loans, which include home equity loans, increased twelve point
forty-five percent (12.45%) to $83,030,000, yielding an average rate of ten
point twenty-three percent (10.23%).
Under-performing assets consist of (1) non-accrual loans on which the
ultimate collectibility of the full amount of interest is uncertain but the
principal is currently considered fully collectible, (2) loans past due
[photo] Harry O. Egger
"Board members invest time, energy, experience
and knowledge in our Corporation. It is my
challenge to make sure we make the most of their
investment."
38
ninety (90) days or more as to principal or interest and (3) other real estate
owned. Under-performing assets as of December 31, 1995 were $4,150,000.
The Corporation provides, as expense, an amount which reflects expected
loan losses. This provision is based on the growth of the loan portfolio, local
economic conditions, and on recent loan loss experience and is called the
provision for loan losses in the Consolidated Statement of Income. Actual
losses on loans are charged against the reserve built up on the Consolidated
Statement of Condition through the allowance for loan losses. The amount of
loans actually removed as assets from the Consolidated Statement of Condition
is referred to as charge-offs. Netting out recoveries on previously charged-off
assets with current year charge-offs provides net charge-offs.
Net charge-offs in 1995 increased to $605,000 from $416,000 in 1994. The
provision for loan losses was $800,000 in 1995 and 1994. The allowance for
loan losses at December 31, 1995 was equivalent to one point nineteen percent
(1.19%) of loans outstanding.
The following table presents loan loss data for the most recent five (5)
year period.
(000's) 1995 1994 1993 1992 1991
==========================================================================================
Balance at Jan. 1 $ 3,546 $ 3,162 $ 3,010 $ 2,779 $ 2,591
Provision for loan
losses 800 800 900 1,100 (700)
Loans charged off (868) (608) (1,049) (1,071) (714)
Recoveries of loans
previously
charged off 263 192 301 202 202
--- --- --- --- ---
Balance at Dec. 31 $ 3,741 $ 3,546 $ 3,162 $ 3,010 $ 2,779
Loans outstanding
at Dec. 31 $ 314,575 $ 314,051 $ 279,566 $ 262,343 $ 240,742
Reserve as a
percent of loans 1.19% 1.13% 1.13% 1.15% 1.15%
Net loan losses to
average loans 0.19% 0.14% 0.28% 0.34% 0.23%
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Corporation's Asset/Liability Management Committee is charged with the
responsibility of maintaining an adequate level of liquidity and of managing
the risks associated with interest rate changes while sustaining a stable
growth in net interest income. The maintenance of an adequate level of
liquidity is necessary to ensure that sufficient funds are available to meet
customer loan demand and deposit withdrawals. The asset liquidity sources
consist of short term marketable securities, federal funds sold, maturing loans
and certificates of deposit. Interest rate management seeks to maintain a
balance between steady net interest growth and the risks associated with
interest rate fluctuations.The strategy is to minimize interest rate risk
through the matching of the repricing period of interest earning assets and
interest bearing liabilities.
The Corporation has a net asset position of $77,122,000 at the one (1) year
interval or a sensitivity ratio of one point forty-two (1.42). This ratio
indicates that, in a declining interest rate environment, those assets that are
due to reprice would be replaced at a decreased interest yield at a faster pace
than maturing liabilities, having a negative impact on the net interest margin.
In an increasing rate environment, those assets that are due to reprice would
be replaced at a higher interest yield, improving the net interest margin.
CAPITAL RESOURCES
Federal Reserve Board standards require banks and bank holding companies to
maintain capital based on "risk-adjusted" assets so that categories of assets
with potentially higher credit risk will require more capital backing than
assets with lower risk. In addition, banks and bank holding companies are
required to maintain capital to support on a risk-adjusted basis, certain
off-balance-sheet activities such as loan commitments.
The Federal Reserve Board standards classify capital into tiers. All banks
are required to meet a minimum ratio of eight point zero percent (8.0%) of
qualifying total capital to risk-adjusted total assets.
Security Banc Corporation maintains a high level of capital as a margin of
safety for its stockholders and depositors. Applying the new risk-based capital
guidelines; total capital to total risk-weighted assets was twenty-one point
ninty-nine percent (21.99%) in 1995 and twenty point seventy-seven percent
(20.77%) in 1994, well above the minimum established guidelines.
MARKET INFORMATION
Security Banc Corporation stock is traded in the over-the-counter market.
The following table sets forth the sales prices for the common stock during the
periods indicated.
1995 1994
===================================================================
Quarter Ended High Bid Low Bid High Bid Low Bid
March 31 $25.38 $24.00 $22.00 $22.00
June 30 $26.25 $25.38 $22.88 $22.00
September 30 $27.25 $26.25 $23.00 $22.88
December 31 $28.50 $27.25 $24.00 $23.00
As of December 31, 1995, the Corporation had 1,205 shareholders of record.
Cash dividends paid per share were $.73.
Thomas Veskauf, Gorman, Veskauf, Henson &
Winberg Attorneys
"It is the responsibility of the Board of Directors to [photo]
act on behalf of the shareholders. We are their
representatives and we must consider their
interests."
39
QUARTERLY INFORMATION
First Second Third Fourth
(000's except per share data) Quarter Quarter Quarter Quarter
=======================================================================================
1995
Interest & Fee Income............. $ 9,386 $ 10,036 $ 10,110 $ 10,213
Interest Expense.................. 3,289 3,555 3,640 3,710
----- ----- ----- -----
Net Interest Income ................ 6,097 6,481 6,470 6,503
Provision for Loan Losses 200 200 200 200
Other Operating Income
Investment
securities gains............... 0 (96) 106 0
All Other ....................... 1,008 980 1,082 1,258
Operating Expense ................ 3,337 3,483 3,137 3,351
----- ----- ----- -----
Income before Income Taxes 3,568 3,682 4,321 4,030
Provision for Income Tax 996 1,057 1,255 1,211
--- ----- ----- -----
Net Income ......................... 2,572 2,625 3,066 2,819
Per Share
Net Income ......................... 0.51 0.51 0.60 0.55
Cash Dividends Paid ................ 0.17 0.17 0.17 0.22
Market Price ....................... 25.38 26.25 27.25 28.50
1994
Interest & Fee Income............. $ 8,468 $ 8,590 $ 9,011 $ 9,350
Interest Expense ................. 2,686 2,699 2,925 3,227
----- ----- ----- -----
Net Interest Income ................ 5,782 5,891 6,086 6,123
Provision for Loan Losses 200 200 200 200
Other Operating Income
Investment
securities gains............... 316 0 0 0
All Other........................ 1,066 938 1,042 1,115
Operating Expense ................ 3,493 3,365 3,188 3,188
----- ----- ----- -----
Income before Income Taxes 3,471 3,264 3,740 3,850
Provision for Income Tax 964 919 1,044 1,094
--- --- ----- -----
Net Income ......................... 2,507 2,345 2,696 2,756
Per Share
Net Income ......................... 0.50 0.46 0.53 0.54
Cash Dividends Paid ................ 0.15 0.15 0.15 0.21
Market Price ....................... $ 22.00 $ 22.88 $ 23.00 $ 24.00
Total Capital (Thousands)
1995 1994 1993 1992 1991
$72,786 $64,196 $57,925 $51,077 $44,678
[photo] Larry Ewald, Process Equipment
"Our purpose as a Board is to be aware of
trends in banking and the needs of our
customers. We must respond with state-of-the-art
financial products that provide comprehensive
services while maintaining profitability for
the Corporation."
40
Report of Independent Auditors
Board of Directors
Security Banc Corporation
We have audited the accompanying consolidated statement of condition of
Security Banc Corporation and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security Banc
Corporation and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Columbus, Ohio
January 11, 1996
[PHOTO] Richard Kramer, Fulmer Supermarkets, Inc.
"A keen awareness of the constant changes in supply and demand is
absolutely necessary to maintain a competitive edge in customer
service and corporate profitability."
41
Consolidated Statement of Condition
AS OF DECEMBER 31, 1995 AND 1994 (000's)
1995 1994
---- ----
ASSETS
Cash and due from banks............................................................ $ 21,658 $ 24,839
Federal funds sold................................................................. 34,800 4,250
---------- ----------
Total Cash and Cash Equivalents................................................ 56,458 29,089
Interest bearing deposits with other banks......................................... 0 686
Investments (Market value $151,784 in 1995)........................................ 150,013 162,289
(Market value $164,318 in 1994)
LOANS:
Commercial and agricultural.................................................... 148,957 145,942
Real estate.................................................................... 88,198 89,091
Consumer....................................................................... 77,420 79,018
---------- ----------
Total Loans............................................................. 314,575 314,051
Less allowance for loan losses................................................. 3,741 3,546
---------- ----------
Net Loans................................................................ 310,834 310,505
Premises and equipment............................................................. 5,182 5,136
Other assets....................................................................... 13,488 13,276
---------- ----------
TOTAL ASSETS....................................................................... $ 535,975 $ 520,981
========== ==========
LIABILITIES
Non-interest bearing deposits...................................................... $ 86,682 $ 79,532
Interest bearing demand deposits................................................... 73,140 79,751
Savings deposits................................................................... 101,741 112,696
Time deposits, $100,000 and over................................................... 24,874 16,567
Other time deposits................................................................ 149,819 138,221
---------- ----------
Total Deposits................................................................. 436,256 426,767
Federal funds purchased and securities
sold under agreement to repurchase............................................... 24,293 27,284
Other liabilities.................................................................. 2,640 2,734
---------- ----------
TOTAL LIABILITIES.................................................................. 463,189 456,785
SHAREHOLDERS' EQUITY
Common Stock ($3.125 Par Value, 1995;.............................................. 16,710 16,693
$6.25 Par Value, 1994)
authorized 11,000,000 shares
issued 5,347,234 shares, 1995
issued 2,670,942 shares, 1994
Surplus............................................................................ 17,883 17,842
Retained Earnings.................................................................. 41,178 33,823
Unrealized gains and (losses)...................................................... 208 (969)
Less: Treasury Stock............................................................... 3,193 3,193
---------- ----------
240,600 shares in 1995 and 120,300 in 1994
TOTAL SHAREHOLDERS' EQUITY.............................................................. 72,786 64,196
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................................. $ 535,975 $ 520,981
========== ==========
See Notes to Consolidated Financial Statements.
42
Consolidated Statement of Income
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (000's)
1995 1994 1993
--------- --------- ---------
INTEREST AND FEE INCOME
Loans................................................................. $ 29,042 $ 25,309 $ 23,372
Interest bearing deposits with other banks............................ 5 120 108
Federal funds sold.................................................... 1,327 372 841
Investments-taxable................................................... 7,033 6,629 6,767
Investments-tax exempt................................................ 2,338 2,989 3,448
--------- --------- ---------
Total Interest and Fee Income.................................... 39,745 35,419 34,536
INTEREST EXPENSE
Deposits of $100,000 and over......................................... 1,066 595 475
Other deposits........................................................ 11,850 10,129 11,492
Federal funds purchased and securities
sold under agreement to repurchase.................................. 1,238 787 445
Demand notes to U.S. Treasury......................................... 40 26 19
--------- --------- ---------
Total Interest Expense........................................... 14,194 11,537 12,431
--------- --------- ---------
NET INTEREST INCOME ....................................................... 25,551 23,882 22,105
Provision for loan losses............................................. 800 800 900
--------- --------- ---------
Net interest income after provision for loan losses................... 24,751 23,082 21,205
OTHER OPERATING INCOME
Trust income.......................................................... 1,464 1,208 1,115
Service charges on deposit accounts................................... 2,126 2,230 2,012
Securities gains...................................................... 10 316 714
Other income.......................................................... 738 723 461
--------- --------- ---------
Total Other Operating Income..................................... 4,338 4,477 4,302
OPERATING EXPENSE
Salaries and employee benefits........................................ 6,773 6,275 5,965
Equipment and occupancy, net.......................................... 1,439 1,327 1,335
Amortization of intangibles........................................... 71 234 532
Other operating expense............................................... 5,205 5,398 5,016
--------- --------- ---------
Total Operating Expenses......................................... 13,488 13,234 12,848
--------- --------- ---------
INCOME BEFORE INCOME TAXES ................................................ 15,601 14,325 12,659
Provision for income tax.............................................. 4,519 4,021 3,094
--------- --------- ---------
NET INCOME....................................................... $ 11,082 $ 10,304 $ 9,565
========= ========= =========
PER SHARE DATA (WHOLE DOLLARS)
Net income............................................................ $ 2.17 $ 2.03 $ 1.89
Cash dividends........................................................ $ 0.73 $ 0.66 $ 0.60
Weighted average share outstanding......................................... 5,104,943 5,089,496 5,056,012
See Notes to Consolidated Financial Statements.
43
Consolidated Statement of Shareholders' Equity
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993 (000's)
Unrealized
Common Retained gains and Treasury
Stock Surplus Earnings (losses) Stock Total
------ ------- -------- --------- -------- -----
Balance at January 1, 1993................ $ 16,469 $ 17,438 $ 20,350 0 ($ 3,180) $ 51,077
Net income........................... 0 0 9,565 0 0 9,565
Cash dividends....................... 0 0 (3,037) 0 0 (3,037)
Exercise of stock options............ 119 201 0 0 0 320
--------- -------- ---------- ----- -------- ---------
Balance at December 31, 1993.............. $ 16,588 $ 17,639 $ 26,878 0 ($ 3,180) $ 57,925
Adjustment to beginning balance
for change in accounting method,
net of income taxes of $767........ 0 0 0 1,490 0 1,490
Net income........................... 0 0 10,304 0 0 10,304
Cash dividends....................... 0 0 (3,359) 0 0 (3,359)
Exercise of stock options............ 105 203 0 0 0 308
Purchase of treasury stock........... 0 0 0 0 (13) (13)
Change in unrealized gains and (losses)
net of income taxes of $1,267...... 0 0 0 (2,459) 0 (2,459)
--------- -------- ---------- ----- -------- ---------
Balance at December 31, 1994.............. $ 16,693 $ 17,842 $ 33,823 ($ 969) ($ 3,193) $ 64,196
Net income........................... 0 0 11,082 0 0 11,082
Cash dividends....................... 0 0 (3,727) 0 0 (3,727)
Exercise of stock options............ 17 41 0 0 0 58
Purchase of treasury stock........... 0 0 0 0 0 0
Change in unrealized gains and (losses)
net of income taxes of $634........ 0 0 0 1,177 0 1,177
--------- -------- ---------- ----- -------- ---------
Balance at December 31, 1995.............. $ 16,710 $ 17,883 $ 41,178 $ 208 ($ 3,193) $ 72,786
========= ======== ========== ===== ======== =========
See Notes to Consolidated Financial Statements.
[PHOTO JANE SCARFF]
Jane Scarff, Scarff's Nursery, Inc.
"Our opportunities for growth abound. However, we must make sure that every
opportunity is matched with the proper conditions to nurture stability."
44
Consolidated Statement of Cash Flows
For the Years Ended December 31, 1995, 1994, and 1993 (000's)
1995 1994 1993
------- ------- -------
Cash Flows From Operating Activities:
Net income............................................................ $ 11,082 $ 10,304 $ 9,565
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation...................................................... 540 475 420
(Gain)/Loss on sale of the following:
Investment Securities available for sale...................... (10) (316) 0
Investment Securities held to maturity........................ 0 0 (714)
Other Assets.................................................. 8 (11) (6)
Provision for loan losses......................................... 800 800 900
Amortization and accretion, net................................... (1,291) 1,540 1,663
Amortization of core deposit intangible........................... 71 234 532
Change in other operating assets and liabilities, net............. (989) (4,399) 310
Total Adjustments......................................... (871) (1,677) 3,105
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES ....................... 10,211 8,627 12,670
Cash Flows From Investing Activities:
Net decrease (increase) in interest bearing deposits with other banks. 686 3,028 (1,657)
Proceeds from maturities and sales of:
Investment securities available for sale.......................... 225,658 31,402 0
Investment securities held to maturity............................ 9,120 9,099 34,289
Purchase of:
Investment securities available for sale.......................... (219,412) (759) 0
Investment securities held to maturity............................ 0 (30,902) (47,874)
Net increase in loans................................................. (1,494) (36,785) (13,735)
Proceeds from sale of other assets.................................... 381 1,906 619
Capital expenditures.................................................. (610) (499) (354)
Net cash used in branch acquisition................................... 0 0 (2,476)
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES ............................ 14,329 (23,510) (31,188)
Cash Flows from Financing Activities:
Net (decrease) increase in demand deposits, NOW accounts and
savings accounts.................................................. (10,416) (18,208) 4,501
Net increase in certificates of deposit............................... 19,905 25,293 6,401
Net (decrease) increase in short-term borrowed funds.................. (2,991) 4,323 (316)
Purchase of treasury stock............................................ 0 (13) 0
Dividends paid........................................................ (3,727) (3,359) (3,037)
Proceeds from exercise of stock options............................... 58 308 320
------- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......................... 2,829 8,344 7,869
------- ------- -------
Net increase (decrease) in cash and cash equivalents....................... 27,369 (6,539) (10,649)
Cash and cash equivalents at beginning of year............................. 29,089 35,628 46,277
------- ------- -------
Cash and Cash Equivalents at End of Year................................... $56,458 $29,089 $35,628
======= ======= =======
See Notes to Consolidated Financial Statments.
45
Notes to Consolidated Financial Statements
December 31, 1995
1. ORGANIZATION
The Corporation is a bank holding company headquartered in Springfield,
Ohio. The bank, Security National Bank is engaged in the general commercial
banking and trust business, primarily in Central Ohio.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Security Banc Corporation are
based on generally accepted accounting principles and conform to general
practices within the banking industry. The following is a description of the
significant accounting policies followed by Security Banc Corporation.
CONSOLIDATION
The consolidated financial statements include the accounts of Security Banc
Corporation and its wholly owned subsidiaries, Security National Bank and Trust
Co., and Security Community Urban Redevelopment Corporation. All significant
intercompany accounts and transactions have been eliminated in consolidation.
CORE DEPOSIT INTANGIBLE ASSET
The acquired core deposit intangible asset is amortized on an accelerated
basis over ten (10) years.
INVESTMENT SECURITIES
Securities held-to-maturity and available-for-sale: Management determines
the appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. Debt securities are
classified as held-to-maturity when Security Banc Corporation has the positive
intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost.
Debt securities not classified as held-to-maturity or trading and
marketable equity securities not classified as trading are classified as
available-for-sale. Available-for-sale securities are stated at fair value,
with the unrealized gains and losses, net of tax, reported in a separate
component of shareholders' equity.
The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization is included in interest
income from investments. Interest and dividends are included in interest income
from investments. Realized gains and losses, and declines in value judged to be
other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.
LOANS
Loans are stated at the principal amount outstanding, net of unearned
income. Interest income on other loans is primarily accrued using the simple
interest method based on the principal amounts outstanding. Loan fees received
in excess of direct costs involved in origination of a loan are amortized over
the estimated loan term. Accrual of interest is discontinued when circumstances
indicate that collection of loan principal is questionable.
The company has adopted Financial Accounting Standards Board Statement No.
114, "Accounting by Creditors for Impairment of a Loan," effective January 1,
1995. As a result of applying the new rules, certain impaired loans are
reported at the present value of expected future cash flows using the loan's
effective interest rate, or as a practical expedient, at the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. The adoption of this statement did not have a material impact on
Security Banc Corporation's financial statements.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is available for loan charge-offs.
The adequacy of the allowance is based on Management's continuous evaluation of
key factors in the loan portfolio with consideration given to current economic
conditions and past charge-off experience.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation of premises and equipment is determined using the
straight-line method over the estimated lives of the respective assets.
Maintenance and repairs are charged to expense as incurred, while renewals and
betterments are capitalized.
INCOME TAXES
Certain income and expense items are accounted for in different time
periods for financial reporting purposes than for income tax purposes.
Appropriate provisions are made in the financial statements for deferred taxes
in recognition of these temporary differences.
NET INCOME PER SHARE
Income per share is computed on the basis of weighted average shares
outstanding.
CASH FLOWS
For purposes of reporting cash flows, cash and cash requirements include
cash on hand, amounts due from banks and federal funds sold. Federal funds are
purchased for one-day periods.
Interest paid by Security Banc Corporation in 1995, 1994 and 1993 was
$14,867,000, $10,468,000, and $12,161,000, respectively.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the bank in estimating
its fair value disclosures for financial instruments.
Cash and cash equivalent and interest-bearing deposits with other banks:
The carrying amounts reported in the balance sheet for cash and short-term
instruments approximate those assets' fair values.
Investment Securities: Fair values for investment securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans receivable: For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying values.
The fair values for mortgage loans are based on quoted market prices of similar
loans sold in conjunction with securitization transactions, adjusted for
differences in loan characteristics. The fair values for other loans (i.e.,
commercial, agricultural and consumer) are estimated using
[PHOTO] Chester Walthall, Heat-Treating
"The true strength of success is the ability to withstand
extremes. Security Banc Corporation has remained stable and
experienced continued growth through all economic conditions."
46
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. The carrying
amount of accrued interest approximates its fair value.
Off-balance-sheet instruments: The carrying amounts reported for Security
Banc Corporation's off-balance-sheet instruments (letters of credit and lending
commitments) approximate those assets' fair value.
Deposit liabilities: The fair values disclosed for demand deposits (i.e.,
interest and non-interest checking, passbook savings, and certain types of
money market accounts) are, by definition, equal to the amount payable on
demand at the reporting date (i.e., their carrying amounts). The carrying
amounts for variable-rate, fixed-term money market accounts approximate their
fair values at the reporting date. Fair values for fixed-rate certificates of
deposit are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Short-term borrowings: The carrying amounts of federal funds purchased and
securities sold under agreement to repurchase approximate their fair values.
RECLASSIFICATIONS
Certain 1994 amounts have been reclassified to conform with the current
year presentation.
2. ACCOUNTING CHANGES
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived
Assets and For Long-Lived Assets to be Disposed Of" requires that long-lived
assets and certain identifiable intangibles be reviewed for impairments. The
Statement prescribes when assets should be reviewed, how to determine
impairment , and what financial disclosures are necessary.
Additionally, Statement of Financial Accounting Standards No. 122
"Accounting for Mortgage Servicing Rights" requires the recognition of rights
to service loans for others as separate assets, however those servicing rights
are acquired.
Both of the Statements are effective for 1996. The Corporation does not
expect the adoption of either of these pronouncements to have a material impact
on the financial statements.
3. RESERVE BALANCE REQUIREMENTS
The Security Banc Corporation's banking subsidiary is required to maintain
certain daily cash and due from banks reserve balances in accordance with
regulatory requirements. The balances maintained under such requirements were
$8,909,000 at December 31, 1995 and $8,241,000 at December 31, 1994.
4. INVESTMENT SECURITIES
The following table lists the book value and market value of debt
securitites and other investments as of December 31.
(000)s 1995
-----------------------------------------
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
---- ---------- --------- ------
Available for Sale Investments
U. S. Treasury .................... $119,390 $ 320 $ 0 $119,710
Held to Maturity Investments
Debt Securities
U. S. Treasury .................. 605 5 (4) 606
State and Political Subdivisions 27,192 1,754 (16) 28,930
Mortgage Back Securities ........ 1,468 36 (4) 1,500
-------- -------- ----- --------
Total Debt Securities ............... 29,265 1,795 (24) 31,036
Federal Reserve Stock and Other ... 1,038 0 0 1,038
-------- --------
Total Held to Maturity Investments... $ 30,303 $ 1,795 ($24) $ 32,074
======== ======== ===== ========
The market value of the available for sale investments ($119,710,000) plus
the cost of the held to maturity investments ($30,303,000) is the total
investments carrying value of $150,013,000.
(000)s 1994
---------------------------------------
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
---- ---------- ---------- ------
Available for Sale Investments
U. S. Treasury ...................... $123,559 $ 0 ($ 1,469) $122,090
Held to Maturity Investments ..........
Debt Securities
U. S. Treasury ................. 1,918 1 (25) 1,894
State and Political Subdivisions 35,317 2,086 (77) 37,326
Mortgage Back Securities ....... 1,923 44 0 1,967
-------- --------- ------- --------
Total Debt Securities ................. 39,158 2,131 (102) 41,187
Federal Reserve Stock and Other ..... 1,041 0 0 1,041
-------- --------- ------- --------
Total Held to Maturity Investments .... $ 40,199 $ 2,131 ($ 102) $ 42,228
======== ======== ======= ========
The market value of the available for sale investments ($122,090,000) plus
the cost of the held to maturity investments ($40,199,000) is the total
investments carrying value of $162,289,000.
The following tables summarizes the cost and market value of debt
securities at December 31, 1995 and 1994 by contractual maturity. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations.
(000's) 1995 1994
---------------- ---------------
Market Market
Cost Value Cost Value
---- ----- ---- ------
Available for Sale Investments
Due in one year or less........ $ 58,813 $ 58,876 $ 89,312 $ 88,506
Due after one year and
through five years .......... 60,577 60,834 34,247 33,584
-------- -------- -------- --------
$119,390 $ 119,710 $123,559 $122,090
======== ======== ======== ========
Held to Maturity Investments
Due in one year or less....... $ 5,449 $ 5,546 $ 8,704 $ 8,713
Due after one year and
through five years.......... 20,853 22,291 27,031 28,927
Due after five years and .....
through ten years.......... 1,495 1,699 1,500 1,580
Due after ten years .......... 0 0 0 0
$ 27,797 $ 29,536 $ 37,235 $ 39,220
Mortgage backed securities ..... 1,468 1,500 1,923 1,967
-------- -------- -------- --------
Total .......................... $ 29,265 $ 31,036 $ 39,158 $ 41,187
======== ======== ======== ========
Proceeds from sales of investments available for sale in 1995 were
$190,648,000. Proceeds from sales of investments held to maturity in 1995 were
$0. Gross gains on investments available for sale in 1995 were $254,000. Gross
losses recognized on investments available for sale in 1995 were $244,000.
Proceeds from sales of investments available for sale in 1994 were $31,402,000.
Proceeds from sales of investments held to maturity in 1994 were 0. Gross gains
on investments available for sale in 1994 were $326,000. Gross losses
recognized on investments available for sale in 1994 were $10,000. Proceeds
from sales of investments in debt securities were $23,713,000 in 1993. Gross
gains of $714,000 were recognized in 1993. Gross losses recognized were $0 in
1993.
47
The following table summarizes investment income for the years ended
December 31.
(000's) 1995 1994 1993
---- ---- ----
U. S. Treasury Available for Sale......... $6,794 $6,236 $ 0
U. S. Treasury Held to Maturity........... 49 180 6,121
U. S. Government Agencies and Corporations 128 151 585
States and Political Subdivisions......... 2,338 2,989 3,448
Federal Reserve stock and other........... 62 62 61
------ ------ -------
Total................................ $9,371 $9,618 $10,215
====== ====== =======
Securities with a carrying value of $75,082,000 at December 31, 1995, and
$69,630,000 at December 31, 1994, were pledged to secure deposits and
repurchase agreements.
5. LOANS
Loans as of December 31, by various categories, are as follows:
(000's) 1995 1994
---- ----
Loans secured by real estate:
Construction and land development.... $ 6,566 $ 3,216
Secured by farmland.................. 2,580 895
Secured by residential properties.... 113,805 79,540
Secured by nonfarm nonresidential properties 29,783 5,440
Loans to finance agricultural production 6,267 8,097
Commercial and industrial loans......... 68,452 133,537
Loans to individuals for household, family and other 84,843 79,018
Tax exempt obligations 2,279 4,308
------- -------
TOTAL LOANS........................ $314,575 $314,051
======= =======
Nonperforming loans totaled $4,150,000 and $3,153,000 at December 31, 1995
and 1994, respectively. Nonaccrual loans included in these amounts totaled
$2,516,000 and $2,592,000 at December 31, 1995 and 1994, respectively. Interest
income not recorded on these loans was $243,000 in 1995, and $188,000 in 1994.
The following table presents the aggregate amount of loans outstanding to
directors and executive officers (including their related interests) as of
December 31, 1995 and December 31, 1994, and an analysis of activity in such
loans during 1995. All such loans were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the same time
for comparable transactions with other persons. These loans do not involve more
than normal risk of collectibility or any other unfavorable features.
(000's)
Balance, December 31, 1994......................................... $8,961
New Loans........................................................ 8,418
Repayments....................................................... 12,974
Net Increase due to Change in Executive Officer/Director Status.. 151
------
Balance, December 31, 1995......................................... $4,556
======
6. ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses is shown in the
following table.
(000's) 1995 1994 1993
---- ---- ----
Balance - beginning of year......... $3,546 $3,162 $3,010
Charge-offs....................... (868) (608) (1,049)
Recoveries........................ 263 192 301
Net charge-offs................... (605) (416) (748)
Provision for loan losses......... 800 800 900
------ ------ ------
Balance - end of year............... $3,741 $3,546 $3,162
====== ====== ======
7. PREMISES AND EQUIPMENT
Premises and Equipment as of December 31, are summarized in the following
table.
(000's) 1995 1994
---- ----
Land ....................................... $1,131 $1,131
Buildings................................... 4,677 4,665
Equipment................................... 4,304 4,030
Construction in process..................... 0 4
Total premises and equipment............. 10,112 9,830
Less: Accumulated depreciation
and amortization......................... 4,930 4,694
------ ------
Net premises and equipment.................. $5,182 $5,136
====== ======
8. FEDERAL FUNDS PURCHASED AND SECURITIES
SOLD UNDER AGREEMENT TO REPURCHASE
The following table is a summary of short-term borrowings at December 31.
(000's) 1995 1994
---- -----
Federal funds purchased........................ $ 75 $ 425
Securities sold under agreement to repurchase.. 23,477 26,100
Demand note due U. S. Treasury................. 741 759
------- -------
Total....................................... $24,293 $27,284
======= =======
Securities sold under repurchase agreements represent borrowings with
overnight maturities and U. S. Government Securities. The following table is a
summary of securities pledged against the securities sold under agreement to
repurchase contracts as of December 31:
(000's) 1995 1994
--------------- ----------------
Book Market Book Market
U. S. Government Securities...... $45,617 $45,774 $35,360 $35,065
9. CAPITAL STOCK
On May 29, 1995, a two for one stock dividend was recorded, payable June 9,
1995. All per share data prior to May 29, 1995 has been restated to reflect the
effect of this stock dividend.
10. INCOME TAX
The components of income tax expense are:
(000's) 1995 1994 1993
---- ---- ----
Federal income taxes currently payable. $4,616 $ 3,972 $ 3,111
Deferred tax provision............... (97) 49 (17)
------ ------- --------
Total income tax expense............... $4,519 $ 4,021 $ 3,094
====== ======= ========
A reconciliation of income tax expense at the statutory rate to income tax
expense at the company's effective rate is as follows:
(000's) 1995 1994 1993
---- ---- ----
Computed tax at the statutory rate.... $5,460 $ 4,871 $4,304
Tax effect of tax free income and
non-deductible interest expense.... (900) (1,036) (1,195)
Adjustment to provision............... (41) 115 (63)
Other................................. 0 71 48
------ ------- ------
Income Tax Expense................. $4,519 $ 4,021 $3,094
====== ======= ======
48
Income taxes paid were $4,750,000, $4,106,000 and $3,101,000 in 1995,
1994, and 1993, respectively. Income tax expense associated with security gains
were $3,500 in 1995, $107,000 in 1994, and $243,000 in 1993.
Significant components of the Corporation's deferred tax assets and
liabilities at December 1995 and 1994 are as follows:
Deferred Assets 1995 1994
Allowance for loan losses............. $1,056,590 $ 916,385
Mark-to-market adjustment............. (112,057) 513,910
Other................................. 230,419 217,493
---------- ----------
Total deferred assets................. 1,174,952 1,647,788
Deferred Liabilities
Employee benefits..................... 119,897 101,525
Depreciation.......................... 153,555 153,555
Other................................. 179,505 141,200
---------- ----------
Total deferred liabilities............ 452,957 396,280
---------- ----------
Net deferred assets..................... $ 721,995 $1,251,508
========== ==========
11. STOCK OPTIONS
Shareholders of Security Banc Corporation approved adoption of the Security
Banc Corporation 1987 and 1995 Stock Option Plans. The plans provide for the
grant to certain key managerial personnel options to purchase shares of common
stock at the stock's fair value at the date of grant. The aggregate number of
common shares of the Corporation which may be issued under the plans are two
hundred forty thousand (240,000) shares.
As of December 31, 1995 and 1994, there were 176,480 incentive stock
options granted with weighted average per share exercise price of $10.06. As of
December 31, 1995 and 1994 there were 74,446 and 79,796 incentive stock options
outstanding. Per the plan agreement, stock options available to be exercised as
of December 31, 1995 are 69,846 shares (72,756 shares at December 31, 1994).
During 1995, 5,350 incentive options were exercised at $58,000. When options
are exercised, the excess of the options prices over par value is credited to
surplus. During 1994, 33,664 incentive options were exercised at $308,000.
12. DIVIDEND RESTRICTION
The payment of dividends is subject to various regulatory restrictions. As
of December 31, 1995, approximately $22,440,000 of retained earnings was
available for the payment of dividends.
13. RETIREMENT PLANS
Security Banc Corporation has a non-contributory defined benefit pension
plan that covers all employees who have reached the age of twenty-one (21) and
have one thousand (1,000) hours of service during their anniversary year. The
amount of the benefit is determined pursuant to a formula contained in the
retirement plan which, among other things, takes into account the employee's
average earnings in the highest sixty (60) consecutive calendar months. Accrued
benefits are fully vested after five (5) years of service. Security Banc
Corporation's funding policy is to make annual contributions to the plan which
at least equals the minimum required contributions.
Disclosure of net periodic Pension cost for 1995, 1994, and 1993 is as
follows:
(000's) 1995 1994 1993
---- ---- ----
Service cost - benefit earned during the period... $ 275 $ 263 $271
Interest cost on projected benefit obligation..... 467 463 439
Actual (return) on plan assets.................... (1,263) 187 (359)
Net amortization and deferral..................... 795 (746) (146)
------ ----- ----
Net pension expense............................ $ 275 $ 167 $205
====== ===== ====
The following table sets forth the plan's funded status and amount
recognized in Security Banc Corporation's consolidated statement of condition
as of December 31, 1995 and 1994.
(000's) 1995 1994
----- -----
Reconciliation of funded status:
Projected benefit obligation............................ ($6,497) ($6,179)
Plan assets at fair value............................... 6,761 5,709
------ ------
Plan assets in excess (deficient) of projected
benefit obligation................................... 264 (470)
Unrecognized prior service cost......................... (18) (19)
Unrecognized net (gain) loss due
to experience different from assumptions made......... 354 1,079
Initial transition asset being recognized over 15 years. (257) (300)
------ ------
Prepaid pension cost included in other assets........... $ 343 $ 290
====== ======
(The Accumulated Benefit Obligation including the vested benefit obligation is
$4,704,516.) Assumptions used in accounting for the Plan were:
(000's) 1995 1994 1993
---- ---- ----
Settlement rate.......................... 7.5% 7.5% 7.5%
Return on assets......................... 8.0% 8.0% 8.0%
Salary growth............................ 4.5% 4.5% 4.5%
Plan assets consist of U.S. Treasury notes and bonds and common stock
equities.
14. COMMITMENTS AND CONTINGENT LIABILITIES
Security Banc Corporation has various commitments and contingent
liabilities outstanding, such as letters of credit and loan commitments, that
are not reflected in the consolidated financial statements. Letters of credit
commit the Corporation to make payments on behalf of customers when certain
specified future events occur. Loan commitments are made to accommodate the
financial needs of Security Banc Corporation's customers. These arrangements
have credit risk essentially the same as that involved in extending loans to
customers and are subject to Security Banc Corporation's normal credit
policies. Collateral is obtained based on Management's credit assessment of the
customer.
Unfunded loan commitments and unused lines of credit as of December 31,
1995 were $82,339,000. The aggregate amount of outstanding letters of credit
was $2,562,000 at December 31, 1995. No significant losses are anticipated as a
result of these commitments.
15. OTHER EXPENSE
The following table is a summary of categories deemed significant in
relationship to Other Expense as of December 31:
(000's) 1995 1994 1993
---- ---- ----
FDIC assessment...................... $ 487 $ 925 $ 885
Franchise tax........................ 963 871 791
Computer service..................... 881 844 867
Stationery and supplies.............. 559 410 381
Other items.......................... 2,315 2,348 2,092
------ ------ ------
Total................................ $5,205 $5,398 $5,016
====== ====== ======
16. LOAN FEES AND RELATED COSTS
Loan origination and commitment fees received in excess of direct costs
related to the origination of a loan are amortized to income over the term of
the loan. As of December 31, 1995, and 1994, Security Banc Corporation had
unamortized loan fees of $392,000 and $476,000, respectively.
49
17. 401(K) PROFIT SHARING SAVINGS PLAN
All employees of Security National Bank become eligible participants in the
plan when they have completed one (1) year of eligibility service; have worked
at least five hundred (500) hours and are at least age twenty-one (21).
Eligible participants may make contributions to the plan by deferring up to
fifteen percent (15%) of their annual earnings.
The Board of Directors of Security National Bank annually determine the
bank's matching contribution to the plan. For the plan year ended December
31,1995 and December 31, 1994, the matching contribution was fifty percent
(50%) of the employee's contribution up to the first six percent (6%) of annual
earnings contributed by the participant. The contribution by the bank for
1995,1994, and 1993 was $110,000, $105,000, and $101,000, respectively.
Employee contributions are one hundred percent (100%) vested immediately.
The bank's matching contributions are vested at twenty percent (20%) for each
year of eligibility service, based on five (5) year vesting schedule.
18. FAIR VALUES OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, "Disclosures about Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, whether or not recognized in the statement of condition, for which
it is practicable to estimate that value. In cases where quoted market prices
are not available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the bank.
The estimated fair values of the bank's financial instruments not disclosed
elsewhere are as follows:
(000's) 1995 1994
-------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
LOANS
Commercial and Agriculture......$150,927 $149,866 $145,942 $143,810
Real Estate..................... 89,127 89,976 89,091 84,350
Consumer........................ 77,825 77,758 79,018 75,517
DEPOSITS
Non Interest-Bearing Deposits...$ 86,682 $ 86,682 $ 79,532 $ 79,532
Interest-Bearing Demand Deposits 73,183 73,183 79,751 79,751
Savings Deposits................ 101,741 101,741 112,696 112,696
Time Deposits................... 175,944 177,078 154,788 154,493
[PHOTO] Larry Kaffenbarger, Kaffenbarger
Truck Equipment Co.
"If you've built a solid framework, you can adapt to changes in
the economy, the community and the consumer market. Security
Banc is solid and by adapting consistently provides
shareholders with a return on their investment."
50
OFFICERS AND MANAGEMENT
of Security National Bank and Trust Co.
Harry O. Egger
Chairman of the Board,
President, and Chief
Executive Officer
LOANS
William C. Fralick
Vice President
COMMERCIAL
Gary L. Linn
Vice President
Norman D. Filburn
Vice President
Jeffrey A. Darding
Vice President
Merrill E. Wells
Vice President
Michael B. Warnecke
Vice President
Thomas A. Goodfellow
Assistant Vice President
Peter W. Foreman
Commercial Banking Officer
REAL ESTATE
Gary J. Seitz
Mortgage Banking Officer
CONSUMER
Steve D. Hopkins, Jr.
Vice President
Ernest R. Picklesimer
Consumer Lender
H. Lewis Eblin
Credit Department Manager
MANAGEMENT SERVICES
Allan W. Macbeth
Vice President
Charles E. Imel
Director of Operations
Stella M. Grasmick
Assistant Vice President
FINANCIAL SERVICES
J. William Stapleton
Vice President
Thomas L. Miller
Controller
Sharon K. Boysel
Accounting Officer
HUMAN RESOURCES
Thomas L. Locke
Director of Human Resources
MARKETING/RETAIL
Glenda S. Greenwood
Director of Marketing
BRANCH ADMINISTRATION
William A. Creed
Vice President
TRUST
Daniel M. O'Keefe
Vice President
Richard O. Matthies
Vice President
James A. Kreckman
Assistant Vice President
Brenda S. Haybarker
Assistant Vice President
Mary L. Goddard
Trust Officer
Margaret E. Thornton
Assistant Trust Officer
AUDIT
Margaret A. Chapman
Auditor
COMPLIANCE
Margaret L. Foley
Compliance Officer
MAIN OFFICE
Janet R. Heck
Operations Supervisor
EAST MAIN OFFICE
Linda R. Swank
Branch Manager
ENON OFFICE
Karen S. Gibson
Assistant Vice President -Manager
MEDWAY OFFICE
John W. Cole
Retail Banking Representative
JAMESTOWN OFFICE
Barbara S. Hennigan
Assistant Vice President -Manager
NEW CARLISLE OFFICE
Donald C. Barnhart
Vice President
C. Alan Bobo
Assistant Vice President -Manager
NORTH LIMESTONE OFFICE
Joyce E. Sheridan
Branch Manager
NORTHRIDGE OFFICE
Judith A. Hopkins
Branch Manager
PARK LAYNE OFFICE
Ruby B. Finch
Branch Manager
SHAWNEE OFFICE
Barbara S. Hennigan
Assistant Vice President -Manager
SOUTH CHARLESTON OFFICE
Larry A. Motter
Branch Manager
WESTERN OFFICE
Martha E. Graham
Branch Manager
XENIA DOWNTOWN OFFICE
Gregg E. Hebrank
Assistant Vice President -Manager
Janet L. Sandifer
Vice President - Commercial Loan Officer
XENIA PLAZA OFFICE
Richard E. Coffelt
Branch Manager
51
DIRECTORS
of Security Banc Corporation and Security National Bank and Trust Co.
Harry O. Egger
Chairman of the Board,
President, and Chief Executive Officer
of the Corporation and
Security National Bank and Trust Co.
Larry D. Ewald
President
Process Equipment Co.
Dwight W. Hollenbeck
Chairman of the Board
The Credit Life Companies, Inc.
Richard E. Kramer
President and Chief
Executive Officer
Fulmer Supermarkets, Inc.
Larry E. Kaffenbarger
President
Kaffenbarger Truck Equipment Co.
Jane N. Scarff
Vice President
Scarff's Nursery, Inc.
W. Dean Sweet
Chairman of the Board,
Chief Executive Officer
Sweet Manufacturing
Company
Thomas J. Veskauf
Partner
Gorman, Veskauf,
Henson & Wineberg
Attorneys
Chester L. Walthall
President
Heat-Treating, Inc.
Directors Emeritus
Robert B. Gordon
Roger W. Kadel
Samuel F. Lamb
Fred R. Leventhal
Paul L. Robe
OFFICERS
of Security Banc Corporation
Harry O. Egger
Chairman of the Board,
President, and Chief
Executive Officer
William C. Fralick
Vice President
Daniel M. O'Keefe
Vice President
J. William Stapleton
Vice President
52
SECURITY BANC CORPORATION
SPRINGFIELD, OHIO
53
SECURITY BANC CORPORATION
40 SOUTH LIMESTONE STREET
SPRINGFIELD, OHIO 45502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Security Banc Corporation will be held at
the Main Office of The Security National Bank and Trust Co., 40 South Limestone
Street, Springfield Ohio, on Tuesday, April 16, 1996 at 2:00 p.m. for the
purpose of considering and voting upon the following matters:
1. To elect three directors of Class II to serve until the Annual Meeting
of Shareholders in 1999 or in the case of each director until his
successor is duly elected and qualified.
2 To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on February 29, 1996 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. All shareholders are cordially invited to attend
the meeting in person. However, if you do not expect to attend the meeting in
person, please fill in, date, sign, and return the enclosed Proxy Card.
By Order of the Board of Directors
J. William Stapleton
Secretary
Springfield, Ohio
March 15, 1996
1
54
SECURITY BANC CORPORATION
PROXY STATEMENT
40 SOUTH LIMESTONE STREET
SPRINGFIELD, OHIO 45502
MARCH 15, 1996
(MAILING DATE)
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed form of proxy is being solicited on behalf of the Board of
Directors of Security Banc Corporation for use at the Annual Meeting of
Shareholders and any adjournment thereof. The Annual Meeting will be held on
Tuesday, April 16, 1996, at the time and place for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. Shares represented by
properly executed proxies, if such proxies are received in time and not revoked,
will be voted at such meeting in accordance with any specifications thereon
or, if no specifications are made, will be voted as set forth therein. Any proxy
may be revoked at any time before it is exercised by receipt of later proxy, by
receipt by the secretary of a revocation, or by ballot at the meeting.
The persons named as proxies were selected by the Board of Directors of the
Corporation. No officer or employee of the Corporation was named as proxy.
The cost of the solicitation of proxies will be borne by the Corporation. In
addition to using the mail, proxies may be solicited by personal interview,
telephone, and wire. Officers and regular employees of the Corporation and its
subsidiary, The Security National Bank and Trust Co., will not receive any
compensation for the solicitation of proxies.
VOTING SECURITIES
The Board of Directors has fixed the close of business on Thursday, February 29,
1996 as the record date for the determination of Shareholders entitled to notice
of and to vote at the Annual Meeting. On the record date, the outstanding
capital stock of the Corporation consisted of 5,107,834 shares, par value three
dollars and an eighth ($3.125) per share, each of which is entitled to one (1)
vote at the meeting. Each such share is entitled to one (1) vote on all matters
properly coming before the Annual Meeting.
PRINCIPAL SHAREHOLDERS
As of January 5, 1996 Security National Bank and Trust Co., as Trustee, held in
trust 904,125 shares, amounting to eighteen percent (18%) of the common shares
of the Corporation. The shares are held by them in their fiduciary capacity
under various agreements as Trustee. The Trustee has advised the Corporation
that it has sole voting power for 794,895 shares and shared voting power for
97,078 shares.
3
55
Cede & Co., Box 20, Bowling Green Station, New York, NY, 10004 holds 427,744
shares (8.4%) interest on behalf of Director Dwight W. Hollenbeck. Mr. Richard
L. Kuss and his wife Barbara, 1130 Vester Avenue, Suite A, Springfield, Ohio,
45503 are the owners of 212,368 shares (4.2%) and 121,572 shares (2.4%),
respectively. They have combined beneficial ownership of 333,940 shares (6.5%).
The Board of Directors has no knowledge of any other person who owned of record
or beneficially more than five percent (5%) of the outstanding common shares of
the Corporation.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors of Security Banc Corporation is divided into three (3)
classes, with the terms of office of each class ending in successive years. The
terms of Directors of Class II expire with this Annual Meeting. The Directors of
Class I and Class III will continue in office. The Shareholders are being asked
to vote on the re-election of the three (3) Directors in Class II. Nominees are
to be elected to serve until the 1999 Annual Meeting of Shareholders and until
their respective successors are fully elected and have qualified. It is intended
that shares represented by the proxies will, unless contrary instructions are
given, be voted for the three (3) nominees as listed below. Although Management
does not expect that any nominee will be unavailable for election, in the event
that vacancies occur unexpectedly, the shares will be voted for substitute
nominees, if any.
The Board of Directors of the Corporation has, by resolution of the Board, fixed
and determined the number of Directors at nine (9) persons in accordance with
Article III, Section I of the Code of Regulations of the Corporation. All
nominees are presently Directors of the Corporation.
Listed are the name of three (3) nominees for election to the Board of Directors
along with present Directors of Class I and Class III, their principal
occupations and other directorships, their age, the year in which each first
became a Director, the number of shares of the Corporation's Common Stock
beneficially owned by each, directly or indirectly as of the close of business
December 31, 1995, and percent of class.
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56
NOMINEES FOR DIRECTORS OF CLASS II
For Three Year Term Expiring Annual Meeting 1999
Name Share of
Position with Common Stock Percent
Corporation/Bank Director Beneficially of
or Occupation Age Since Owned Class
Larry D. Ewald 57 1987 20,768(1) *
President
Process Equipment Co.
Richard E. Kramer 61 1988 11,218(2) *
President
Fulmer Supermarkets, Inc.
W. Dean Sweet 67 1970 1,648 *
Chairman of the Board & CEO
Sweet Manufacturing Co.
(Conveyors, Conveying Equipment)
MEMBERS OF BOARD OF DIRECTORS
CONTINUING IN OFFICE
CLASS III
Term Expiring Annual Meeting 1997
Dwight W. Hollenbeck 86 1939 428,384(3) 8.4%
Chairman of the Board
The Credit Life Companies, Inc.
Larry E. Kaffenbarger 54 1995 1,740 *
President
Kaffenbarger Truck Equipment Co.
Chester L. Walthall 54 1994 1,336(4) *
President
Heat Treating Inc.
5
57
MEMBERS OF BOARD OF DIRECTORS
CONTINUING IN OFFICE
CLASS I
Term Expiring Annual Meeting 1998
Harry O. Egger 56 1977 88,494(5) 1.7%
Chairman of the Board, President & CEO
Security Banc Corporation
The Security National Bank and Trust Co.
Jane N. Scarff 67 1990 9,240 *
Vice President
Scarff Nursery, Inc.
(Production Nursery)
Thomas J. Veskauf 64 1986 2,662(6) *
Partner
Gorman, Veskauf, Henson & Wineberg
Attorneys at Law
*Less than one percent (1%).
The following statement pertains to the nominees and Directors:
When appropriate, each nominee includes in his or her beneficial holdings of the
Corporation's stock, shares held by or in trust for the respective nominee's
spouse, minor children and/or relatives having the same home as the nominee,
shares held by such nominee as fiduciary where the nominee has the right to vote
or dispose of such shares and such nominee disclaims any beneficial ownership of
such shares.
(1) Includes 7,276 shares owned by the wife of Larry D. Ewald and includes
4,000 shares held in a trust as to which Larry D. Ewald, as co-trustee,
shares investment and voting power.
(2) Includes 960 shares owned by the wife of Richard E. Kramer and includes
8004 shares held in trust.
6
58
(3) Includes 427,744 shares held in Trust.
(4) Includes 1,016 shares held by the wife of Chester L. Walthall.
(5) Includes 30,000 shares owned by the wife of Harry O. Egger and includes
24,720 stock options granted to Harry O. Egger, which are exercisable.
(6) Includes 522 shares owned by the wife of Thomas J. Veskauf.
As of December 31, 1995, the Directors and Executive Officers of the
Corporation, as a group, beneficially owned an aggregate of 635,009 shares of
the Corporation's Common Stock which constitutes approximately twelve percent
(12%) of the shares outstanding.
7
59
MEETINGS OF THE CORPORATION/BANK BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
During 1995, the Corporation's Board of Directors had five (5) regularly
scheduled meetings. All of the directors attended at least seventy-five percent
(75%) of the regularly scheduled meetings except Director Hollenbeck.
The Executive Committee rotates on a regularly scheduled basis. Those members of
the Committee at December 31, 1995 were Directors Egger, Ewald, Kramer, Veskauf,
and Walthall. The Executive Committee is empowered to exercise powers and
perform all duties of the Board of Directors when the Board is not in session.
The Executive Committee met four (4) times in 1995.
The Executive Compensation Committee of the Corporation/Bank is composed of
Directors Ewald, Scarff and Sweet. The Executive Compensation Committee met two
(2) times in 1995. The purpose of the Executive Compensation Committee is to
establish and execute compensation policy and programs for executives of the
organization.
The Audit Committee of the Corporation/Bank is composed of members of the Board
of Directors rotating on a regularly scheduled basis, all of whom were present
for at least seventy- five percent (75%) of the meetings of this Committee.
Directors Ewald, Hollenbeck, Kaffenbarger, and Veskauf were members of the
Committee as of December 31, 1995. The Audit Committee met four (4) times in
1995. The function of the Audit Committee consists of reviewing, with the
Company's internal auditor and the independent auditors, the scope and results
of procedures for auditing and the adequacy of the system of internal controls.
8
60
The Corporation has no standing Nomination Committee. Nominations for election
to the Board of Directors will receive full consideration by the Executive
Committee. Shareholders desiring to make valid nominations for the election of
the Board of Directors need to comply with the statements in the section
entitled "Shareholder Proposals".
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
This Committee deals with compensation issues as they pertain to executive
officers.
Each year the Compensation Committee reviews several areas as they relate to the
Chief Executive Officer's compensation package. The Committee reviewed the CEO
salaries at peer banks of our asset size, return on average assets, midwest
location and population size. The Committee also reviewed the salaries of
specific banks of similar size. The Chief Executive Officer is charged with the
development and retention of employees and the Corporation's community
involvement as these result in maintaining a positive Corporate image. Harry O.
Egger participates only in the compensation decisions for the other officers and
does not participate in compensation decisions for himself.
Based on the performance of the Corporation and its increased value for the
shareholder as well as being rated one of the top performing community banks in
the State of Ohio, the Committee believes Mr. Egger's compensation is a fair
reflection of the services he performs for the Corporation.
THE EXECUTIVE COMPENSATION COMMITTEE MEMBERS
Larry D. Ewald
Jane N. Scarff
W. Dean Sweet
FINANCIAL PERFORMANCE
The graph summarizes cumulative return experienced by the Corporation/Bank's
shareholders over the years 1991 through 1995, compared to the S&P 500 Stock
Index, and the Mid-Atlantic Bank Index:
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG
SECURITY BANC CORPORATION, MID-ATLANTIC BANK INDEX** AND S&P 500
S & P 500 Mid Atlantic SBC Date
100 100 100 12/31/90
130.7 126.3 115.5 12/31/91
140.7 185 144.4 12/31/92
154.4 235.1 165.2 12/31/93
156.5 233.4 184.9 12/31/94
215.4 316.6 225.1 12/31/95
Assumes $100 invested on 12-31-90 in Security Banc Corporation, Mid-Atlantic
Bank Index, and S & P 500.
* Total return assumes reinvestment of dividends.
** Mid-Atlantic Bank Index is composed of 29 bank holding companies with total
assets at September 30, 1995 of between $250 million and $2.5 billion
headquartered in NJ, NY, OH, and PA.
The financial information upon which the S & P 500 and Mid-Atlantic Bank Index
has been compiled from information issued by the companies themselves or other
secondary sources. Although these sources are considered to be reliable,
management makes no representations or warranties with respect to the accuracy
or completeness of this analysis or the underlying data, and specifically
disclaims any implied warranties of merchantability or fitness for any
particular purpose. This analysis does not purport to be a complete analysis nor
does it constitute an offer or recommendation to buy or sell any securities.
9
61
EXECUTIVE COMPENSATION
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Corporation/Bank's chief
executive officer and each of the Corporation/Bank's most highly compensated
executive officers (the "named executives") during each of the last three (3)
fiscal years.
====================================================================================================================================
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Long Term
Compensation Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
All Other
Name and Principal Stock Options Compensation (1)
Position Year Salary Bonus # $
- ------------------------------------------------------------------------------------------------------------------------------------
Harry O. Egger 1995 315,000 50,000 - 8,024
Chairman of the Board 1994 263,000 35,200 - 8,242
Chief Executive Officer 1993 243,000 25,200 - 8,662
and President
William C. Fralick 1995 90,000 12,000 - 3,674
Vice President,Senior 1994 73,615 11,710 - 3,750
Lending Officer 1993 67,615 6,200 - 2,797
J. William Stapleton 1995 90,000 12,000 - 3,674
Vice President, Chief 1994 71,230 12,735 - 3,659
Financial Officer 1993 66,231 6,200 - 3,410
====================================================================================================================================
<FN>
(1) All amounts shown include funds contributed or allocated pursuant to the
401 (K) Profit Sharing Savings Plan and Fringe Benefit Plan.
COMPENSATION OF DIRECTORS
During 1995, directors of the Bank met monthly and received a single annual
retainer of $1,200 and a fee of $600 per meeting attended ($200 for committee
meetings). Directors who are also employees received no additional compensation
for service on the Board. Pursuant to a Deferred Compensation Plan, directors
may annually defer any amount of their compensation as directors until age
seventy (70) or until they cease to serve on the Board, whichever occurs last.
The deferred funds bear interest until paid at an annually adjusted rate equal
to one- fourth percent (1/4%) greater than the average bond equivalent yield to
maturity on one-year United States Treasury Bills in effect for the first five
(5) business days in December immediately preceding such calendar year, unless
an alternate rate is set by the Committee for that year at least fifteen (15)
days before the beginning of the year.
EMPLOYMENT AGREEMENTS
The employment agreement with Harry O. Egger will automatically be extended on
January 1, of each year so that it provides for a continuing five (5) year
employment contract. In the event the Corporation/Bank ceases to exist as a
corporate entity, Harry O. Egger shall be paid in cash, as a lump sum, equal to
two-point-nine (2.9) times his annual base compensation determined by averaging
the same over the five (5) years immediately prior to the occurrence.
STOCK OPTION COMMITTEES INTERLOCKS AND INSIDER PARTICIPATION
The Stock Option Committee members are Directors Ewald, Scarff and Sweet.
401(K) PROFIT SHARING SAVINGS PLAN
All employees of Security National Bank and Trust Co. become eligible
participants in the plan when they have completed one (1) year of eligibility
service; have worked at least five hundred (500) hours, and are at least age
twenty-one (21). Eligible participants may make contributions to the plan by
deferring up to fifteen percent (15%) of their annual earnings.
10
62
The Board of Directors of Security National Bank and Trust Co. annually
determines the Bank's matching contribution to the plan. For the plan year
ending December 31, 1995, the matching contribution was fifty percent (50%) of
the employee's contribution up to the first six percent (6%) of annual earnings
contributed by the participant. The contribution by the Bank for 1995 was
$110,000.
Employee contributions are one hundred percent (100%) vested immediately. The
Bank's matching contributions are vested at twenty percent (20%) for each year
of eligibility service, based on a five (5) year vesting schedule.
Distributions are made from the plan to the individual participants in the event
of normal or early retirement, disability, termination of employment or to the
designated beneficiary in the event of death.
RETIREMENT PLANS
The following table shows estimated annual benefits payable for life to
participants upon retirement at age sixty-five (65) in 1995 under the Security
National Bank Pension Plan based upon combinations of compensation levels and
years of service:
========================================================================================================================
PENSION PLAN TABLE
- ------------------------------------------------------------------------------------------------------------------------
Approximate Annual Retirement Benefit Upon Retirement at Age 65
Average Annual Before Adjustments (1) (2) (3)
---------------------------------------------------------------------------------------------
Salary (3)
15 20 25 30 or more
- ------------------------------------------------------------------------------------------------------------------------
100,000 31,717 42,290 52,862 63,434
125,000 40,230 53,640 67,050 80,459
150,000 48,742 64,990 81,237 97,484
175,000 56,120 75,205 94,290 113,374
200,000 63,497 85,420 107,342 120,000 (4)
225,000 69,170 (4) 93,275 (4) 117,379 (4) 120,000 (4)
250,000 69,170 (4) 93,275 (4) 117,379 (4) 120,000 (4)
300,000 69,170 (4) 93,275 (4) 117,379 (4) 120,000 (4)
========================================================================================================================
<FN>
(1) For the purpose of computing a benefit under the Plan on December 31, 1995,
Harry O. Egger, William C. Fralick, and J. William Stapleton have twenty
(20), nineteen (19), and eighteen (18) years of credit service
respectively.
(2) The Bank maintains a Retirement Plan that provides for the payment of a
monthly retirement benefit commencing, in most cases, at the normal
retirement age of sixty-five (65). The benefits are purchased from
contributions made by the employer from year-to- year. The amount of the
benefit is determined pursuant to a formula contained in the Retirement
Plan which, among other things, takes into account the employee's average
earnings in the highest sixty (60) consecutive calendar months. Accrued
benefits are fully
11
63
vested after five (5) years of vesting service.
(3) ERISA 1995 maximum annual compensation limit of $150,000 used to determine
these benefits.
(4) Maximum IRC Section 415 annual pension payable in 1995 assuming a minimum
of ten (10) years participation.
REPORT OF THE STOCK OPTION COMMITTEE
The Stock Option Committee of the Board of Directors determines stock option
grants to executive officers and other eligible employees. Stock options are
intended to encourage key employees to remain employed by the Corporation/Bank
by providing them with a long term interest in the Corporation/Bank's overall
performance as reflected by the performance of the market of the
Corporation/Bank's Common Stock.
The Security Banc Corporation 1987 and 1995 Stock Option Plans are administered
by the Board of Directors of the Corporation. The aggregate number of common
shares of the Corporation which may be issued under the Plans are two hundred
thousand (200,000) and forty thousand (40,000) shares, respectively.
Under the terms of the Plan, the Corporation may grant stock options to Officers
and certain key Executives. The options, which must be granted at fair market
value, expire ten (10) years from the date of grant.
All outstanding incentive stock options entitle the holder to purchase shares at
prices equal to the fair market value of the shares on the dates the options
were granted. The fair market value of a share of the Corporation's Common Stock
was $28.50 as of December 31, 1995.
The following table sets forth certain information regarding individual
exercises of stock options during 1995 by each of the names executives:
==========================================================================================================================
AGGREGATED OPTION EXERCISES IN 1995
AND YEAR END OPTION VALUE
- --------------------------------------------------------------------------------------------------------------------------
Number of Value of
Unexercised Unexercised
Options at Options at
Shares 12/31/95 12/31/95
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
(#) (#)
- --------------------------------------------------------------------------------------------------------------------------
Harry O. Egger 0 0 24,720 / 0 $457,170 / $0
William C. Fralick 0 0 4,840 / 0 $ 83,115 / $0
J. William Stapleton 1,400 24,150 4,000 / 0 $ 66,000 / $0
==========================================================================================================================
12
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Generally, option grants to executive officers are a reflection of the
executive's attainment of Corporation/Bank and personal goals.
STOCK OPTION COMMITTEE MEMBERS
Larry D. Ewald
Jane N. Scarff W. Dean Sweet
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Corporation's banking subsidiary has, and expects in the future to have,
transactions with corporations in which Directors and Officers of the Company
are active as Directors, Officers, or substantial Shareholders. These
transactions are undertaken in the ordinary course of business and on
substantially the same terms and conditions as comparable transactions with
other corporations. The Bank has made, and expects in the future to make, loans
to such Directors, Officers and their associates. These loans are made in the
ordinary course of business, on substantially the same terms, including interest
rates and collateral as those prevailing at the time for comparable transactions
with other persons and do not involve more than normal risk of collectibility or
present any other unfavorable terms.
The firm of Gorman, Veskauf, Henson & Wineberg, Attorneys-at-Law of which Thomas
J. Veskauf is a partner was paid fees for various legal services performed for
the Corporation during the year ended December 31, 1995.
RELATIONSHIP WITH CERTIFIED PUBLIC ACCOUNTANT
The Security Banc Corporation Board of Directors has retained the professional
services of Ernst & Young, Certified Public Accountants for 1996. The
Corporation's financial statements for the previous fiscal year were examined by
Ernst & Young. In connection with the audit function, Ernst & Young also
reviewed the 10-K filing with the Securities and Exchange Commission.
SHAREHOLDER PROPOSALS
Shareholders of the Corporation who wish to make a proposal to be included in
the Proxy Statement and Proxy of the Corporation's Annual Meeting of
Shareholders which, unless changed, will be held on April 15, 1997, must cause
such proposal to be received by the Corporation at its principal office no later
than October 18, 1996. Each proposal submitted should be accompanied by the name
and address of the Shareholder submitting the proposal and number of shares
owned. The proxy rules, as implemented by the Securities Exchange Act of 1934,
govern the content and form of Shareholder proposals. All proposals must be a
proper subject for action at the 1997 Annual Meeting.
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65
OTHER BUSINESS
The Board of Directors does not know of any other matters to be presented at the
Annual Meeting. However, if any other matters do come before such meeting or an
adjournment thereof, it is intended that the holders of the proxies will vote in
accordance with the recommendation of Management.
Harry O. Egger
Chairman of the Board
President and Chief Executive Officers
March 15, 1996
THIS FORM 10-K ANNUAL REPORT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS AVAILABLE WITHOUT CHARGE AFTER MARCH 31, 1996. TO OBTAIN
A COPY, CALL (513) 324-6874 OR WRITE TO SHAREHOLDER RELATIONS, SECURITY
BANC CORPORATION, 40 SOUTH LIMESTONE STREET, SPRINGFIELD, OHIO 45502.
14