1
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
From time to time, the Corporation may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, new banking and financial service products and similar matters. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, Corporation notes that a variety of factors could cause its actual
results and experiences to differ materially from the anticipated results or
other expectations expressed in its forward-looking statements. These risks and
uncertainties include, without limitation, changes in interest rates,
developments in the economies served by the Corporation, changes in anticipated
credit quality trends and changes in accounting, tax or regulatory practices or
requirements.
In the following pages, the analysis of the financial condition and
results of operations in 1997 compared to prior years is discussed by
Management. The data presented in this discussion should be read in conjunction
with the 1997 audited financial statements of the report. Management is
committed to the improvement of return on average assets, return on average
equity and the efficiency ratio. 1997 brought about many changes which will
allow management to continue to achieve above-average ratios for the industry.
1997 represented the first full year with the three (3) affiliates
together as a Corporation. The Corporation is finding that with three (3)
affiliates, many opportunities exist to reduce cost. The Corporation's new
affiliates, Third Savings and Loan and Citizens National Bank converted data
processing systems in February 1997 and May 1997. It is anticipated in the near
future that these conversions will improve customer service while decreasing
overall corporate costs for data processing.
Also for 1997, the Corporation acquired software for Product Profitability
which in the near future will assist us in the types of products and the cost of
those products that are provided to our customers. It is the intention of the
Corporation to provide these costs obtained from the Product Profitability
Software with the Marketing Central Information System which was acquired in
1996. These two systems will provide better product offerings to our customers
and in turn allow the Corporation to have a full understanding of the actual
cost to offer and service a product.
Security Banc Corporation continues to perform very well when compared to
our banking peers.
2
RESULTS OF OPERATIONS SUMMARY
Net income advanced in 1997 to $14,488,000. Net income has steadily
increased in each of the previous five (5) years. Net income in 1997 was
$14,488,000 compared to net income in 1996 of $13,387,000 and in 1995 of
$12,707,000. Net income for 1997 increased $1,101,000 or eight percent (8%) over
1996. Basic Earnings per share was $2.39 in 1997, $2.22 in 1996, and $2.11 in
1995, whereas Diluted Earnings per share was $2.38, $2.21, and $2.10,
respectively.
Total assets grew three percent (3%) in 1997 to $839,605,000. Security
Banc Corporation continued its record performance with a 1997 return on average
assets of one point seventy-five percent (1.75%) and a return on average
shareholder equity of thirteen point ninety-two percent (13.92%). The
Corporation has continued to increase cash dividends paid to our shareholders.
Cash dividends paid in 1997 were $.89 per share, compared to $.81 per share in
1996. Market price per share at December 31, 1997 was $54.50 compared to $38.00
at December 31, 1996. Financial summary (Table 1) recaps these measures.
Table 1: Financial Summary
Five Years Ended December 31
(000's, except per share and ratio data) 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Interest and Fee Income ...................... $ 62,778 $ 51,891 $ 49,706 $ 44,288 $ 43,142
Interest Expense ............................. 24,903 19,311 18,003 14,540 15,646
-------- -------- -------- -------- --------
Net Interest Income .......................... 37,875 32,580 31,703 29,748 27,496
Provision for Loan Losses .................... 1,300 1,875 950 844 1,050
Investment Securities Gains .................. 217 362 10 316 717
All Other Operating Income ................... 6,887 5,531 5,200 5,039 4,437
Operating Expense ............................ 22,729 18,021 18,079 17,880 17,130
-------- -------- -------- -------- --------
Income Before Income Taxes ................... 20,950 18,577 17,884 16,379 14,470
Provision for Income Tax ..................... 6,462 5,190 5,177 4,603 3,605
-------- -------- -------- -------- --------
Net Income ................................... $ 14,488 $ 13,387 $ 12,707 $ 11,776 $ 10,865
Per Share
Basic Earnings ............................... $ 2.39 $ 2.22 $ 2.11 $ 1.96 $ 1.82
Diluted Earnings ............................. $ 2.38 $ 2.21 $ 2.10 $ 1.95 $ 1.80
Cash Dividends Declared and Paid ............. $ 0.89 $ .81 $ 0.73 $ 0.66 $ 0.60
Year-end Book Value .......................... $ 17.93 $ 16.66 $ 15.00 $ 13.23 $ 12.10
Year-end Market Price ........................ $ 54.50 $ 38.00 $ 28.50 $ 24.00 $ 22.00
Selected Year-ended Information
Total Assets ................................. $839,605 $816,334 $676,106 $647,712 $631,776
Investment Securities ........................ 149,179 190,983 183,861 198,037 218,843
Loans, Net ................................... 555,751 533,941 391,234 389,897 345,061
Deposits ..................................... 677,391 667,035 555,844 535,898 533,140
Non-interest-Bearing Demand Deposits ......... 119,373 107,913 112,002 101,959 95,337
Interest-Bearing Demand Deposits ............. 129,351 122,996 97,422 102,171 111,929
Time Deposits ................................ 277,548 281,973 219,057 191,164 165,966
Savings ...................................... 151,119 154,153 127,363 140,604 159,908
Shareholder's Equity ......................... 108,736 100,794 90,237 79,502 72,306
Cash Dividends Paid .......................... 5,394 4,545 3,740 3,376 3,321
Net Income ................................... $ 14,488 $ 13,387 $ 12,707 $ 11,776 $ 10,865
Weighted Average Common Shares Outstanding ... 6,059 6,029 6,013 5,997 5,964
Ratios
Return on Average Assets ..................... 1.75% 1.92% 1.95% 1.85% 1.76%
Return on Average Equity ..................... 13.92% 14.18% 14.91% 15.30% 15.93%
Total Capital to Total Risk-Based Assets .... 20.04% 19.74% 20.98% 20.91% 21.33%
Net Interest Margin (Tax Equivalent Basis) ... 5.07% 5.21% 5.46% 5.29% 5.07%
3
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,
1997, 1996, and 1995.
The Corporation's net interest income on a taxable equivalent basis was
$38,730,000, $33,920,000 and $33,280,000 in 1997, 1996, and 1995, respectively.
Total average earning assets increased to $763,438,000 in 1997, compared to
$650,922,000 in 1996 and $609,859,000 in 1995. Earning assets are total loans,
total securities, interest bearing deposits with other banks and federal funds
sold. Average total loans increased $124,688,000 to $549,932,000. Average
securities, interest bearing deposits with other banks, and federal funds sold
decreased a combined total of $12,172,000.
Total average interest bearing liabilities increased $111,552,000 to
$606,632,000 in 1997. Average time deposits increased $47,101,000. Average
purchased funds increased $7,103,000. Average NOW, Money Fund and savings
increased $2,943,000, $33,630,000 and $20,775,000, respectively.
Average earning assets of $763,438,000 in 1997 contributed a tax
equivalent interest income of $63,633,000 with a yield of eight point
thirty-four percent (8.34%). Average earning assets for 1996 contributed a tax
equivalent interest yield of eight point eighteen percent (8.18%). Principally
the increased yield on average earning assets was attributed to increased rates
in commercial and real estate loans, as well as increased yields in the
investment portfolio.
Average interest bearing liabilities of $606,632,000 in 1997 contributed
interest expense of $24,903,000 with an average rate of 4.11% compared to the
prior year of 3.90%. Money fund rates attributed to the large percent of
increase. Generally, these rates for the money fund portfolio increased from
2.85% to 4.25%. This increase was attributed to the new non-personal money fund
established in 1997 which was designed to attract additional deposit dollars for
the Corporation.
Average rates on CDs greater than $100,000 increased from 5.09% to 5.43%
while CDs less than $100,000 decreased 5.49% to 5.42%.
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.
Net interest income increased on a tax equivalent basis from $33,920,000 to
$38,730,000 or an increase of $4,810,000. The majority of this increase was
largely due to an increase in volume when compared to 1996. The increase in
volume of average earning assets from $650,922,000 to $763,438,000 when coupled
with the general interest rates from 8.18% to 8.34% increased total interest
income by $10,402,000 to $63,633,000.
Rates for interest expense increased from 3.90% to 4.11% and when coupled
with the increased volume of interest bearing liabilities from $495,080,000 to
$606,632,000, this increased total interest expense for the Corporation by
$5,592,000 to $24,903,000. Comparing current year volumes and rates with
previous year volume and rates, the Corporation experienced an increase in net
interest income of $4,810,000.
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. Total other operating income for
the Corporation is $7,104,000 for 1997 compared to $5,893,000 for 1996.
Trust income increased $100,000 to $1,616,000. Services charges on deposit
accounts increased to $2,958,000 from $2,660,000 while other income increased to
$2,213,000 from $1,355,000.
The Corporation realizes the importance of increasing other operating
income which will compliment the improvement of the overall efficiency ratio.
As discussed earlier, it's important for the Corporation to continue to
work on improving its efficiency ratio which will lead to the improved ratio for
return on average assets and return on average equity.
Graph -- Net Income
Thousands
1997 1996 1995 1194 1993
$14,488 $13,387 $12,707 $11,776 $10,865
Graph -- Return on Average Assets
1997 1996 1995 1994 1993
1.75% 1.92% 1.95% 1.85% 1.76%
4
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)
1997 1996 1995
---- ---- ----
(000's) Balance Interest Yield Balance Interest Yield Balance Interest Yield
ASSETS
Earning Assets
Loans (1)
Commercial 2) .................. $234,195 $21,422 9.15% $182,300 $16,484 9.04% $169,170 $15,789 9.33%
Real Estate 3) ................. 214,612 18,329 8.54% 146,063 12,169 8.33% 128,691 10,790 8.38%
Consumer 3) .................... 101,125 10,533 10.42% 96,881 10,329 10.66% 99,644 10,274 10.31%
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total Loans ........................... 549,932 50,284 9.14% 425,244 38,982 9.17% 397,505 36,853 9.27%
Investment Securities
Taxable .......................... 160,144 9,350 5.84% 164,548 9,003 5.47% 150,343 8,721 5.80%
Tax-exempt ....................... 19,056 2,109 11.07% 29,311 3,529 12.04% 34,460 4,103 11.91%
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total securities ................. 179,200 11,459 6.39% 193,859 12,532 6.46% 184,803 12,824 6.94%
Federal funds sold and interest-
bearing deposits with other
banks ............................ 34,306 1,890 5.51% 31,819 1,717 5.40% 27,551 1,606 5.83%
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total earning assets ............... 763,438 63,633 8.34% 650,922 53,231 8.18% 609,859 51,283 8.41%
Nonearning assets
Allowance for loan losses ........ (6,712) (5,771) (5,383)
Cash and due from banks .......... 29,297 27,223 25,676
Premises, equipment
and other assets ................. 43,282 25,880 22,150
-------- -------- --------
Total assets ....................... $829,305 $698,254 $652,302
======== ======== ========
LIABILITIES
Interest-bearing liabilities
Deposits
NOW ............................ $ 76,854 $ 1,425 1.85% $ 73,911 $ 1,437 1.94% $ 71,768 $ 1,428 1.99%
Money Fund ..................... 59,874 2,545 4.25% 26,244 748 2.85% 24,893 622 2.50%
Savings ........................ 153,544 3,956 2.58% 132,769 3,322 2.50% 132,402 3,419 2.58%
Time Deposits
CD's > 100,000 ................... 40,772 2,214 5.43% 42,953 2,187 5.09% 31,619 1,703 5.39%
CD's < 100,000 ................... 235,298 12,763 5.42% 186,016 10,206 5.49% 175,559 9,450 5.38%
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total interest-bearing deposits .. 566,342 2,903 4.04% 461,893 17,900 3.88% 436,241 16,622 3.81%
Purchased funds
Federal funds purchased and
securities sold under
agreements to repurchase ......... 40,290 2,000 4.96% 33,187 1,411 4.25% 27,996 1,381 4.93%
-------- ------- ----- -------- ------- ----- -------- ------- -----
Total interest-bearing
liabilities ...................... 606,632 24,903 4.11% 495,080 19,311 3.90% 464,237 18,003 3.88%
Non-interest-bearing demand
deposits ......................... 111,391 103,989 99,162
Other liabilities .................. 7,222 4,807 3,676
Shareholder's equity ............... 104,060 94,378 85,227
-------- -------- --------
Total liabilities and Shareholders'
equity .............................. $829,305 $698,254 $652,302
======== ======== ========
Net interest income and ............... 38,730 33,920 33,280
Interest rate spread ............... 4.23% 4.28% 4.53%
----- ----- -----
Net interest margin
(tax equivalent basis) ........... 5.07% 5.21% 5.46%
----- ----- -----
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%).
3) For Management Discussion and Analysis, a portion of home equity loan
averages are included in the consumer loan portfolio as opposed to the
real estate loan portfolio.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS STATISTICAL INFORMATION
Table III: Analysis of Net Interest Income Changes
(Tax equivalent basis)
1997 Compared to 1996 1996 Compared to 1995
--------------------- ---------------------
Yield/ Yield/
(000's) Volume Rate Mix Total Volume Rate Mix Total
Increase (Decrease) in Interest Income
Loans
Commercial ..................... $ 4,693 $ 191 $ 54 $ 4,938 $1,225 $(492) $ (38) $ 695
Real Estate .................... 5,711 306 143 6,160 1,456 (68) (9) 1,379
Consumer ....................... 452 (238) (10) 204 (285) 350 (10) 55
------- ----- ----- ------- ------ ----- ----- ------
Total Loans ....................... 10,856 259 187 11,302 2,396 (210) (57) 2,129
Investment Securities
Taxable ........................ (241) 604 (16) 347 824 (495) (47) 282
Tax-exempt ..................... (1,235) (285) 100 (1,420) (613) 46 (7) (574)
------- ----- ----- ------- ------ ----- ----- ------
Total securities .................. (1,476) 319 84 (1,073) 211 (449) (54) (292)
Federal funds sold and interest-
bearing deposits with other
banks ........................ 134 36 3 173 248 (119) (18) 111
------- ----- ----- ------- ------ ----- ----- ------
Total Interest Income Change ........... 9,514 614 274 10,402 2,855 (778) (129) 1,948
Increase (Decrease) in interest expense
Interest-bearing liabilities
NOW ............................ 58 (67) (3) (12) 43 (33) (1) 9
Money Fund ..................... 958 368 471 1,797 34 87 5 126
Savings ........................ 520 99 15 634 9 (106) 0 (97)
Time Deposits
CD's > 100,000 ................. (111) 145 (7) 27 610 (93) (33) 484
CD's < 100,000 ................. 2,704 (116) (31) 2,557 563 182 11 756
------- ----- ----- ------- ------ ----- ----- ------
Total interest-bearing deposits ........ 4,129 429 445 5,003 1,259 37 (18) 1,278
Federal Funds purchased and
securities sold under agreements
to repurchase .................. 302 236 51 589 256 (191) (35) 30
------- ----- ----- ------- ------ ----- ----- ------
Total Interest Expense Change .......... 4,431 665 496 5,592 1,515 (154) (53) 1,308
Increase (decrease) in net interest
Income on a Taxable Equivalent
Basis .......................... $ 5,083 $ (51) $(222) $ 4,810 $1,340 $(624) $ (76) $ 640
Decrease in Taxable Equivalent
Basis .......................... 485 237
------- ------
Net Interest Income Change ..... $ 5,295 $ 877
OPERATING EXPENSES
The Corporation recognizes the importance of a low efficiency ratio. Low
efficiency ratios indicate the success of the Corporation in controlling
operating expenses; such as salaries, equipment expenses, and other operating
expenses. These expenses are generally measured using the term "Efficiency
Ratio" which is operating expenses divided by the sum of net interest income
plus other operating income. The Corporation's efficiency ratio as of December
31, 1997 was 49%. This indicates that it costs the Corporation 49 cents for each
dollar of revenue earned before taxes.
Historically, prior to the acquisition of two additional affiliates, the
efficiency ratio was 42%. As the Corporation continues to improve its measure of
cost control, this ratio will continue to decrease. This is evident in the first
full year of consolidation being that the first three months of 1997, the
efficiency ratio was 50% as compared to the last three months of 1997 when the
efficiency ratio was recorded at 47%, thereby lowering the overall yearly
efficiency ratio to 49%. The efficiency ratios for Security National, Citizens
National, and Third Savings and Loan were 45%, 60% and 51%, respectively.
Overall employment was 341 employees with total salary and benefits of
$11,005,000.
Equipment and occupancy for 24 banking offices totaled $2,785,000 while
other operating expenses was $8,187,000. Other operating expenses include items
such as marketing, community donations, stationery and supplies, postage, and
data processing services.
Amortization of intangibles increased to $752,000 as a result of the
Corporation's acquisition of the Third Financial Corporation.
Operating expenses for 1996 reflect only two months of expenses for Third
Savings and Loan. This was due to the Corporation using the purchase method of
accounting in the acquisition of Third Financial Corporation. Whereas 1997
reflects a full 12 months of expenses for Third Savings and Loan.
LOANS
Total average commercial loans increased twenty-eight point five percent
(28.50%) to $234,195,000 in 1997 yielding an average rate of nine point fifteen
percent (9.15%). Average real estate loans increased forty-six point nine
percent (46.90%) to $214,612,000, yielding an average rate of eight point
fifty-four percent (8.54%). Average consumer loans increased four point four
percent (4.40%) to $101,125,000, yielding an average rate of ten point forty-two
percent (10.42%).
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 ninety
(90) days or more as to principal or interest; and (3) other real estate owned.
Under-performing assets as of December 31, 1997, were $5,212,000.
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 1997 increased to $1,873,000 from $1,669,000 in 1996.
The provision for loan losses was $1,300,000 in 1997 and $1,875,000 in 1996. The
allowance for loan losses at December 31, 1997, was equivalent to one point
eleven percent (1.11%) of loans outstanding.
The following table presents loan loss data for the most recent five (5)
year period.
6
RESERVE FOR LOAN LOSSES FIVE YEAR HISTORY
(000's) 1997 1996 1995 1994 1993
Balance at Jan. 1 $ 6,827 $ 5,336 $ 5,101 $ 4,364 $ 4,310
Acquired allowance 0 1,285 0 0 4
Provision for loan losses 1,300 1,875 950 844 1,050
Loans charged off (2,188) (1,963) (1,077) (732) (1,419)
Recoveries of loans
previously charged off 315 294 362 625 419
-------- -------- -------- -------- --------
Balance at Dec. 31 $ 6,254 $ 6,827 $ 5,336 $ 5,101 $ 4,364
Loans outstanding
at Dec. 31 $562,005 $540,768 $396,570 $394,998 $349,425
Reserve as a
percent of loans 1.11% 1.26% 1.35% 1.29% 1.25%
Net loan losses to
average loans 0.34% 0.39% 0.18% 0.03% 0.30%
INTEREST RATE AND LIQUIDITY
MANAGEMENT
INTEREST RATE RISK MANAGEMENT
The Company seeks to achieve consistent growth in net interest income and
net income while managing volatility arising from shifts in interest rates. The
Asset and Liability Management Committee (ALCO) oversees financial risk
management, establishing broad policies and specific operating limits that
govern a variety of financial risks inherent in the Company's operations,
including interest rate, liquidity, and market risks. Balance sheet strategies
are reviewed and monitored regularly by ALCO to ensure consistency with approved
risk tolerances.
Interest rate risk management is a dynamic process, encompassing both the
business flows onto the balance sheet and the changing market and business
environment. Interest rate risk by definition is the risk of decreased net
interest income whenever there are movements in market interest rates. Effective
management of interest rate risk begins with investments and funding sources.
Measurement and monitoring of interest rate risk is an ongoing process. A
key element in this process is the Company's estimation of the amount that net
interest income will change over a twelve to twenty-four month period given a
directional shift in interest rates. The income simulation model used by the
Company captures all assets and liabilities, accounting for significant
variables which are believed to be affected by interest rates. These include
prepayment speeds on real estate mortgages and consumer installment loans,
principal amortization, and maturities on other financial instruments. The model
captures embedded options, e.g. interest rate caps/floors or call options, and
accounts for changes in rate relationships, as various rate indices lead or lag
changes in market rates. While these assumptions are inherently uncertain,
management utilizes probabilities and, therefore, believes that the model
provides an accurate estimate of the interest rate risk exposure. Management
reporting of this information is shared with the Board of Directors.
At December 31, 1997, the results of the Company's interest sensitivity
analysis indicated that net interest income would be relatively unchanged by a
100 basis points increase or decrease in rate (assuming the change occurs evenly
over the next year and that corresponding changes in other market rates occur as
forecasted). Net interest income would be expected to decrease 2.1% if rates
were to fall 200 basis.
LIQUIDITY MANAGEMENT
Liquidity Management is also a significant responsibility of ALCO. The
objective of ALCO in this regard is to maintain an optimum balance of maturities
among assets and liabilities such that sufficient cash, or access to cash, is
available at all times to meet the needs of borrowers, depositors, and
creditors, as well as to fund corporate expansion and other activities without
incurring unacceptable losses.
A chief source of liquidity is derived from the retail deposit base
accessible by its network of branches.
While liability sources are many, significant liquidity is available from
the Company's investment and loan portfolios. ALCO regularly monitors the
overall liquidity position of the business and ensures that various alternative
strategies exist to cover unanticipated events. At December 31, 1997, sufficient
liquidity was available to meet estimated short-term and long-term funding
needs.
7
MARKET INFORMATION
Security Banc Corporation stock (symbol STYB) is traded in the
over-the-counter market. The following table sets forth the sales prices for the
common stock during the periods indicated.
1997 1996
---- ----
Quarter Ended High Bid Low Bid High Bid Low Bid
March 31 ...... $43.50 $38.00 $31.00 $28.50
June 30 ....... $46.00 $43.50 $35.00 $31.00
September 30 .. $50.50 $46.00 $36.50 $35.00
December 31 ... $54.50 $50.50 $38.00 $36.50
As of December 31, 1997, the Corporation had 1,680 shareholder accounts of
record. Cash dividends paid per share were $.89.
QUARTERLY INFORMATION
First Second Third Fourth
(000's) except per share data Quarter Quarter Quarter Quarter
1997
- ----
Interest and fee income ...... $15,063 $15,927 $15,830 $15,958
Interest expense ............. 6,095 6,398 6,235 6,175
------- ------- ------- -------
Net interest income .......... 8,968 9,529 9,595 9,783
Provision for loan losses .... 200 200 700 200
Investment securities
gains (losses) ............. 56 50 108 4
All other income ............. 1,583 1,511 1,872 1,921
Operating expense ............ 5,537 5,677 5,827 5,688
------- ------- ------- -------
Income before income taxes ... 4,870 5,213 5,048 5,820
Provision for income tax ..... 1,486 1,597 1,554 1,825
------- ------- ------- -------
Net income ................... 3,384 3,616 3,494 3,995
Per Share
Basic Earnings Per Share ..... 0.56 0.59 0.58 0.66
Diluted Earnings Per Share ... 0.56 0.59 0.58 0.65
Cash Dividends Paid .......... 0.21 0.21 0.21 0.26
Market Price ................. 43.50 46.00 50.50 54.50
1996
- ----
Interest and fee income ...... $12,286 $12,485 $12,522 $14,598
Interest expense ............. 4,607 4,575 4,539 5,590
------- ------- ------- -------
Net interest income .......... 7,679 7,910 7,983 9,008
Provision for loan losses .... 237 238 700 700
Investment securities
gains (losses) ............. 358 0 5 (1)
All other income ............. 1,351 1,317 1,339 1,524
Operating expense ............ 4,546 4,239 4,429 4,807
------- ------- ------- -------
Income before income taxes ... 4,605 4,750 4,198 5,024
Provision for income tax ..... 1,333 1,383 1,025 1,449
------- ------- ------- -------
Net Income ................... 3,272 3,367 3,173 3,575
Per Share
Basic Earnings Per Share ..... 0.54 0.56 0.53 0.59
Diluted Earnings Per Share ... 0.54 0.56 0.52 0.59
Cash Dividends Paid .......... 0.19 0.19 0.19 0.24
Market Price ................. 31.00 35.00 36.50 38.00
TOTAL CAPITAL (BAR GRAPH) (See Annual Report)
(Thousands)
1997 1996 1995 1994 1993
$108,736 $100,794 $90,237 $79,502 $72,306
8
YEAR 2000 ISSUE
The Company is aware of the issues associated with the programming code in
existing computer systems as the millenium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two-digit year value to 00.
The issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the system for the year 2000 compliance.
Management has initiated a "Year 2000 Committee" to prepare the Company's
computer systems and applications for the year 2000. It is anticipated that all
efforts will be complete by March 31, 1999 allowing adequate time for testing.
To date, confirmations have been received from the Company's primary processing
vendors that plans are being developed to address processing of transactions in
the year 2000. Management does not expect the year 2000 compliance expenses to
be material to the Company's future earnings. The Company expects its year 2000
date conversion project to be completed on a timely basis.
9
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, 1997 and 1996, and
the related consolidated statements of income, shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of Security Banc 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 its subsidiaries at December 31, 1997 and 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Columbus, Ohio
January 12, 1998
10
CONSOLIDATED STATEMENT OF CONDITION
AS OF DECEMBER 31, 1997 AND 1996 (000's)
1997 1996
-------- --------
ASSETS
Cash and due from banks ................................... $ 33,043 $ 36,527
Federal funds sold ........................................ 52,655 13,300
-------- --------
Total cash and cash equivalents ..................... 85,698 49,827
Interest-bearing deposits with other banks ................ 2,700 1,500
Investments (Market value $149,531 in 1997) ............. 149,179 190,983
(Market value $191,970 in 1996)
LOANS:
Commercial and agriculture ............................. 252,053 212,046
Real Estate ............................................ 225,791 234,935
Consumer ............................................... 84,161 93,787
-------- --------
Total Loans ...................................... 562,005 540,768
Less allowance for loan losses ................... 6,254 6,827
-------- --------
Net Loans ..................................... 555,751 533,941
Premises and equipment .................................... 8,658 8,431
Other Assets .............................................. 37,619 31,652
-------- --------
TOTAL ASSETS .............................................. $839,605 $816,334
======== ========
LIABILITIES
Non-interest-bearing deposits ........................... $119,373 $107,913
Interest-bearing demand deposits ........................ 129,351 122,996
Savings deposits ........................................ 151,119 154,153
Time deposits, $100,000 and over ........................ 41,745 54,219
Other time deposits ..................................... 235,803 227,754
-------- --------
Total Deposits .......................................... 677,391 667,035
Federal funds purchased and securities
sold under agreement to repurchase .................. 30,746 30,783
Federal Home Loan Bank term advances .................... 16,333 12,974
Other liabilities ....................................... 6,399 4,748
-------- --------
TOTAL LIABILITIES ....................................... 730,869 715,540
SHAREHOLDERS' EQUITY
Common Stock ($3.125 Par Value) ......................... 19,707 19,658
authorized 11,000,000 shares
issued 6,306,186 shares, 1997
issued 6,290,617 shares, 1996
Surplus ................................................. 21,831 21,670
Retained Earnings ....................................... 70,149 62,557
Unrealized gains on securities available for sale........ 242 102
Less: Treasury Stock ................................. 3,193 3,193
240,600 shares
TOTAL SHAREHOLDERS' EQUITY ................................... 108,736 100,794
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $839,605 $816,334
======== ========
See Notes to Consolidated Financial Statements.
11
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 (000's)
1997 1996 1995
---- ---- ----
INTEREST AND FEE INCOME
Loans ................................................ $ 50,168 $ 38,877 $ 36,712
Interest-bearing deposits with other banks ........... 182 110 42
Federal funds sold ................................... 1,707 1,607 1,564
Investments-taxable .................................. 9,350 9,003 8,721
Investments-tax exempt ............................... 1,371 2,294 2,667
---------- ---------- ----------
Total Interest and Fee Income ................... 62,778 51,891 49,706
INTEREST EXPENSE
Deposits of $100,000 and over ........................ 2,214 2,187 1,703
Other Deposits ....................................... 20,689 15,713 14,919
Federal funds purchased and securities
sold under agreement to repurchase .............. 1,944 1,356 1,317
Demand notes to U. S. Treasury ....................... 56 55 64
---------- ---------- ----------
Total Interest Expense .......................... 24,903 19,311 18,003
---------- ---------- ----------
NET INTEREST INCOME ....................................... 37,875 32,580 31,703
Provision for loan losses ............................ 1,300 1,875 950
---------- ---------- ----------
Net interest income after provision for loan losses .. 36,575 30,705 30,753
OTHER OPERATING INCOME
Trust income ......................................... 1,616 1,516 1,464
Service charges on deposit accounts .................. 2,958 2,660 2,598
Securities gains ..................................... 217 362 10
Other income ......................................... 2,313 1,355 1,138
---------- ---------- ----------
Total Other Operating Income .................... 7,104 5,893 5,210
OPERATING EXPENSE
Salaries and employee benefits ....................... 11,005 9,224 9,191
Equipment and occupancy, net ......................... 2,785 2,354 2,206
Amortization of intangibles .......................... 752 53 71
Other operating expense .............................. 8,187 6,390 6,611
---------- ---------- ----------
Total Operating Expense ......................... 22,729 18,021 18,079
---------- ---------- ----------
INCOME BEFORE INCOME TAXES ................................ 20,950 18,577 17,884
Provision for income tax ............................. 6,462 5,190 5,177
---------- ---------- ----------
NET INCOME ...................................... $ 14,488 $ 13,387 $ 12,707
========== ========== ==========
PER SHARE DATA (WHOLE DOLLARS)
Basic earnings ....................................... $ 2.39 $ 2.22 $ 2.11
Diluted earnings ..................................... $ 2.38 $ 2.21 $ 2.10
Cash dividends ....................................... $ 0.89 $ 0.81 $ 0.73
Weighted average shares outstanding ....................... 6,058,763 6,028,847 6,012,829
See Notes to Consolidated Financial Statements.
12
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 (000'S)
Unrealized
Common Retained gains and Treasury
Stock Surplus Earnings (losses) Stock Total
----- ------- -------- -------- ---- -----
Balance at January 1, 1995 ...................... $18,619 $20,598 $44,981 $(1,503) $(3,193) $ 79,502
Net income ................................. 0 0 12,707 0 0 12,707
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 (281) (281)
Sale of treasury stock ..................... 0 0 0 0 187 187
Stock dividends ............................ 37 298 (335) 0 0 0
Cash paid in lieu of fractional shares 0 0 (13) 0 0 (13)
Change in unrealized gains and (losses),
net of income taxes of $971 ............ 0 0 0 1,804 0 1,804
------- ------- ------- ------- ------- --------
Balance at December 31, 1995 .................... $18,673 $20,937 $53,613 $ 301 ($3,287) $ 90,237
Net income ................................. 0 0 13,387 0 0 13,387
Cash dividends ............................. 0 0 (4,545) 0 0 (4,545)
Exercise of stock options .................. 111 263 0 0 0 374
Purchase of treasury stock ................. 0 0 0 0 (18) (18)
Tax benefits of options exercised
and sold ............................... 0 0 102 0 0 102
Other ...................................... 874 470 0 0 112 1,456
Change in unrealized gains and (losses),
net of income taxes of $107 ............ 0 0 0 (199) 0 (199)
------- ------- ------- ------- ------- --------
Balance at December 31, 1996 .................... $19,658 $21,670 $62,557 $ 102 ($3,193) $100,794
Net income ................................. 0 0 14,488 0 0 14,488
Dividend distributions ..................... 0 0 (6,896) 0 0 (6,896)
Exercise of stock options .................. 49 161 0 0 0 210
Change in unrealized gains and (losses),
net of income taxes of $75 ............. 0 0 0 140 0 140
------- ------- ------- ------- ------- --------
Balance at December 31, 1997 .................... $19,707 $21,831 $70,149 $ 242 ($3,193) $108,736
======= ======= ======= ======= ======= ========
See Notes to Consolidated Financial Statements.
13
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 (000'S)
1997 1996 1995
---- ---- ----
Cash Flows from Operating Activities
Net Income ...................................................... $ 14,488 $ 13,387 $ 12,707
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ........................................... 1,049 903 879
(Gain)/Loss on sale of the following:
Investment Securities available for sale ........... (217) (362) (10)
Other Assets ....................................... (119) (32) 8
Provision for loan losses .............................. 1,300 1,875 950
Amortization and accretion, net ........................ (97) 829 (1,508)
Amortization and core deposit intangible ............... 752 53 71
Change in other operating assets and
liabilities, net ................................... (14,918) 2,118 (1,078)
Total Adjustments .................................. (12,250) 5,384 (688)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ....................... 2,238 18,771 12,019
Cash Flows From Investing Activities:
Net decrease (increase) in interest-bearing deposits
with other banks ............................................ 3,902 (2,380) 651
Proceeds from maturities and sales of investment
securities available for sale ............................... 192,329 147,536 247,858
Proceeds from maturities of investments held to
maturity .................................................... 15,414 7,732 9,943
Purchase of:
Investment securities available for sale .................... (166,286) (148,238) (239,017)
Investment securities held to maturity ...................... (722) (3,084) (326)
Increase in loans ............................................... (23,611) (17,212) (2,652)
Proceeds from sale of other assets .............................. 9,614 1,818 381
Capital expenditures ............................................ (1,163) (440) (890)
Net cash used in acquisition .................................... (1,502) (38,190) 0
Purchase of life insurance policies ............................. (3,054) (2,831) (326)
Proceeds from surrender of life insurance policies .............. 239 783 0
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ............. 25,160 (54,506) 15,622
Cash Flows from Financing Activities:
Net increase (decrease) in demand deposits, NOW accounts and
savings accounts ............................................ 14,784 (4,104) (7,946)
Net (decrease) in certificates of deposit ....................... (4,468) (1,506) 27,892
Net increase in short-term borrowed funds ....................... 3,341 1,440 (2,440)
Net purchase and sale of treasury stock ......................... 0 (18) (94)
Dividends paid .................................................. (5,394) (4,545) (3,740)
Proceeds from exercise of stock options ......................... 210 475 58
Cash provided from acquisition .................................. 0 17,062 0
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ....................... 8,473 8,804 13,730
Net increase (decrease) in cash and cash equivalents ................. 35,871 (26,931) 41,731
Cash and cash equivalents at beginning of year ....................... 49,827 76,758 35,387
--------- --------- ---------
Cash and Cash Equivalents at End of Year ............................. $ 85,698 $ 49,827 $ 76,758
See Notes to Consolidated Financial Statements
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,1997
1. ORGANIZATION
Security Banc Corporation ("Security" or "the Company") is a bank holding
company headquartered in Springfield, Ohio. The Company's principal
subsidiaries, Security National Bank and Trust Company, Citizens National Bank,
and Third Savings and Loan Company are located in Central Ohio and are engaged
in general commercial banking and trust business.
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
The accounting and reporting policies of Security 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.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany transactions and balances have
been eliminated. The consolidated financial statements have been prepared to
give retroactive effect to the September 30, 1996 merger with CitNat (Citizens
National Bank), which was accounted for as a pooling-of-interests. Certain prior
year amounts have been reclassified to conform with the current year
presentation.
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 or when loans meet
regulatory non accrual standards.
The company accounts for impaired loans in accordance with Financial
Accounting Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan." Certain large commercial loans are considered impaired
loans and 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.
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.
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 in 1997, 1996, and 1995 was $25,447,000,
$19,035,000 and $18,584,000, respectively.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company 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
15
values for other loans (e.g., commercial, agricultural and consumer) are
estimated using 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 (letters of credit and lending commitments)
approximate those assets' fair value.
Deposit liabilities: The fair values disclosed for demand deposits (e.g.,
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.
EARNINGS PER COMMON SHARE
On December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per
Share" which specifies the computation, presentation and disclosure requirements
for earnings per share for entitles with publicly held common stock or common
stock equivalents. SFAS No. 128 replaces the presentation of primary and fully
diluted earnings per share with the presentation of basic and diluted earnings
per share. It also requires dual presentation of basic and diluted earnings per
share on the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic earnings per share computation to the corresponding amounts of the diluted
earnings per share computation. The adoption of this standard had no effect on
prior period data. The computation of the earnings per Common Share is as
follows:
Years ended December 31,
(000's) 1997 1996 1995
---- ---- ----
EARNINGS APPLICABLE TO COMMON SHARE ............... 14,488 13,387 12,707
BASIC EARNINGS PER SHARE
Weighted Average Common Shares Outstanding......... 6,058,763 6,028,847 6,012,829
Earnings Applicable to Common Shares (000) ........ $ 14,448 $ 13,387 $ 12,707
Basic Earnings Per Share .......................... $ 2.39 $ 2.22 $ 2.11
DILUTED EARNINGS PER SHARE
Weighted Average Common Shares Outstanding ........ 6,058,763 6,028,847 6,012,829
Diluted Common Stock Options ...................... 38,683 39,602 42,659
---------- ---------- ----------
Weighted Average Common Shares and Common
Shares Equivalents Outstanding ................. 6,097,446 6,068,449 6,055,488
========== ========== ==========
Earnings applicable to Common Shares (000) ........ $ 14,488 $ 13,387 $ 12, 707
Diluted Earnings per Share ........................ $ 2.38 $ 2.21 $ 2.10
2. ACQUISITIONS
THIRD FINANCIAL CORPORATION
On October 21, 1996, the company acquired all of the outstanding shares of
Third Financial Corporation for $41 million. The acquisition was funded with
existing cash. The results of Third Financial Corporation's operations have been
combined with those of the Company since the date of acquisition.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, a portion of the purchase price was allocated to the net assets
acquired based on their estimated fair values. The fair value of tangible assets
acquired and liabilities/equity assumed was $162 million and $150 million,
respectively. The balance of the purchase price, $12 million, was recorded as
excess of cost over net assets acquired (goodwill) and other identified
intangibles and is being amortized over approximately twenty-five years on a
straight line basis.
CITNAT BANCORP, INC.
On September 30, 1996, the Company merged with CitNat Bancorp, Inc., a $140
million bank holding company headquartered in Ohio, in a transaction accounted
for as a pooling of interest. Security Banc Corporation issued 907,893 shares of
common stock to the shareholders of CitNat Bancorp, Inc. based upon an exchange
ratio of 2.1842437 shares of Security Banc Corporation common stock for each
outstanding share of CitNat common stock.
JEFFERSONVILLE BRANCH
On November 6, 1997, Security National Bank and Trust Co. purchased certain
assets and assumed approximately $11,700,000 in deposit liabilities of the
Jeffersonville Branch from a Bank competitor.
This acquisition allowed Security National to expand its services to
Fayette County. The premium for the above transaction was $944,000 which will be
amortized over a period of 25 years for the portion allocated to goodwill and 10
years for the portion allocated to Core Deposit Intangible.
3. ACCOUNTING CHANGES
REPORTING COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income.
This statement establishes standards for reporting the components of
comprehensive income and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
included in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income includes net income as well as
certain items that are reported directly within a separate component of
stockholders' equity and bypass net income. The provisions of this statement are
effective beginning with 1998 interim reporting. These disclosure requirements
will have no impact on financial position or results of operations.
16
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION:
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information. The
provisions of this statement require disclosure of financial and descriptive
information about an enterprise's operating segments in annual and interim
financial reports issued to shareholders. The statement defines an operating
segment as a component of an enterprise that engages in business activities that
generate revenue and incur expense, whose operating results are reviewed by the
chief operating decision maker in the determination of resource allocation and
performance, and for which discrete financial information is available. This
statement is effective for fiscal years beginning after December 15, 1997
however; it is not required to be applied for interim reporting in the initial
year of application. The Corporation is currently evaluating the impact of this
statement on the disclosures included in its annual and interim period financial
statements.
4. RESERVE BALANCE REQUIREMENTS
The Company's subsidiaries are required to maintain certain daily cash and
due from banks reserve balances in accordance with regulatory requirements. The
balances maintained under such requirements were $10,745,000 at December 31,
1997 and $10,331,000 at December 31, 1996.
5. INVESTMENT SECURITIES
The following table lists the book value and market value of debt
securities and other investments as of December 31.
(000's) 1997
----
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
Available for Sale Investments
Debt Securities
U. S. Treasury ................................. $115,847 $188 $(24) $116,011
U. S. Government Agencies and Corporations...... 12,886 23 (22) 12,887
Corporate Bonds ................................ 250 0 (0) 250
Mortgage Backed Securities ..................... 136 0 (1) 135
-------- ---- ---- --------
Total Debt Securities ........................... 129,119 211 (47) 129,283
Equity Investments ............................. 151 205 0 356
-------- ---- ---- --------
Total Investment Securities ..................... 129,270 416 (47) 129,639
======== ==== ==== ========
Held to Maturity Investments
Debt Securities
State and Political Subdivisions ............... 13,262 328 (4) 13,586
Mortgage Backed Securities ..................... 3,484 56 (28) 3,512
-------- ---- ---- --------
Total Debt Securities ........................... 16,746 384 (32) 17,098
Federal Reserve Stock and Other ................ 2,794 0 0 2,794
-------- ---- ---- --------
Total Held to Maturity Investments .............. $ 19,540 $384 ($32) $ 19,892
======== ==== ==== ========
The market value of the available for sale investments ($129,639,000) plus
the cost of the held to maturity investments ($19,540,000) is the total
investments carrying value of $149,179,000.
(000's) 1996
----
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
Available for Sale Investments
Debt Securities
U. S. Treasury ................................ $136,147 $ 49 $(176) $136,020
U. S. Government Agencies and Corporations .... 15,385 71 (37) 15,419
Corporate Bonds ............................... 1,452 12 0 1,464
Mortgage Backed Securities .................... 2,388 8 (9) 2,387
-------- ------ ----- --------
Total Debt Securities ........................... 155,372 140 (222) 155,290
Equity Securities ............................... 251 234 0 485
-------- ------ ----- --------
Total Available for Sale Investments ............ 155,623 374 (222) 155,775
======== ====== ===== ========
Held to Maturity Investments
Debt Securities
State and Political Subdivisions .............. 28,530 919 (12) 29,437
Mortgage Backed Securities .................... 4,010 134 (54) 4,090
-------- ------ ----- --------
Total Debt Securities ........................... 32,540 1,053 (66) 33,527
Federal Reserve Stock and Other ............... 2,668 0 0 2,668
-------- ------ ----- --------
Total Held to Maturity Investments .............. $ 35,208 $1,053 $(66) $ 36,195
======== ====== ===== ========
The market value of the available for sale investments ($155,775,000) plus the
cost of the held to maturity investments ($35,208,000) is the total investments
carrying value of $190,983,000.
17
The following tables summarizes the cost and market value of debt
securities at December 31, 1997 and 1996 by contractual maturity. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations.
(000's) 1997 1996
---- ----
Market Market
Cost Value Cost Value
---- ----- ---- -----
Available for Sale Investments
Due in one year or less ...................... $ 16,498 $ 16,479 $135,029 $134,926
Due after one year and through five years .... 111,485 111,671 16,460 16,480
Due after five years and through ten years ... 1,000 998 1,495 1,497
-------- -------- -------- --------
128,983 129,148 152,984 152,903
Mortgage Backed Securities ................... 136 135 2,388 2,387
-------- -------- -------- --------
Total Available for Sale Investments ............ $129,119 $129,283 $155,372 $155,290
-------- -------- -------- --------
Held to Maturity Investments
Due in one year or less ...................... $ 7,734 $ 7,802 $ 13,894 $ 14,106
Due after one year and through five years .... 3,769 3,821 12,318 12,777
Due after five years and through ten years ... 1,699 1,905 2,258 2,488
Due after ten years .......................... 60 58 60 66
-------- -------- -------- --------
13,262 13,586 28,530 29,437
Mortgage backed securities ................... 3,484 3,512 4,010 4,090
-------- -------- -------- --------
Total Held to Maturity Investments .............. $ 16,746 $ 17,098 $ 32,540 $ 33,527
======== ======== ======== ========
Proceeds from sales of investments available for sale in 1997 were
$168,732,000. Proceeds from sales of investments held to maturity in 1997 were
0. Gross gains on investments available for sale in 1997 were $243,000. Gross
losses recognized on investments available for sale in 1997 were $30,000. Gross
gains on investments held to maturity were $4,000 in 1997. Gross losses
recognized on investments held to maturity in 1997 were 0. Proceeds from sales
of investments available for sale in 1996 were $120,682,000. Proceeds from sales
of investments held to maturity in 1996 were $1,399,000. Gross gains on
investments available for sale in 1996 were $372,000. Gross losses recognized on
investments available for sale in 1996 were $0. Gross gains on investments held
to maturity were $6,000 in 1996. Gross losses recognized on investments held to
maturity in 1996 were $16,000. Proceeds from sales of investments available for
sale were $190,648,000 in 1995. Gross gains on investments available for sale
were $254,000 in 1995. Gross losses recognized on investments available for sale
in 1995 were $244,000. Proceeds from sale of investments held to maturity in
1995 were $0.
The following table summarizes investment income for the years ended
December 31.
(000's) 1997 1996 1995
---- ---- ----
U. S. Treasury Available for sale .............. $ 7,965 $ 7,715 $ 7,222
U. S. Treasury Held to Maturity ................ 0 17 49
U. S. Government Agencies and Corporations ..... 1,204 981 1,133
States and Political Subdivisions .............. 1,371 2,294 2,667
Federal Reserve stock and other ................ 181 290 317
------- ------- -------
Total ....................................... $10,721 $11,297 $11,388
======= ======= =======
Securities with a carrying value of $114,423,000 at December 31, 1997, and
$109,031,000 at December 31, 1996, were pledged to secure deposits and
repurchase agreements.
6. LOANS
Loans as of December 31, by various categories are as follows:
(000's) 1997 1996
---- ----
Loans secured by real estate:
Construction and land development ................... $ 20,157 $15,179
Secured by farmland ................................. 6,908 10,217
Secured by residential properties ................... 246,781 242,900
Secured by nonresidential properties ................ 65,454 50,063
Loans to finance agricultural production ............... 20,058 19,712
Commercial and industrial loans ........................ 107,679 98,695
Loans to individuals for household, family and other ... 89,644 97,401
Tax exempt obligations ................................. 3,139 5,355
Other loans ............................................ 1,943 898
Lease financing ........................................ 242 348
-------- --------
TOTAL LOANS ............................................ $562,005 $540,768
======== ========
Nonperforming loans totaled $4,954,000 and $6,124,000 at December 31, 1997
and 1996, respectively. Nonaccrual loans included in these amounts totaled
$3,417,000 and $4,123,000 at December 31, 1997 and 1996, respectively. Interest
income not recorded on these loans was $300,000 in 1997 and $436,000 in 1996.
The following table presents the aggregate amount of loans outstanding to
directors and executive officers (including their related interests) as of
December 31, 1997 and December 31, 1996, and an analysis of activity in such
loans during 1997. 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, 1996..................... $ 6,009
New Loans................................... 12,302
Repayments.................................. 12,359
Balance, December 31, 1997..................... $ 5,952
18
7. ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses is shown in the
following table.
(000's) 1997 1996 1995
---- ---- ----
Balance - beginning of year .......... $ 6,827 $ 5,336 $ 5,101
Acquired allowance ................... 0 1,285 0
Charge-offs ...................... (2,188) (1,963) (1,077)
Recoveries ....................... 315 294 362
------- ------- -------
Net charge-offs ...................... (1,873) (1,669) (715)
Provision for loan losses ............ 1300 1,875 950
------- ------- -------
Balance-end of year .................. $ 6,254 $ 6,827 $ 5,336
======= ======= =======
8. PREMISES AND EQUIPMENT
Premises and Equipment as of December 31, are summarized in the following
table.
(000's) 1997 1996
---- ----
Land .................................................. $ 1,508 $ 1,534
Buildings ............................................. 10,048 9,652
Equipment ............................................. 8,838 7,948
------- -------
Total premises and equipment .......................... 20,394 19,134
Less: Accumulated depreciation and amortization ...... 11,736 10,703
------- -------
Net premises and equipment ............................ $ 8,658 $ 8,431
======= =======
9. 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) 1997 1996
---- ----
Federal funds purchased .......................... $ 0 $12,974
Securities sold under agreement to repurchase .... 29,296 29,575
Demand note due U. S. Treasury ................... 1,450 1,208
------- -------
Total ......................................... $30,476 $43,757
======= =======
The following table is a summary of securities pledged against the
securities sold under agreement to repurchase contracts as of December 31:
(000's) 1997 1996
---- ----
Book Market Book Market
---- ------ ---- ------
U. S. Government Securities ... $37,018 $37,069 $46,657 $46,592
10. ADVANCES FROM FHLB
The Company had advances from the Federal Home Loan Bank ("FHLB") of
$10,000,000 due in 1998 at variable interest rates on December 31, 1997. The
Company also had advances from the FHLB on December 31, 1997 of $6,333,000 due
on various dates through 2008, at adjustable and fixed rates ranging from 5.60%
to 7.40%.
Real estate loans collateralize the FHLB advances.
11. 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,
1997 were $124,498,000. The aggregate amount of outstanding letters of credit
was $2,072,000 at December 31, 1997. No significant losses are anticipated as a
result of these commitments.
19
12. INCOME TAX
The components of income tax expense are:
(000s) 1997 1996 1995
---- ---- ----
Federal income taxes currently payable ... $6,727 $5,297 $5,330
Deferred tax provision ................ (265) (107) (153)
------ ------ ------
Total income tax expense ................. $6,462 $5,190 $5,177
A reconciliation of income tax expense at the statutory rate to income tax
expense at the company's effective rate is as follows:
(000s) 1997 1996 1995
---- ---- ----
Computed tax at the statutory rate ... $7,332 $6,316 $6,236
Tax effect of tax free income and
non-deducible interest expense .... (711) (921) (1,018)
Other ................................ (159) (205) (41)
------ ------ ------
Income Tax Expense ................... $6,462 $5,190 $5,177
Income taxes paid were $6,987,000, $5,285,000 and $4,778,000 in 1997, 1996,
and 1995, respectively. Income tax expense associated with security gains were
$74,000 in 1997, $123,000 in 1996, and $3,500 in 1995.
Significant components of the Corporation's deferred tax assets and
liabilities at December 1997 and 1996 are as follows:
1997 1996
---- ----
Deferred Assets
Allowance for loan losses ....... $2,078 $1,472
Mark to Market adjustment ....... 133 0
Other ........................... 282 435
------ ------
Total deferred assets ........... $2,493 $1,907
Deferred Liabilities
Employee benefits ............... 160 154
Depreciation .................... 303 240
Mark to Market adjustment ....... 127 52
Other ........................... 455 201
------ ------
Total deferred liabilities ...... 1,045 647
------ ------
Net deferred assets ................ $1,448 $1,260
====== ======
13. STOCK OPTIONS
Security sponsors non-qualified and incentive stock option plans covering
key employees. Approximately 240,000 shares have been authorized under the
plans, 4,020 shares of which were available at December 31, 1997 for future
grants. All options granted have a maximum term of 10 years. Options granted
vest ratably over five years.
Security has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation", requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of Security employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Security stock option activity and related information for the periods
ended December 31, 1997, 1996, and 1995 is summarized below:
1997 1996 1995
---- ---- ----
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
Outstanding at beginning
of period ................. 96,956 $24.85 83,766 $12.72 89,116 $12.72
Granted ...................... 3,600 42.50 58,000 33.00 -- --
Exercised .................... (15,576) 13.47 (35,490) 10.52 (5,350) 10.80
Forfeited/Expired ............ (3,500) 33.00 (9,320) 10.16 -- --
----------------- ------------------ ----------------
Outstanding at end of
period .................... 81,480 26.45 96,956 24.85 83,766 12.72
----------------- ------------------ ----------------
Exercisable end of period .... 33,440 $19.03 36,796 $24.85 69,846 $12.72
Weighted average fair
value of options .......... $ 6.99 $ 4.28 $ 4.28
Exercise prices for options outstanding as of December 31, 1997, ranged
from $8.12 to $42.50. The weighted average remaining contractual life of these
options is seven (7) years.
The fair value of the options presented above was estimated at the date of
grant using a Black-Scholes option pricing model with the following weighted
average assumptions for 1997, 1996, and 1995, respectively; risk free interest
rates of 5.00% in 1997 and 5.25% in 1996 and 1995; dividend yields of 1.98% in
1997 and 2.67% in 1996 and 1995; volatility factors of the expected market price
of Security common stock of .059 in 1997 and .037 in 1996 and 1995 and a
weighted average expected option life of seven (7) years. Because the effect of
applying Statement 123's fair value method to stock options results in net
income and earnings per share that are not materially different from amounts
reported in the consolidated statements of income, pro forma information has not
been provided.
20
14. 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 the net periodic Pension cost for 1997, 1996, and 1995 is as
follows:
(000's)
1997 1996 1995
---- ---- ----
Service cost-benefit earned during the period ....... $ 511 $ 277 $ 275
Interest cost on the projected benefit obligation ... 527 479 467
Actual (return) on plan assets ...................... (969) (940) (1,263)
Net amortization and deferral ....................... 300 359 795
----- ----- -------
Net pension expense .............................. $ 369 $ 175 $ 274
===== ===== =======
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, 1997 and 1996.
(000's)
1997 1996
---- ----
Reconciliation of funded status:
Projected benefit obligation .............................. $(7,176) $(6,632)
Plan assets at fair value ................................. 8,412 7,322
------- -------
Plan assets in excess of projected benefit obligation .. 1,236 690
Unrecognized prior service cost ........................... (16) (17)
Unrecognized net (gain) loss due to experience
different from assumptions made ........................ (590) (43)
Initial transition asset being recognized over 15 years ... (171) (214)
------- -------
Prepaid pension costs included in other assets ......... $ 459 $ 416
======= =======
(The accumulated Benefit Obligation including the vested benefit obligation is
$5,091,862.)
Assumptions used in accounting for the Plan were:
(000's)
1997 1996 1995
---- ---- ----
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.
15. PROFIT SHARING PLAN
All employees of Security Banc Corporation and its affiliates 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 the Corporation annually determines the bank's
matching contribution to the plan. For the plan year ended December 31, 1997 and
December 31, 1996, 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.
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.
The contribution by the Corporation for 1997, 1996, and 1995 was $190,000,
$208,000, and $209,000, respectively.
21
16. SECURITY BANC CORPORATION (PARENT ONLY)
AND REGULATORY RESTRICTIONS
Dividends paid by the Company's subsidiaries are subject to various legal
and regulatory restrictions. In 1997, the subsidiaries paid $37 million in
dividends to the parent company.
The subsidiaries can initiate dividend payments in 1998 equal to their net
profits, as defined by statute, up to the date of any such dividend declared.
SECURITY BANC CORPORATION
Statement Of Condition for the Years Ended December 31
(000's) 1997 1996
---- ----
Assets
Cash ...................................... $ 110 $ 0
Investments in Subsidiaries ............... 108,521 100,542
Other Assets .............................. 215 252
-------- --------
Total Assets ................................. $108,846 $100,794
======== ========
Liabilities ............................... 110 0
-------- --------
Total Liabilities ............................ 110 0
======== ========
Stockholders' equity
Common Stock .............................. 19,707 19,658
Surplus ................................... 21,831 21,670
Retained Earnings ......................... 70,149 62,557
Unrealized gains and (losses) ............. 242 102
Less: Treasury Stock ..................... (3,193) (3,193)
-------- --------
Total Shareholders' Equity ................... 108,736 100,794
-------- --------
Total Liabilities And Shareholders' Equity ... $108,846 $100,794
======== ========
SECURITY BANC CORPORATION
Statement Of Income for the Years Ended December 31
(000's) 1997 1996 1995
---- ---- ----
Income from subsidiaries ........................... $ 37,022 $ 27,121 $ 4,859
Other Income ....................................... 0 180 197
-------- -------- -------
Total Income ....................................... 37,022 27,301 5,056
======== ======== =======
Operating Expenses .............................. 163 179 81
-------- -------- -------
Total Expenses ..................................... 163 179 81
======== ======== =======
Income before taxes and undistributed income..... 36,859 27,122 4,975
Income taxes .................................... 0 31 30
Equity in undistributed income .................. (22,371) (13,704) 7,762
-------- -------- -------
Net Income ......................................... $ 14,488 $ 13,387 $12,707
======== ======== =======
SECURITY BANC CORPORATION
Statement Of Cash Flows for the Years Ended December 31
(000's) 1997 1996 1995
---- ---- ----
Cash flows from operating activities
Net Income ....................................... $ 14,488 $ 13,387 $12,707
Adjustment to reconcile net income to net cash
(Gain) or loss on sales of assets............... 0 (5) 0
Equity in undistributed (earnings) losses ...... 22,371 13,704 (7,762)
Net change in liabilities ...................... 110 (9) 9
Net change in other assets ..................... 37 (224) 2
Other, net ..................................... 0 (7) 0
-------- -------- -------
Total adjustments .............................. 22,518 13,459 (7,751)
-------- -------- -------
Net cash provided by operating activities ........ $ 37,006 $ 26,846 $ 4,956
Cash flows from investing activities
Purchase of securities ......................... 0 0 (349)
Sales and maturities of securities ............. 0 2,791 0
Payments for investments in and advances
to subsidiaries .............................. (30,210) (475) (58)
Other, net ..................................... 0 581 (35)
-------- -------- -------
Net cash provided (used) by investing
activities ................................... (30,210) 2,897 (442)
Cash flows from financing activities
Proceeds from issuance of common stock ......... 210 475 244
Payment to repurchase common stock ............. 0 (18) (280)
Dividends paid ................................. (5,394) (4,545) (3,741)
Other, net ..................................... (1,502) (27,227) 0
-------- -------- -------
Net cash (used) by financing
Activities ................................... $ (6,686) $(31,315) $(3,777)
Cash and cash equivalents
Net increase (decrease) in cash and cash
equivalents .................................... 110 (1,572) 737
Cash and cash equivalents at beginning of year ... 0 1,572 835
-------- -------- -------
Cash and cash equivalents at end of year ......... $ 110 $ 0 $ 1,572
======== ======== =======
22
17. CAPITAL RATIOS
The following table reflects various measures of capital at December 31,
1997 and December 31, 1996.
1997 1996
---- ----
(000's) Amount Ratio Amount Ratio
Total equity (1) ................ $108,736 20.04% $100,794 19.74%
Tier 1 capital (2) .............. 94,508 17.42% 88,470 17.33%
Total risk-based capital (3) .... 100,762 18.57% 94,858 18.58%
Leverage (4) .................... 94,508 11.55% 88,470 10.83%
(1) Computed in accordance with generally accepted accounting principles,
including unrealized market value adjustment of securities
available-for-sale.
(2) Stockholders' equity less certain intangibles and the unrealized market
value adjustment of securities available-for-sale; computed as a ratio to
risk-adjusted assets as defined.
(3) Tier 1 capital plus qualifying loan loss allowance, computed as a ratio to
risk-adjusted assets, as defined.
(4) Tier 1 capital computed as a ratio to average total assets less certain
intangibles.
The Corporation's Tier 1, total risk-based capital and leverage ratios are
well above both the required minimum levels of 4.00%, 8.00%, and 4.00%,
respectively, and the well-capitalized levels of 6.00%, 10.00%, and 5.00%,
respectively.
At December 31, 1997, all of the Corporation's subsidiary financial
institutions met the well-capitalized levels under the capital definitions
prescribed in the FDIC Improvement Act of 1991.
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:
(000s) 1997 1996
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
LOANS
Commercial and Agriculture ........ $252,053 $250,768 $212,046 $210,456
Real Estate ....................... 225,791 224,956 234,935 233,831
Consumer .......................... 84,161 85,474 93,787 94,622
DEPOSITS
Non-Interest-Bearing Deposits...... $119,373 $119,373 $107,913 $107,913
Interest-Bearing Demand Deposits .. 129,351 129,351 122,996 122,996
Savings Deposits .................. 151,119 151,119 154,153 154,153
Time Deposits ..................... 277,548 278,269 281,973 284,398