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FORM 10-Q -- QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AS LAST AMENDED IN REL. NO. 34-26589, EFF. 4/12/89)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
For the period ended Sept. 30, 1996
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.
For the transition period from to Commission File
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Number: 0-13655
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Security Banc Corporation
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(Exact name of registrant as specified in its charter)
Ohio 31-1133284
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 South Limestone Street, Springfield, OH 45502
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(Address of principal executive offices) (Zip Code)
(513) 324-6920
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock.
Class Outstanding at Oct. 15, 1996
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Common Stock, $3.125 Par Value 6,045,096
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SECURITY BANC CORPORATION AND SUBSIDIARIES
INDEX
PAGE NO.
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets
Sept. 30, 1996 and December 31, l995 3
Consolidated Condensed Statements of Income
for the three (3) months ended Sept. 30, l996
and Sept. 30, 1995. 4
Consolidated Condensed Statements of Income 5
for the nine (9) months ended Sept. 30, 1996 and
Sept. 30, 1995.
Consolidated Condensed Statements of Cash 6
Flows for the nine (9) months ended Sept. 30,
1996 and Sept. 30, 1995.
Notes to Consolidated Condensed Financial 7
Statements.
Item 2 - Management's Discussion and Analysis of
Condition and Results of Operations 8-10
Part II - Other Information 11
Signature 12
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PART I ITEM 1 - FINANCIAL STATEMENTS
SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
Sept. 30 Dec 31
1996 1995
---- ----
(in thousands)
ASSETS
Cash and due from banks $ 30,034 $ 33,258
Federal funds sold 24,385 43,500
------------ --------
TOTAL CASH AND CASH EQUIVALENT 54,419 76,758
------------ --------
Interest bearing deposits with other banks 1,913 581
Investments (Market Value $195,533 @ 9-30-96,
$185,820 @ 12-31-95) 194,418 183,861
Loans: Commercial and agricultural 186,200 171,125
Real estate and mortgage 139,813 132,400
Consumer 86,524 93,045
------------ --------
TOTAL LOANS 412,537 396,570
Less: Allowance for Loan Losses 5,597 5,337
------------ --------
NET LOANS 406,940 391,233
Premises & Equipment 6,859 7,660
Other Assets 17,646 16,013
------------ --------
TOTAL ASSETS $ 682,195 $676,106
============ ========
LIABILITIES
Non-interest bearing deposits $ 103,519 $112,002
Interest bearing demand deposits 103,778 97,422
Savings deposits 126,934 127,363
Time deposits, $100,000 and over 37,812 38,931
Other time deposits 173,018 180,126
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TOTAL DEPOSITS 545,061 555,844
Fed funds purchased and securities sold
under agreement to repurchase 37,548 26,184
Other liabilities 3,029 3,842
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TOTAL LIABILITIES $ 585,638 $585,870
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SHAREHOLDERS'S EQUITY
Common Stock (Par Value $3.125) $ 19,643 $ 19,548
Shares authorized 11,000,000
Shares issued 6,285,696 - 1996
6,255,306 - 1995
Surplus 20,179 19,967
Retained earnings 60,331 53,613
Net unrealized (loss)gain on investment securities classified
as available for sale (net of income tax) (403) 301
Less: Treasury Stock, 240,600 shares 3,193 3,193
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TOTAL SHAREHOLDERS' EQUITY 96,557 90,236
------------ --------
TOTAL LIABILITIES &
SHAREHOLDER'S EQUITY $ 682,195 $676,106
============ ========
See notes to Consolidated Condensed Financial Statements
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SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended
Sept. 30, Sept. 30,
1996 1995
---- ----
(in thousands except
per share data)
Interest Income $12,522 $12,607
Interest Expense 4,539 4,636
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NET INTEREST INCOME 7,983 7,971
Provision for loan losses 700 238
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NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 7,283 7,733
OTHER OPERATING INCOME
Trust Income 345 335
Service charges on deposit accounts 666 677
Securities, Gains (Losses) 5 106
Other charges, rents and fees 328 293
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TOTAL OTHER OPERATING INCOME 1,344 1,411
OPERATING EXPENSES
Salaries and employee benefits 2,175 2,238
Equipment and occupancy expense 550 565
Other operating expense 1,704 1,477
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TOTAL OPERATING EXPENSE 4,429 4,280
INCOME BEFORE TAXES 4,198 4,864
Income taxes (See Note B) 1,025 1,409
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NET INCOME $ 3,173 $ 3,455
======= =======
Per share* $ .53 $ .57
Cash dividends
per share** $ .16 $ .15
<FN>
*Earnings per common share is calculated using weighted average shares
outstanding of 6,034,535 for 1996 and 6,014,206 for 1995.
** Cash dividends per common share is calculated using weighted average shares
outstanding of 6,045,096 for 1996 and 5,939,405 for 1995.
See notes to Consolidated Condensed Financial Statements.
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SECURITY BANC CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
Nine Months Ended
Sept. 30, Sept. 30,
1996 1995
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(in thousands except
per share data)
Interest Income $37,293 $36,926
Interest Expense 13,721 13,286
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NET INTEREST INCOME 23,572 23,640
Provision for loan losses 1,175 713
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NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 22,397 22,927
OTHER OPERATING INCOME
Trust Income 1,015 935
Service charges on deposit accounts 1,970 1,950
Securities, Gains (Losses) 363 10
Other charges, rents and fees 1,022 822
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TOTAL OTHER OPERATING INCOME 4,370 3,717
OPERATING EXPENSES
Salaries and employee benefits 6,641 6,764
Equipment and occupancy expense 1,719 1,604
Other operating expense 4,854 5,104
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TOTAL OPERATING EXPENSE 13,214 13,472
INCOME BEFORE TAXES 13,553 13,172
Income taxes (See Note B) 3,741 3,763
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NET INCOME $ 9,812 $ 9,409
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Per share* $ 1.63 $ 1.56
Cash dividends
per share** $ .52 $ .44
<FN>
*Earnings per common share is calculated using weighted average shares
outstanding of 6,022,677 for 1996 and 6,012,546 for 1995.
**Cash dividends per common share is calculated using weighted average shares
outstanding of 5,970,812 for 1996 and 5,957,032 for 1995.
See notes to Consolidated Condensed Financial Statements.
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SECURITY BANC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
Sept. 30 Sept. 30
1996 1995
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(in thousands)
Cash Flows From Operating Activities:
Net income $ 9,812 $ 9,409
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 671 649
Gain on sale of Investment Securities AFS (362) (10)
Gain on sale of Investment Securities HTM (1) 0
Gain (loss) on sale of other assets (10) 9
Provisions for loan losses 1,175 713
Amortization and accretion, Net 630 (934)
Amortization of core deposit intangibles 40 53
Change in other operating assets/liabilities, net (1,746) (92)
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Total adjustments 397 388
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NET CASH PROVIDED BY OPERATING ACTIVITIES 10,209 9,797
Cash Flows from Investing Activities:
Net (increase) decrease in interest bearing
deposits with other banks (1,880) 576
Proceeds from maturities of invest. securities AFS 20,674 17,000
Proceeds from maturities of invest. securities HTM 6,205 44,101
Proceeds from sales of investment securities AFS 104,872 190,658
Purchase of investment securities AFS (143,167) (233,929)
Purchase of investment securities HTM (467) (326)
Net increase in loans (18,357) (5,488)
Proceeds from sale of other assets 1,735 291
Capital expenditures (186) (858)
Purchase life insurance policies (328) (331)
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NET CASH USED IN INVESTING ACTIVITIES (30,899) 11,694
Cash Flows from Financing Activities:
Net decrease in demand deposits, NOW
accounts and savings accounts (2,549) (23,787)
Net (decrease) increase in certificates of deposit (8,227) 20,559
Net increase in short term
borrowed funds 11,914 2,124
Dividends paid (3,093) (2,610)
Proceeds from exercise of stock option 324 53
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Sale (purchase) of Treasury Stock (18) (15)
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NET CASH PROVIDED BY FINANCING ACTIVITIES (1,649) (3,676)
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Net (decrease)increase in cash and cash equivalents (22,339) 17,815
Cash and cash equivalents at beginning of year 76,758 35,388
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Cash and Cash Equivalents at Sept. 30 $ 54,419 $ 53,203
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See Notes to Consolidated Financial Statements.
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SECURITY BANC CORPORATION
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - PREPARATION OF FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments consisting of normal re-occurring items necessary to
present fairly the financial condition of the company as of Sept. 30, l996 and
the results of operations and cash flows for the nine month periods ended Sept.
30, 1996 and Sept. 30, 1995.
NOTE B - TAXES
The effective tax rate of 28% is considerably lower than the statutory 35%
because of investments made in tax exempt municipal securities. The subsidiaries
of Security Banc Corporation have approximately $27,578,000.00 invested in tax
exempt municipal securities.
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PART 1 ITEM 2
SECURITY BANC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Registrant's financial condition and results of
operations during the periods included in the consolidated financial statements
enclosed with this filing.
BUSINESS COMBINATIONS
On September 30, 1996, CitNat Bancorp merged with and into Security Bancorp
(Company) and shares of the Company's common stock was issued in exchange for
all of the commmon stock of CitNat. The merger was accounted for as a pooling of
interest, and accordingly, the accompanying financial statements have been
restated to include the accounts and operations of CitNat for all periods prior
to the merger.
Separate results of the combining companies for the nine months ended September
30, 1996 and 1995 are as follows in (000):
September 30, 1996 September 30, 1995
Revenue (net interest income plus
non-interest income)
Security $22,559 $22,128
CitNat 5,383 5,229
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27,942 27,357
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Net income
Security $ 8,444 $ 8,263
CitNat 1,368 1,146
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$ 9,812 $ 9,409
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RESULTS OF OPERATIONS
Net income was $9,812,000 for the first nine months of 1996, compared to
$9,409,000 for the same period in 1995. Earnings per share were $1.63 for the
first nine months, a 4% increase over last year's $1.56.
Total assets were $682,195,000 at Sept. 30, 1996 compared to 1995's assets of
$676,106,000. For the first nine months of l996, return on average equity was
14.02% and return on average assets was 1.94%.
Net interest income on a fully taxable equivalent basis for the first nine
months of l996 was $24,592,000 compared to the $24,822,000 realized in the same
period of l995.
The allowance for loan losses was $5,597,000 in the first nine months of l996
and $5,521,000 in the first nine months of 1995. The allowance for losses as a
percent of loans and leases outstanding was 1.36% at Sept. 30, l996 and l.38% at
Sept. 30, 1995.
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PART 1 ITEM 2(CONT'D)
Beginning in 1995, the Company adopted Financial Accounting Standards Board
Statement No. 114, "Accounting by Creditors for Impairment of a Loan". Under the
new standard, the allowance for credit losses related to loans that are
identified for evaluation in accordance with Statement 114 is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral for certain collateral dependent loans. Prior to
1995, the allowance for credit losses related to these loans was based on
undiscounted cash flows or the fair value of the collateral for collateral
dependent loans. The following table presents data concerning loans at risk at
the end of each period. (000s).
December 31
Sept. 30, -------------------------------------
1996 1995 1994 1993 1992
--------- ---- ---- ---- ----
Non-accrual loans $4,417 $2,772 $2,598 $2,229 $1,754
Accruing loans past due
90 days or more 1,556 1,543 558 245 283
Restructured loans 0 0 0 0 97
Total other operating income was $4,370,000 and $3,712,000 during the first nine
months of 1996 and 1995 respectively. Trust income increased 9%. There was a 1%
increase in service charges on deposits, and a 24% increase in other charges,
rents and fees. Total securities gains for the first nine months of 1996 were
$363,000 or $236,000 after tax. Total securities gains for the same period of
1995 were $10,000 or $6,500 after tax.
(Part 1, Item 2 continued on Page 3)
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PART 1 ITEM 2 - PAGE 3
SECURITY BANC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Total operating expenses decreased during the first nine months, 2% under
the similar period of l995. Salaries, wages and employee benefits decreased
2% under 1995. Equipment and net occupancy expenses during the first nine
months were $1,719,000 and $1,604,000 for 1996 and 1995 respectively, which
reflects a 7% increase. Other operating expenses decreased 5% under 1995.
MATERIAL CHANGES IN FINANCIAL CONDITION
The material changes that have occurred in the Registrant's financial
condition during 1996 are as follows (000s):
Sept. 30, Dec 31,
1996 1995 $+/- %+/-
---- ---- ---- ----
Cash and due from banks $ 30,034 $ 33,258 (3,224) (10)
Interest bearing deposits with other banks 1,913 581 1,332 229
Securities 194,418 183,861 10,557 6
Federal funds sold 24,385 43,500 (19,115) (44)
Loans and leases 412,537 396,570 15,967 4
Funds purchased and repos 37,548 26,184 11,364 43
Demand Deposits
Non interest bearing 103,519 112,002 (8,483) (8)
Interest bearing 103,778 97,422 6,356 7
Savings Deposits 126,934 127,363 (429) 0
Time Deposits 210,830 219,057 (8,227) (4)
LIQUIDITY AND CAPITAL RESOURCES
The maintenance of an adequate level of liquidity is necessary to
ensure that sufficient funds are available to meet customers' loan
demand and deposit withdrawals. The Corporation's liquidity sources
consist of short term marketable securities, maturing loans, and
Federal Funds sold. The Corporation has a cumulative gap of
$113,318,000 at the one year interval or a cumulative gap ratio of
1.49.
CAPITAL RESOURCES
The table below illustrates the Company's subsidiary banks regulatory
capital ratios at Sept. 30,1996 under the year end 1992
requirements: (000s)
Security National Citizens National
Springfield, OH Urbana
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Tier 1 Capital $ 78,428 $13,722
Tier 2 Capital 3,916 994
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TOTAL QUALIFYING CAPITAL $ 82,344 $14,716
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Risk Adjusted Total Assets (including off balance exposures) $330,041 $78,829
======== =======
Tier 1 Risk-Based Capital Ratio 23.76% 17.41%
Total Risk-Based Capital Ratio 24.95% 18.67%
Leverage Ratio 14.21% 13.36%
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SECURITY BANC CORPORATION
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings Inapplicable
ITEM 2 Changes in Securities Inapplicable
ITEM 3 Defaults upon Senior Securities Inapplicable
ITEM 4 Submission of Matters to a Vote Inapplicable
of Security Holders
ITEM 5 Other Information Inapplicable
ITEM 6 Exhibits and Reports on Form 8-K Inapplicable
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SECURITY BANC CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SECURITY BANC CORPORATION
By /s/ Thomas L. Miller
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Thomas L. Miller
Controller
By /s/ J. William Stapleton
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J. William Stapleton
Vice President/CFO
Oct. 5, 1996
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