(Security Capital Bancorp logo)
1 9 9 3 A N U A L R E P O R T
TABLE OF CONTENTS
Selected Financial Data 1
Letter to Stockholders 2
Management's Discussion and Analysis 5
Consolidated Financial Statements 8
Independent Auditors' Report 27
Directors and Officers 28
CORPORATE DESCRIPTION
Security Capital Bancorp (Security Capital), a bank holding company, is
incorporated under the laws of the State of North Carolina and headquartered in
Salisbury, North Carolina.
Security Capital currently operates 40 offices in 28 communities located in
11 counties and serves an area in the south central and western Piedmont regions
of North Carolina through four banking subsidiaries.
Security Capital's banking subsidiaries are Security Bank and Trust Company
and OMNIBANK, Inc., A State Savings Bank, of Salisbury, North Carolina, Citizens
Savings, Inc., SSB, Concord, North Carolina and Home Savings Bank, Inc., SSB,
Kings Mountain, North Carolina.
Through its banking subsidiaries, Security Capital engages in the
commercial and retail banking business and provides a full range of mortgage
products, personal and corporate trust services, insurance products and
investment services. All Security Capital banking subsidiaries are members of
the Federal Deposit Insurance Corporation.
CORPORATE INFORMATION
SECURITY CAPITAL BANCORP HEADQUARTERS
507 West Innes Street
P.O. Box 1387
Salisbury, North Carolina 28145-1387
(704) 636-3775
TRANSFER AGENT AND REGISTRAR
Wachovia Bank of North Carolina, N.A.
301 North Church Street
Winston-Salem, North Carolina 27102
GENERAL COUNSEL
Brooks Pierce McLendon Humphrey & Leonard, L.L.P.
2000 Renaissance Plaza
230 North Elm Street
Greensboro, North Carolina 27401
Smith Helms Mulliss & Moore
227 North Tryon Street
Charlotte, North Carolina 28202
INDEPENDENT AUDITORS
KPMG Peat Marwick
Suite 2800
Two First Union Center
Charlotte, North Carolina 28282-8290
COMMON STOCK
Security Capital's common stock is qualified for quotation on the NASDAQ
National Market System under the symbol SCBC. At March 7, 1994, there were
11,710,391 shares of common stock outstanding and approximately 3,200
stockholders of record.
ANNUAL MEETING
The Annual Meeting of Stockholders of Security Capital Bancorp will be held
on April 28, 1994, at 2:00 p.m. local time, at Security Capital's corporate
headquarters, 507 West Innes Street, Salisbury, North Carolina.
DIVIDEND REINVESTMENT
Stockholders may purchase additional shares of Security Capital common
stock through Security Capital's Dividend Reinvestment and Stock Purchase Plan.
For a Prospectus and other information on the Plan, contact David B. Jordan,
Vice-Chairman and Chief Executive Officer, at (704) 636-3775.
FORM 10-K
A COPY OF SECURITY CAPITAL'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1993, IS AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN
REQUEST. THESE REQUESTS SHOULD BE DIRECTED TO THE SECRETARY, SECURITY CAPITAL
BANCORP, P.O. BOX 1387, SALISBURY, NORTH CAROLINA 28145-1387.
INFORMATION
Analysts, stockholders and other investors seeking financial information
about Security Capital should contact Pressley A. Ridgill, Senior Vice President
and Chief Financial Officer, at (704) 855-6127.
News media, and others seeking general information should contact David B.
Jordan, Vice-Chairman and Chief Executive Officer, at (704) 636-3775.
SELECTED FINANCIAL DATA
DECEMBER 31,
BALANCE SHEET DATA 1993 1992 1991 1990 1989
(DOLLARS IN THOUSANDS)
Cash, non-interest bearing $ 28,102 19,242 21,305 16,748 25,431
Investment securities (1) 368,353 338,604 287,731 246,212 240,051
Loans, net (2) 484,384 505,784 549,651 580,834 542,168
All other assets 48,096 50,081 56,085 63,466 55,595
Total assets $928,935 913,711 914,772 907,260 863,245
Deposit accounts 784,456 773,635 775,140 767,929 739,128
FHLB advances 8,000 12,500 19,500 24,800 18,100
All other liabilities 12,259 10,648 9,987 13,195 12,970
Stockholders' equity 124,220 116,928 110,145 101,336 93,047
Total liabilities and stockholders' equity $928,935 913,711 914,772 907,260 863,245
YEARS ENDED DECEMBER 31,
OPERATIONS DATA 1993 1992 1991 1990 1989
(DOLLARS IN THOUSANDS)
Interest income $64,223 71,853 83,061 85,457 81,323
Interest expense 28,135 35,129 47,950 51,320 50,970
Net interest income 36,088 36,724 35,111 34,137 30,353
Provision for loan losses 653 1,848 1,924 1,620 963
Net interest income after provision for loan losses 35,435 34,876 33,187 32,517 29,390
Other income 10,519 8,948 9,213 7,469 5,516
Other expense 23,842 27,540 25,481 22,755 21,405
Income taxes 7,273 6,323 5,642 5,938 4,491
Net income $14,839 9,961 11,277 11,293 9,010
AT OR FOR THE YEARS ENDED DECEMBER 31,
OTHER DATA 1993 1992 1991 1990 1989
Return on average assets 1.62 % 1.09 1.22 1.28 1.02
Return on average equity 12.26 8.81 10.77 11.67 10.12
Average equity to average assets
ratio 13.18 12.37 11.36 10.94 10.08
Interest rate spread (3) 3.49 3.42 3.15 3.08 2.88
Net yield on average interest-
earning assets 4.15 4.21 4.02 4.08 3.86
Average interest-earning assets
to
average interest-bearing
liabilities 120.48 % 119.56 115.81 116.20 115.19
Total shares outstanding 11,682,837 11,811,122 11,822,226 11,811,279 10,617,634
Net income per share $ 1.26 .84 .95 .95 .85
Book value per share 10.63 9.90 9.32 8.58 8.76
Dividends per share (4) $ .39 .31 .23 .19 .15
(1) INCLUDES INVESTMENT SECURITIES AVAILABLE FOR SALE.
(2) INCLUDES LOANS HELD FOR SALE.
(3) DIFFERENCE BETWEEN WEIGHTED AVERAGE RATE ON ALL INTEREST-EARNING ASSETS
AND ALL INTEREST-BEARING LIABILITIES.
(4) DUE TO THE RESTATEMENT OF FINANCIAL INFORMATION, AS DISCUSSED IN NOTE 2
OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, DIVIDENDS PER SHARE FOR
ALL PERIODS PRESENTED EXCEPT FOR THE YEAR ENDED DECEMBER 31, 1993, HAVE
BEEN COMPUTED BY DIVIDING CASH DIVIDENDS PAID BY WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING, AS ADJUSTED RETROACTIVELY FOR STOCK
SPLITS AND DIVIDENDS.
LETTER TO STOCKHOLDERS
Dear Security Capital Stockholder:
We are pleased to report that by every measure, 1993 was an extremely
successful year for Security Capital Bancorp. Security Capital achieved record
earnings in 1993, with total assets, deposits and capital also reaching all-time
highs. Asset quality improved from an already enviable level. Cash dividends,
along with our stock price, also established new record levels. All of this was
accomplished during a year in which management continued to focus on
consolidating the activities of our existing companies while pursuing potential
acquisition opportunities.
These outstanding results did not go unnoticed as Security Capital received
favorable ratings and rankings throughout the year. To highlight a few, the
December 7, 1993, issue of FINANCIAL WORLD carried an article ranking 213
publicly traded commercial banks with assets of $750 million or more. Based on
adjusted equity, nonperforming assets to asset ratios, overhead ratio and
economic value, Security Capital ranked third. On January 24, 1994, the
CHARLOTTE OBSERVER, in a feature article in its Business Monday section,
compared the return on assets and 1993 stock price performance of the ten
largest North Carolina bank holding companies. Security Capital ranked number
one in both categories.
While Security Capital faced many challenges during 1993, our success in
meeting these challenges has been accomplished with the unyielding dedication of
our employees and the wise counsel of our Board of Directors. However, none of
this would have been possible without the continual support of our loyal
customers and stockholders. Thank you for the trust you have placed in Security
Capital.
1993 RESULTS
EARNINGS Net earnings for 1993 were $14,839,000, or $1.26 per share, an
increase of 48.97% over 1992 earnings of $9,961,000, or $.84 per share. While
1992 earnings were significantly impacted by one time Merger-related expenses
and non-recurring restructuring charges, the 1993 results reflect an increase of
approximately 13.0% over the prior year earnings, exclusive of the 1992
Merger-related special charges and provisions.
PERFORMANCE RATIOS Using one of the most widely accepted measurements of
earning power, return on average assets, Security Capital ranks among the
leaders of the industry with a 1.62% return. Our return on average equity was
12.26%, a very respectable return, especially in light of the high level of
capitalization at Security Capital. Stockholders' equity was $124,220,000 at
year end, an impressive 13.37% of assets. This allows Security Capital extreme
flexibility when evaluating potential opportunities to expand the overall
franchise. Each of our banking subsidiaries far exceeds all regulatory capital
requirements.
BALANCE SHEET Total assets at year-end 1993 were $928,935,000, an increase
of $15,224,000 over year-end 1992. Total loans declined $21,400,000 to
$484,384,000 at December 31, 1993. This decline relates primarily to our sale of
fixed rate mortgage loan originations in the secondary market and continued weak
loan demand. Total deposits increased $10,821,000 to $784,456,000 at year-end.
This increase was hampered by customers continuing to seek higher yields in the
low rate environment of 1993 through alternative investments.
ASSET QUALITY AND RESERVES Total nonperforming assets at December 31,
1993, were $3.1 million, or 0.34% of total assets. This remains extremely low
when compared to industry figures. Our loan loss reserve at December 31, 1993,
was $7.2 million, or 230.86% of nonperforming assets. Net loan charge-offs for
the year amounted to $335,000, or 0.07%, of average loans, lower by $33,000 from
the previous year. Management is proud of the high quality of assets at Security
Capital and believes our low level of nonperforming assets coupled with our loan
loss reserve continues to provide our banks with excellent safety.
STOCK PERFORMANCE AND CASH DIVIDENDS Security Capital's stock performed
well during 1993 and reached a new high of $14.75. We continued to receive
favorable coverage and recommendations by many investment professionals.
Reflecting our belief that stockholders should be able to participate directly
in Security Capital's success, the Board of Directors increased the cash
dividends to $.39 per share during 1993 from $.31 per share in 1992. Also, on
January 27, 1994, the Board of Directors continued this trend by increasing the
quarterly cash dividend to $.11 per share.
ACHIEVEMENTS
CONSOLIDATION AND DATA PROCESSING CONVERSION
Consolidation plans remained on track in 1993. In May 1993, Security Capital
consolidated eight branch locations into four facilities. These superbranches
are a new concept in North Carolina since the four remaining branches actually
provide retail operations for two companies in each location. This reduction in
facilities resulted in lower expenses for the second half of 1993 and these
savings should continue in future periods. Also, we met our goal of converting
Security Bank and Trust Company to a new in-house data processing system in
January 1994. This new system will provide state-of-the-art capabilities and
offer many enhancements not available on the previous system. The other banking
companies are scheduled to
(Photo appears here)
SECURITY CAPITAL EXECUTIVE COMMITTEE: SEATED LEFT TO
RIGHT, LLOYD G. GURLEY AND DAVID B. JORDAN; STANDING LEFT
TO RIGHT, RALPH A. BARNHARDT AND MILES J. SMITH, JR.
convert to this new system during 1994, with all companies operating on the same
system before year-end. The conversion to the new system should result in higher
efficiencies and productivity gains in 1994 and future years.
PENDING ACQUISITION AND BRANCH SWAP On December 15, 1993, Security Capital
announced that it and Fairfield Communities, Inc. (FCI), had executed a letter
of intent concerning Security Capital's acquisition of First Federal Savings and
Loan Association (First Federal) of Charlotte, North Carolina, a wholly-owned
subsidiary of FCI. First Federal operates ten banking offices and had total
assets of approximately $333 million at December 31, 1993. Under the letter of
intent, the consummation of the proposed acquisition is subject to numerous
conditions, including completion by Security Capital to its satisfaction of a
due diligence investigation of First Federal. Assuming a definitive agreement is
reached and all conditions are satisfied, the parties expect the acquisition
will be consummated during the second quarter of 1994.
Also, on January 25, 1994, Security Capital announced that it and First
Citizens Bank and Trust Co. had entered into an agreement involving the sale of
First Citizens' Bessemer City office to Home Savings Bank and the sale of Home
Savings' Gastonia office to First Citizens. With the transaction, Home Savings
will assume approximately $4.6 million in deposits in Bessemer City from First
Citizens and First Citizens will assume approximately $11.4 million in deposits
in Gastonia from Home Savings. Subject to regulatory approvals, the purchases
are expected to be completed in the second quarter of 1994.
We are excited about these transactions and will continue examining all
opportunities for expansion with our objective being the enhancement of our
franchise value by building market share while maintaining strict controls over
operations and credit quality.
SUMMARY
Our earnings for 1993 continued our trend of consistent profitability and
was our best earnings performance ever. We look forward to the possible
completion of the acquisition of First Federal and its potentially positive
impact in 1994 and beyond.
While the economy is giving signs of improvement, there are still many
uncertainties in the economic and regulatory environment in which we operate. Be
assured that we have planned well and are capable and ready to meet the
challenges of the future. The experience, competence, dedication, and loyalty of
our officers and staff will enable us to capitalize on opportunities and
continue to be one of the best companies in our industry in the years ahead. We
are proud of the accomplishments over the past year and look forward to sharing
in even greater success with you in the future.
Sincerely,
(Signature of David B. Jordan)
David B. Jordan
VICE-CHAIRMAN
CHIEF EXECUTIVE OFFICER
(Signature of Lloyd G. Gurley)
Lloyd G. Gurley
PRESIDENT
CHIEF ADMINISTRATIVE OFFICER
GENERAL BUSINESS DISCUSSION
BUSINESS OF SECURITY CAPITAL BANCORP
Security Capital Bancorp (Security Capital) is a North Carolina corporation
organized as a multi-bank holding company. On June 30, 1992, Omni Capital Group,
Inc. (Omni), a multi-thrift holding company incorporated under the laws of the
State of North Carolina, merged with and into First Security Financial
Corporation (FSFC), a bank holding company incorporated under the laws of the
State of North Carolina (the Merger). Upon completion of the Merger, FSFC's name
was changed to Security Capital Bancorp.
Security Capital, which operates primarily through its four banking
subsidiaries which have 40 offices in 11 counties, serves an area in the south
central and western Piedmont regions of North Carolina. Its general and
administrative offices are located in Salisbury, North Carolina.
The principal business of its banking subsidiaries, Security Bank and Trust
Company, OMNIBANK, SSB, Citizens Savings, SSB, and Home Savings Bank, SSB, is
accepting deposits from the general public and using those deposits, together
with borrowings and other funds, to originate various types of loans, including
residential loans, installment loans, commercial loans, commercial real estate
loans and credit card loans. Security Capital also has two other wholly owned
subsidiaries, First Cabarrus Corporation and Estates Development Corporation.
First Cabarrus Corporation is a service corporation providing management,
electronic data processing, and other services to Security Capital and its
subsidiaries. Prior to the Merger, Estates Development Corporation engaged
primarily in real estate development, building and sales activities.
CAPITAL STOCK
The no par value common stock of Security Capital is traded on the NASDAQ
National Market System under the symbol SCBC. As of March 7, 1994, Security
Capital had 11,710,391 shares of common stock outstanding and approximately
3,200 stockholders of record.
The following table presents for the periods indicated the high and low
sales prices, as reported by NASDAQ, of the common stock of Security Capital.
1993 1992
HIGH LOW High Low
First Quarter $14.75 $11.00 $11.00 $ 8.75
Second Quarter 13.75 12.50 11.00 9.50
Third Quarter 14.75 13.00 12.50 10.00
Fourth Quarter 14.75 13.25 12.25 10.75
The Board of Directors of Security Capital declared and paid a quarterly
cash dividend on each share of common stock amounting to $.39 and $.31 per share
for the years ending December 31, 1993 and 1992, respectively. Due to the
restatement of financial information, as discussed in note 2 of Notes to
Consolidated Financial Statements, the dividend per share for the year ended
December 31, 1992, has been computed by dividing dividends paid by the weighted
average number of shares outstanding as adjusted retroactively for stock splits
and stock dividends. The ability of Security Capital to pay dividends is subject
to certain regulatory restrictions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1993 AND 1992
NET INCOME
Security Capital and its subsidiaries (collectively herein, Security
Capital) earned $14,839,000, or $1.26 per share, for the year ended December 31,
1993, an increase of 49.0% from 1992 net income of $9,961,000, or $.84 per
share. This increase is primarily attributable to the one-time Merger-related
expenses and restructuring charges recognized by First Security Financial
Corporation and Omni Capital Group, Inc., in connection with the Merger. These
charges amounted to $4.1 million consisting of approximately $600,000 of
Merger-related expenses and $3.5 million of nonrecurring restructuring charges.
The nonrecurring restructuring charges included $1.5 million provided to
increase the thrift component of Security Capital's overall allowance for loan
losses in keeping with the policies and practices of conservatively managed
community bank holding companies. The remaining $2.0 million was composed of
accrued outplacement, benefit, professional, printing, and other Merger-related
costs. Also, in accordance with current accounting requirements, Security
Capital adopted Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes (Statement 109) effective January 1, 1993. Adoption of
Statement 109 resulted in a net benefit to Security Capital of approximately
$388,000 in 1993. Security Capital's return on average assets increased to 1.62%
in 1993 from 1.09% in 1992. Return on average equity increased to 12.26% in 1993
from 8.81% in 1992.
NET INTEREST INCOME
Net interest income decreased $636,000 (1.7%) to $36,088,000. Total
interest income decreased $7,630,000, or 10.6%, in 1993. The average yield on
interest-earning assets fell 85 basis points to 7.39%, while the average volume
was lower by $2.4 million. Total interest expense decreased $6,994,000, or
19.9%, in 1993. The average rate on interest-bearing liabilities fell 92 basis
points to 3.90%, while the average volume was lower by $7.5 million.
Also impacting the decrease in interest income was a decrease in Security
Capital's most significant interest-earning asset, loans receivable. Total loans
decreased $37,227,000 (7.3%) to $473.2 million at December 31, 1993. This
decrease was primarily the result of the continuation of the selling of current
production of fixed rate mortgage loans through Security Capital's secondary
marketing program. While investment securities increased $29,749,000 (8.8%) to
$368.4 million at December 31, 1993, the yields on new investments were
significantly less than the yields on maturing investments and existing
portfolio mortgage loans refinanced at lower fixed rates in 1993, thus
negatively impacting interest income. The net yield on interest-earning assets
decreased 6 basis points to 4.15%. In future periods, Security Capital could
experience a reduction in interest income should prepayments continue and
mortgage loans continue to price downward.
LOAN ORIGINATION AND SALE ACTIVITY
Proceeds from the sales of loans were approximately $85.7 million in 1993
compared to approximately $85.1 million in 1992, resulting in gains of
$1,384,000 and $738,000, respectively. As noted above, Security Capital has
continued to sell its current production of fixed rate mortgage loans during
1993. Security Capital retained the servicing rights on all fixed rate mortgage
loans sold during 1993. These servicing rights represent a continuing source of
future fee income. Fixed rate mortgage loans held for sale at December 31, 1993,
amounted to $18,409,000. Proceeds from the sales of loans, along with loan
repayments, were used to fund loan originations, which increased $14.2 million
(5.8%) to approximately $259.2 million in 1993, and to increase the investment
portfolio, which increased $29.7 million (8.8%) in 1993.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $653,000 for 1993 compared to $1,848,000
for 1992. As noted above, the 1992 provision includes $1.5 million recognized in
connection with the Merger. Charge-offs decreased 28.5% in 1993 to $732,000
while recoveries decreased 39.5% to $397,000. This resulted in the allowance for
loan losses increasing $318,000 (4.6%) to $7,227,000 at December 31, 1993, from
$6,909,000 at December 31, 1992. The allowance for loan losses at December 31,
1993, represents 1.53% of period-end loans and 2.31 times non-performing assets.
Management believes that the allowance for loan losses is adequate. In addition,
in the opinion of management, asset quality remains high, with total
non-performing assets totaling $3.1 million, one-third of one percent (0.34%) of
total assets at December 31, 1993. This was an improvement over the December 31,
1992, total non-performing assets of $5.4 million, or six tenths of one percent
(0.59%) of total assets. Security Capital does not have any material loans
outstanding classified for regulatory purposes as doubtful or loss.
Additionally, its loan portfolio does not contain any highly leveraged
transactions or foreign loans.
OTHER INCOME
Other income increased $1,571,000 (17.6%) to $10,519,000 in 1993. As noted
above, net gain on sales of loans increased $646,000 (87.5%) to $1,384,000 in
1993 from $738,000 in 1992. Brokerage commissions increased $411,000 to
$1,404,000 in 1993. This increase is due to an increase in volume, which can be
attributed to an expansion of the operation during 1993, along with depositors
seeking higher yields through alternative investments. Net securities gains
increased to $310,000 in 1993 from $8,000 in 1992. These gains were the result
of the sale of Security Capital's investment in Atlantic States Bankcard
Association, Inc., and the exercise of call provisions by the issuers of several
municipal securities. Other increased $446,000 (74.0%) due to several smaller
increases within this category.
OTHER EXPENSE
Other expense decreased $3,698,000 (13.4%) to $23,842,000 in 1993. For the
year ended December 31, 1992, Security Capital had approximately $2.6 million of
Merger-related expenses. These Merger-related expenses were reflected in the
personnel, net occupancy, professional and other services, and other categories
for 1992. Federal and other insurance premiums decreased $194,000 during 1993
due to a decline in the average deposit accounts and the consolidation of other
insurance coverage. During 1993, Security Capital experienced additional
increases in efficiencies of operations due to the Merger which are reflected in
various categories. Additional efficiencies are anticipated; however, the amount
of decreased expense from these efficiencies cannot be determined at this time.
INCOME TAXES
Income taxes increased $950,000 (15.0%) to $7,273,000 for the year ended
December 31, 1993, while income before income taxes increased $5,828,000 (35.8%)
to $22,112,000 in 1993 from $16,284,000 in 1992. Excluding the impact of
adoption of Statement 109, income taxes would have been $7,661,000, or 34.6% of
income before income taxes, compared to 38.8% in 1992. This decrease is largely
due to a portion of the 1992 provision for thrift loan losses for which a tax
benefit could not be recognized. In 1993, as allowed by Statement 109, an income
tax benefit was recognized for the provision for loan losses. Income taxes for
the year ended December 31, 1993, includes the effect of the Omnibus Budget
Reconciliation Act of 1993 (the Act) signed into law on August 10, 1993. The
overall effect of the Act was an increase in income taxes of approximately
$200,000, primarily due to the increased corporate tax rate.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1992 AND 1991
NET INCOME
Security Capital earned $9,961,000, or $.84 per share, for the year ended
December 31, 1992, a decrease of 11.7% from the 1991 net income of $11,277,000,
or $.95 per share. This decrease was primarily a result of the Merger-related
expenses and nonrecurring restructuring charges recognized in connection with
the Merger. Partially offsetting the impact of the Merger-related expenses and
nonrecurring restructuring charges was the increase in net interest income
discussed below. Security Capital's return on average assets decreased to 1.09%
in 1992 from 1.22% in 1991. Return on average equity decreased to 8.81% in 1992
from 10.77% in 1991.
NET INTEREST INCOME
Net interest income increased $1,613,000 (4.6%) to $36,724,000 in 1992.
Total interest income decreased $11.2 million, or 13.5%, and total interest
expense decreased $12.8 million, or 26.7% in 1992. Also impacting the decrease
in interest income was a decrease in loans receivable. Total loans decreased
$40,909,000 (7.4%) to $510.4 million at December 31, 1992. This decrease was
primarily a result of reduced new loan demand and the continuation of the
selling of current production of fixed rate mortgage loans through the secondary
marketing program. Interest expense was also reduced as a result of a net
decrease in interest-bearing liabilities, and an increase in noninterest-bearing
demand accounts throughout 1992.
LOAN ORIGINATION AND SALE ACTIVITY
Proceeds from the sales of loans were approximately $85.1 million in 1992
compared to approximately $46.2 million in 1991, resulting in gains of $738,000
and $927,000, respectively. As noted above, Security Capital continued to sell
its current production of fixed rate mortgage loans during 1992. Security
Capital retained the servicing rights on all fixed rate mortgage loans sold
during 1992. Proceeds from the sales of loans, along with other funds, were used
to fund loan originations and to increase the investment portfolio.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $1,848,000 for 1992 compared to
$1,924,000 for 1991. Charge-offs decreased 39.3% in 1992 to $1,024,000 while
recoveries increased 42.3% to $656,000. This resulted in the allowance for loan
losses increasing $1,480,000 (27.3%) to $6,909,000 at December 31, 1992, from
$5,429,000 at December 31, 1991.
OTHER INCOME
Other income decreased 2.9% to $8,948,000 in 1992. Net securities gains
decreased to $8,000 in 1992 from $549,000 in 1991. As noted above, net gains on
sales of loans decreased to $738,000 in 1992 from $927,000 in 1991. Deposit and
other service charge income increased $628,000 (13.6%) to $5,255,000 in 1992.
This increase represents a continual monitoring of the pricing structure along
with improved fee collection. In addition, Security Capital experienced an
increase in volume due to an increase in transaction accounts. Other decreased
$279,000 (31.6%) due to several smaller decreases within this category.
OTHER EXPENSE
Total other expense increased $2.1 million (8.1%) in 1992. This increase
was primarily due to the Merger-related expenses and non-recurring restructuring
charges recognized in connection with the Merger. Approximately $2.6 million of
Merger-related expenses and non-recurring restructuring charges are included
throughout the Other Expense categories, specifically increasing personnel, net
occupancy, professional and other services and other.
INCOME TAXES
Income taxes increased $681,000 to $6.3 million in 1992 while income before
taxes decreased to $16.3 million in 1992 from $16.9 million in 1991. This
increase in the effective income tax rate from 33.3% in 1991 to 38.8% in 1992
results primarily from a larger 1992 provision for thrift loan losses for which
a tax benefit could not be recognized.
FINANCIAL CONDITION
Total assets of Security Capital at December 31, 1993, were $928,935,000,
an increase from December 31, 1992, of $15,224,000 (1.7%). Investment securities
increased $29,749,000 (8.8%) to $368,353,000 primarily due to weak loan demand
and management's policy to sell current production of fixed rate mortgage loans.
Net loans receivable decreased $37,227,000 (7.3%) to $473,202,000 due to the
reasons noted above. Loans held for sale increased $16,145,000 to $18,409,000
primarily due to the timing of the sales which is influenced by fluctuations in
the market. Total deposits increased $10,821,000 (1.4%) to $784,456,000.
Advances from the Federal Home Loan Bank decreased $4,500,000 to $8,000,000 due
to the payment of maturing advances throughout the year. Total stockholders'
equity was $124,220,000 or 13.37% of total assets, at December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of liquidity for Security Capital's banking
subsidiaries are deposit accounts, Federal Home Loan Bank (FHLB) advances,
principal and interest payments on loans, interest received on investment
securities, and fees. Deposit accounts are considered a primary source of funds
supporting the banking subsidiaries' lending and investment activities. At
December 31, 1993, the Security Capital banking subsidiaries were in compliance
with all regulatory liquidity requirements. Management believes that Security
Capital has adequate sources of liquidity at December 31, 1993.
At December 31, 1993, Security Capital and its banking subsidiaries were in
compliance with all applicable regulatory capital requirements. The following
table compares Security Capital's regulatory capital as of December 31, 1993,
with the minimum capital standards established by the Board of Governors of the
Federal Reserve System (the FRB).
[CAPTION]
Leverage Capital Risk-Based Capital
Amount % of Assets Amount % of Assets
(Dollars in Thousands)
Actual $124,220 13.31% $129,821 29.08%
Minimum Capital Standard 27,992 3.00(1) 35,719 8.00
Excess of Actual Regulatory
Capital Over Minimum Regulatory
Capital Standards $ 96,228 10.31% $ 94,102 21.08%
(1) THE FRB MINIMUM LEVERAGE RATIO REQUIREMENT IS 3% TO 5%, DEPENDING ON THE
INSTITUTION'S COMPOSITE RATING AS DETERMINED BY ITS REGULATORS. THE FRB HAS
NOT ADVISED SECURITY CAPITAL OF ANY SPECIFIC REQUIREMENT APPLICABLE TO IT.
Management is not aware of any current recommendations by regulatory
authorities which, if implemented, would have a material effect on liquidity,
capital resources or operations.
During the year ended December 31, 1993, Security Capital repurchased
approximately 265,000 shares of its outstanding common stock in the open market
or in privately-negotiated transactions. The net cost of these transactions was
approximately $3.6 million.
On December 15, 1993, Security Capital announced that it and Fairfield
Communities, Inc. (FCI), had executed a letter of intent concerning Security
Capital's acquisition of First Federal Savings and Loan Association of
Charlotte, North Carolina, a wholly owned subsidiary of FCI. For further
discussion of this pending acquisition, see note (2) of Notes To Consolidated
Financial Statements.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
[CAPTION]
ASSETS 1993 1992
(DOLLARS IN
THOUSANDS)
Cash and due from banks $ 28,102 19,242
Interest-bearing balances in other banks 5,145 9,589
Federal funds sold 3,450 4,500
Investment securities (market value of $375,046 and $347,350
at December 31, 1993 and 1992, respectively) (note 3) 368,353 338,604
Loans, net of unearned income ($2,698 in 1993 and $2,545 in 1992) (note 4) 473,202 510,429
Less allowance for loan losses (note 5) 7,227 6,909
Loans, net 465,975 503,520
Loans held for sale 18,409 2,264
Premises and equipment, net (note 6) 18,360 17,103
Other assets (note 4) 21,141 18,889
Total assets $928,935 913,711
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposit accounts:
Demand, noninterest-bearing 67,830 60,639
Interest-bearing 673,854 675,231
Time deposits over $100 42,772 37,765
Total deposit accounts 784,456 773,635
Advances from the Federal Home Loan Bank (note 7) 8,000 12,500
Other borrowed money 1,764 706
Other liabilities 10,495 9,942
Total liabilities 804,715 796,783
Stockholders' equity (notes 9, 11, and 12):
Preferred stock, no par value, 5,000,000 shares authorized;
none issued and outstanding -- --
Common stock, no par value, 25,000,000 shares authorized; 11,682,837 and
11,811,122 shares issued and outstanding at December 31, 1993 and 1992,
respectively 51,167 54,120
Retained earnings, substantially restricted 73,053 62,808
Total stockholders' equity 124,220 116,928
Commitments and contingencies (notes 10 and 13)
Total liabilities and stockholders' equity $928,935 913,711
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
[CAPTION]
1993 1992 1991
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Interest income:
Loans $41,195 48,277 59,572
Investment securities
Taxable 21,299 21,165 20,874
Nontaxable 955 1,137 1,130
Other 774 1,274 1,485
Total interest income 64,223 71,853 83,061
Interest expense:
Deposit accounts 27,255 33,695 45,879
Borrowings 880 1,434 2,071
Total interest expense 28,135 35,129 47,950
Net interest income 36,088 36,724 35,111
Provision for loan losses (note 5) 653 1,848 1,924
Net interest income after provision for loan losses 35,435 34,876 33,187
Other income:
Loan servicing and other loan fees 1,396 1,351 1,287
Deposit and other service charge income 4,976 5,255 4,627
Brokerage commissions 1,404 993 941
Gain on sales of loans 1,384 738 927
Securities gains, net (note 3) 310 8 549
Other 1,049 603 882
Total other income 10,519 8,948 9,213
Other expense:
Personnel (notes 10 and 12) 13,314 14,536 13,821
Net occupancy 3,390 3,488 2,570
Telephone, postage, and supplies 1,564 1,579 1,523
Federal and other insurance premiums 1,832 2,026 2,427
Professional and other services 793 1,683 1,283
Other 2,949 4,228 3,857
Total other expense 23,842 27,540 25,481
Income before income taxes 22,112 16,284 16,919
Income taxes (note 8) 7,273 6,323 5,642
Net income $14,839 9,961 11,277
Net income per share $ 1.26 .84 .95
Weighted average shares outstanding 11,771,739 11,832,570 11,821,315
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
Total
Common Retained Obligations Stockholders'
Stock Earnings of ESOP Equity
(DOLLARS IN THOUSANDS)
Balance at December 31, 1990 $54,495 48,013 (1,172) 101,336
Proceeds from stock options exercised (note 11) 78 -- -- 78
Repayment of ESOP debt (note 12) -- -- 287 287
Retirement of common stock (102 ) -- -- (102)
Dividends paid to stockholders
($.23 per share) -- (2,731) -- (2,731)
Net income -- 11,277 -- 11,277
Balance at December 31, 1991 54,471 56,559 (885) 110,145
Proceeds from stock options exercised (note 11) 158 -- -- 158
Repayment of ESOP debt (note 12) -- -- 376 376
Retirement of unallocated ESOP shares (note 12) (509 ) -- 509 --
Dividends paid to stockholders
($.31 per share) -- (3,712) -- (3,712)
Net income -- 9,961 -- 9,961
Balance at December 31, 1992 54,120 62,808 -- 116,928
PROCEEDS FROM STOCK OPTIONS EXERCISED (NOTE 11) 606 -- -- 606
RETIREMENT OF COMMON STOCK (3,559 ) -- -- (3,559)
DIVIDENDS PAID TO STOCKHOLDERS
($.39 PER SHARE) -- (4,594) -- (4,594)
NET INCOME -- 14,839 -- 14,839
BALANCE AT DECEMBER 31, 1993 $51,167 73,053 -- 124,220
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
[CAPTION]
1993 1992 1991
(DOLLARS IN THOUSANDS)
Cash flows from operating activities:
Net income $ 14,839 9,961 11,277
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 653 1,848 1,924
Depreciation 1,456 1,422 1,308
Securities gains, net (310) (8) (549)
Amortization of securities discounts 2,325 1,151 219
Change in investment securities available for sale, net -- 1,991 (1,991)
Change in loans held for sale, net (16,145) 1,478 (1,323)
(Increase) decrease in other assets (270) 1,718 1,804
Increase in other liabilities 553 593 195
Net cash provided by operating activities 3,101 20,154 12,864
Cash flows from investing activities:
Proceeds from maturities and issuer calls of investment securities 90,299 71,874 29,945
Proceeds from sales of investment securities -- 11 56,148
Purchases of investment securities (122,063) (125,892) (125,290)
Decrease in loans 34,910 39,532 25,837
Capital expenditures for premises and equipment (2,713) (1,313) (2,963)
Net cash provided by (used in) investing activities 433 (15,788) (16,323)
Cash flows from financing activities:
Increase (decrease) in deposits 10,821 (1,505) 7,212
Proceeds from FHLB advances 14,740 8,000 --
Repayment of FHLB advances (19,240) (15,000) (5,300)
Increase (decrease) in other borrowed money, net 1,058 68 (21)
Purchase and retirement of common stock, net (3,559) (509) (102)
Dividends paid to stockholders (4,594) (3,712) (2,731)
Proceeds from stock options exercised 606 158 78
Purchase of ESOP stock -- 885 287
Net cash used in financing activities (168) (11,615) (577)
Net increase (decrease) in cash and cash equivalents 3,366 (7,249) (4,036)
Cash and cash equivalents at beginning of year 33,331 40,580 44,616
Cash and cash equivalents at end of year $ 36,697 33,331 40,580
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 27,962 35,812 48,263
Income taxes 7,286 7,064 5,942
Supplemental schedule of noncash investing activities:
Loans receivable transferred to real estate owned $ 1,982 1,009 1,363
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the more significant accounting and
reporting policies which Security Capital Bancorp and subsidiaries
(Security Capital) follow in preparing and presenting their consolidated
financial statements:
PRINCIPLES OF CONSOLIDATION AND REPORTING (a)
The accompanying consolidated financial statements include the accounts of
Security Capital Bancorp, a North Carolina corporation organized as a
multi-bank holding company and its wholly owned subsidiaries, Security Bank
and Trust Company, Salisbury, North Carolina (Security Bank), OMNIBANK,
Inc., A State Savings Bank, Salisbury, North Carolina (OMNIBANK), Citizens
Savings, Inc., SSB, Concord, North Carolina (Citizens), Home Savings Bank,
Inc., SSB, Kings Mountain, North Carolina (Home Savings), First Cabarrus
Corporation, Salisbury, North Carolina (FCC), and Estates Development
Corporation, Salisbury, North Carolina (EDC). All significant intercompany
balances have been eliminated.
Certain amounts have been reclassified to conform with the statement
presentation for 1993. The reclassifications have no effect on
stockholders' equity or net income as previously reported.
All dollar amounts except share and per share amounts in the notes to the
consolidated financial statements are in thousands.
INVESTMENT SECURITIES (b)
When securities are purchased, they are classified as investment securities
if, in management's opinion, Security Capital has the intent to hold them
as long-term investments and the ability to hold them to maturity. These
securities are carried at cost, adjusted for amortization of premiums and
accretion of discounts.
Gains and losses on sales of securities are recognized when realized, with
cost being determined by the specific identification method. Premiums and
discounts are amortized into interest income using a level yield method.
Regulations require the savings bank subsidiaries (i.e. OMNIBANK, Citizens,
and Home Savings) to maintain cash and approved securities in an amount
equal to a prescribed percentage (10% at December 31, 1993) of total
assets.
LOANS HELD FOR SALE (c)
Loans held for sale are carried at the lower of aggregate cost or market as
determined by the outstanding commitments from investors or current
investor yield requirements calculated on the aggregate loan basis. Gains
and losses are realized if at the time of sale the average interest rate on
the loans sold, adjusted for servicing costs, differs from the agreed yield
to the buyer. Any excess servicing fee is deferred and amortized using a
level yield method over the contractual life of such loans. Gains or losses
resulting from sales of loans are recognized when the proceeds are received
from the investors.
LOAN INTEREST INCOME (d)
Loan interest income is recognized on the accrual basis.
The accrual of interest is generally discontinued on all loans that become
90 days past due as to principal or interest unless collection of both
principal and interest is assured by way of both collateralization,
guarantees, or other security, and the loan is in the process of
collection. Security Capital provides an allowance for uncollected accrued
interest income if, in the opinion of management, collectibility of that
accrued interest income is doubtful. This allowance is netted against
accrued interest income, which is included in other assets in the
accompanying consolidated financial statements. Interest income foregone on
nonaccrual and restructured loans for each of the years in the three-year
period ended December 31, 1993 was not significant.
ALLOWANCE FOR LOAN LOSSES (e)
Security Capital provides for loan losses on the allowance method.
Accordingly, all loan losses are charged to the related allowance and all
recoveries are credited to it. Additions to the allowance for loan losses
are provided by charges to operations based on various factors that, in
management's judgment, deserve current recognition in estimating losses
inherent in the portfolio. Such factors considered by management include
the market value of the underlying collateral, growth and composition of
the loan portfolio, the relationship of the allowance for loan losses to
outstanding loans, delinquency trends and economic conditions. Management
evaluates the carrying value of loans periodically and the allowance is
adjusted accordingly. While management uses the best information available
to make evaluations, future adjustments may be necessary if economic and
other conditions differ substantially from the assumptions used.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the allowance for loan losses.
Such regulatory agencies may require the financial institution subsidiaries
to recognize additions to the allowance for loan losses based on their
judgments about information available to them at the time of their
examination.
REAL ESTATE OWNED (f)
Real estate owned is included in other assets and represent other real
estate that has been acquired through loan foreclosures or deed received in
lieu of foreclosure. Such properties are generally appraised annually and
are recorded at the lower of cost or fair value, less applicable selling
costs. Costs relating to the development and improvement of property are
capitalized, whereas those relating to holding the property are charged to
expense.
PREMISES AND EQUIPMENT (g)
Premises and equipment are recorded at cost, and depreciation is provided
over the estimated useful lives of the related assets principally on a
straight-line basis. Estimated lives are ten to fifty years for buildings,
building components and improvements; five to ten years for furniture,
fixtures, and equipment; and three years for automobiles. Leasehold
improvements are amortized on a straight-line basis over the lesser of
their estimated life or the remaining lease term.
Maintenance and repairs are charged to expense as incurred and improvements
are capitalized. The costs and accumulated depreciation relating to
premises and equipment retired or otherwise disposed of are eliminated from
the accounts and any resulting gains or losses are credited or charged to
income.
LOAN ORIGINATION FEES AND COSTS (h)
Loan origination fees and certain direct loan origination costs are
deferred and amortized over the contractual life of the related loan as an
adjustment of the loan yield using a level yield method. Direct costs of
unsuccessful loans and indirect costs are expensed as incurred.
INCOME TAXES (i)
Security Capital adopted the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (Standard No.
109) during 1993 and has applied the provisions of the statement without
restating prior years' financial statements. Prior to the adoption of
Standard No. 109, Security Capital accounted for income taxes using the
deferred method required by APB Opinion 11.
Standard No. 109 has changed Security Capital's method of accounting for
income taxes from the deferred method to the asset and liability method.
The objective of the asset and liability method is to establish deferred
tax assets and liabilities for the temporary differences between the
financial reporting basis and the tax basis of Security Capital's assets
and liabilities at enacted rates expected to be in effect when such amounts
are realized or settled. Deferred tax assets are reduced, if necessary, by
the amount of such benefits that are not expected to be realized based upon
available evidence.
The cumulative effect of adopting Standard No. 109 as of January 1, 1993
was not material, and therefore no cumulative effect was presented in the
consolidated statement of income for the year ended December 31, 1993.
Pursuant to the deferred method under APB Opinion 11, which applied in 1992
and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable for the year
of the calculation. Under the deferred method, deferred taxes are not
adjusted for subsequent changes in tax rates.
NET INCOME AND DIVIDENDS PER SHARE (j)
Net income per share has been computed by dividing net income by the
weighted average number of shares outstanding, as adjusted retroactively
for stock splits and stock dividends. Due to the pooling-of-interests
merger in 1992, as discussed in note 2, dividends per share for 1992 and
1991 was computed by dividing dividends paid by the weighted average number
of shares outstanding, as adjusted retroactively for stock splits and stock
dividends.
CASH AND CASH EQUIVALENTS (k)
Cash and cash equivalents include cash and due from banks, interest-bearing
balances in other banks, and federal funds sold. Generally, cash and cash
equivalents are considered to have maturities of three months or less.
FAIR VALUE OF FINANCIAL INSTRUMENTS (l)
In December 1991 the FASB issued Statement of Financial Accounting
Standards No. 107, Disclosures About Fair Value of Financial Instruments
(Statement No. 107). Statement No. 107 requires disclosures about the fair
value of all financial instruments. Fair value estimates, methods, and
assumptions are set forth in note 16.
POSTRETIREMENT BENEFITS (m)
The FASB issued Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions
(Statement No. 106), which requires during an employee's active years of
service, accrual of expected costs of providing postretirement benefits,
principally health care and life insurance, to employees and their
beneficiaries and dependents. Statement No. 106 was effective for 1993, but
there was no material impact on Security Capital's 1993 consolidated
financial statements since Security Capital generally does not provide such
benefits.
(2) PENDING ACQUISITIONS AND MERGER
On December 15, 1993, Security Capital announced that it and Fairfield
Communities, Inc. (FCI), had executed a letter of intent concerning
Security Capital's acquisition of First Federal Savings and Loan
Association (First Federal) of Charlotte, North Carolina, a wholly owned
subsidiary of FCI. First Federal operates ten banking offices and had total
assets of approximately $333,000 at December 31, 1993. Under the letter of
intent, the consummation of the proposed acquisition is subject to numerous
conditions, including completion by Security Capital to its satisfaction of
a due diligence investigation of First Federal. Assuming a definitive
agreement is reached and all conditions are satisfied, the parties expect
the acquisition will be consummated during the second quarter of 1994.
On January 25, 1994, Security Capital announced that Home Savings and First
Citizens Bank and Trust Co. (First Citizens) had entered into an agreement
involving the sale of First Citizens' Bessemer City office to Home Savings
and the sale of Home Savings' Gastonia office to First Citizens. With the
transaction, Home Savings will assume approximately $4,600 in deposits in
Bessemer City and First Citizens will assume approximately $11,400 in
deposits in Gastonia. Subject to regulatory approval, the purchases are
expected to be completed in the second quarter of 1994.
On June 30, 1992, Omni Capital Group, Inc. (Omni), a multiple thrift
holding company incorporated under the laws of the State of North Carolina
and the former parent of OMNIBANK, Citizens, Home Savings, FCC and EDC,
merged with and into First Security Financial Corporation (FSFC), a bank
holding company incorporated under the laws of the State of North Carolina
and the parent of Security Bank (the Merger). Upon the completion of the
Merger, FSFC's name was changed to Security Capital Bancorp. Pursuant to
the Agreement of Combination and the related Plan of Merger, which were
approved by the stockholders of both FSFC and Omni, 5,681,216 shares of
Security Capital common stock, no par value per share, were issued in
exchange for the surrender of the issued and outstanding shares of common
stock of Omni, par value of $1.00 per share, at an exchange ratio of 2.25
shares of Security Capital common stock for each such share of Omni common
stock. The Merger was accounted for as a pooling-of-interests and,
accordingly, the consolidated financial statements for periods prior to the
Merger were restated to combine the accounts of FSFC and Omni.
(3) INVESTMENT SECURITIES
A comparative summary of investment securities follows:
DECEMBER 31, 1993
GROSS GROSS ESTIMATED
BOOK UNREALIZED UNREALIZED FAIR
VALUE GAINS LOSSES VALUE
(DOLLARS IN THOUSANDS)
U.S. Government obligations $305,180 5,762 183 310,759
US Government agency obligations 40,409 304 345 40,368
Mortgage-backed securities 12,676 459 -- 13,135
State and municipal obligations 10,022 676 -- 10,698
Other 66 20 -- 86
$368,353 7,221 528 375,046
December 31, 1992
Gross Gross Estimated
Book Unrealized Unrealized Fair
Value Gains Losses Value
(DOLLARS IN THOUSANDS)
U.S. Government obligations $292,848 7,718 451 300,115
US Government agency obligations 9,966 85 55 9,996
Mortgage-backed securities 19,298 514 43 19,769
State and municipal obligations 15,592 978 -- 16,570
Other 900 -- -- 900
$338,604 9,295 549 347,350
Total proceeds from sales or issuer calls of investment securities during 1993,
1992 and 1991 were $5,860, $11 and $56,148, respectively. There were gross
realized gains of $310 and $8, respectively, and no gross realized losses in
1993 and 1992, respectively. Gross gains of $591 and gross losses of $42 were
realized on sales of investment securities in 1991. Investment securities with
an aggregate par value of $23,764 were pledged to secure public deposits and
for other purposes as required by various agencies.
The Financial Accounting Standards Board (FASB) has issued Standard No. 115,
Accounting for Certain Investments in Debt and Equity Securities, that requires
debt and equity securities held: (i) to maturity be classified as such and
reported at amortized cost; (ii) for current resale be classified as trading
securities and reported at fair value, with unrealized gains and losses
included in current earnings; and (iii) for any other purpose be classified as
securities available for sale and reported at fair value, with unrealized gains
and losses excluded from current earnings and reported as a separate component
of stockholders' equity. It is required for fiscal years beginning after
December 15, 1993. Security Capital will adopt Standard No. 115 as of January
1, 1994. In connection with this adoption, Security Capital anticipates that
approximately $324,500 of investment securities will be classified as
securities available for sale. As of December 31, 1993, these securities had
unrealized securities gains of approximately $6,100, which would result in an
unrealized securities gain, net of income tax effects, of approximately $4,100
being recorded as an increase to stockholders' equity on the date of adoption.
(4) LOANS RECEIVABLE
A comparative summary of loans receivable follows:
[CAPTION]
December 31,
1993 1992
(DOLLARS IN THOUSANDS)
Real estate mortgage (principally single family dwellings, 1-4 units) $338,562 361,935
Real estate construction 10,085 11,215
Commercial, financial, and agricultural 64,739 68,598
Installment 62,341 70,909
Unearned income (2,698) (2,545)
Premium on loans sold 173 317
$473,202 510,429
Nonaccrual and restructured loans included above $ 1,759 2,994
Accruing loans past due 90 days were $420 and $1,380 at December 31, 1993 and
1992, respectively.
Accrued interest receivable at December 31, 1993 and 1992, consisted of the
following:
[CAPTION]
December 31,
1993 1992
(DOLLARS IN THOUSANDS)
Loans $3,430 4,034
Investment securities 6,041 6,163
Other 70 72
$9,541 10,269
Certain real estate loans are pledged as collateral for advances from the
Federal Home Loan Bank (FHLB) as set forth in note 7.
Loans serviced for others approximated $203,403, $174,884 and $147,563 at
December 31, 1993, 1992, and 1991, respectively.
Included in other assets are foreclosed properties (real estate owned) of $951
and $983 at December 31, 1993 and 1992, respectively.
Security Capital's banking subsidiaries offer mortgage and consumer loans to
their officers, directors, and employees for the financing of their personal
residences and for other personal purposes. These loans are made in the
ordinary course of business and are made on substantially the same terms,
including interest rates and collateral, prevailing at the time for comparable
transactions with unaffiliated persons. Management does not believe these loans
involve more than the normal risk of collectibility or present other
unfavorable features.
The following is a reconciliation of loans outstanding in excess of $60 to
Security Capital's executive officers, directors, and their immediate families
for the year ended December 31, 1993:
(DOLLARS IN THOUSANDS)
Balance at December 31, 1992 $2,177
New loans 470
Repayments (771)
Balance at December 31, 1993 $1,876
The FASB has issued Standard No. 114, Accounting by Creditors for Impairment of
a Loan, which requires that all creditors value all specifically reviewed loans
for which it is probable that the creditor will be unable to collect all
amounts due according to the terms of the loan agreement at either the present
value of expected cash flows discounted at the loan's effective interest rate,
or if more practical, the market price or value of collateral. This Standard is
required for fiscal years beginning after December 15, 1994. Security Capital
has not determined the impact, if any, of this Standard on its consolidated
financial statements.
(5) ALLOWANCE FOR LOAN LOSSES
The following is a reconciliation of the allowance for loan losses for the
years ended December 31, 1993, 1992 and 1991:
[CAPTION]
Years Ended December 31,
1993 1992 1991
(DOLLARS IN THOUSANDS)
Balance at beginning of year $6,909 5,429 4,732
Charge-offs (732) (1,024) (1,688)
Recoveries 397 656 461
Net charge-offs (335) (368) (1,227)
Provision for loan losses 653 1,848 1,924
Balance at end of year $7,227 6,909 5,429
(6) PREMISES AND EQUIPMENT
A comparative summary of premises and equipment follows:
[CAPTION]
December 31,
1993 1992
(DOLLARS IN THOUSANDS)
Land and land improvements $ 3,917 3,891
Office buildings and improvements 16,175 15,174
Furniture, fixtures, and equipment 11,910 11,282
Construction in progress 1,120 638
33,122 30,985
Accumulated depreciation (14,762) (13,882)
Premises and equipment, net $ 18,360 17,103
(7) ADVANCES FROM THE FEDERAL HOME LOAN BANK
A comparative summary of advances from the FHLB follows:
[CAPTION]
December 31,
Date Due Interest Rate 1993 1992
(DOLLARS IN THOUSANDS)
March 15, 1993 7.60% $ -- 2,500
June 1, 1993 9.40 -- 2,000
March 10, 1994 9.55 1,000 1,000
March 10, 1996 9.65 1,000 1,000
April 23, 1996 8.50 2,000 2,000
May 21, 1996 8.20 1,000 1,000
July 1, 1996 9.25 1,000 1,000
July 2, 1996 9.05 1,000 1,000
March 10, 1997 8.15 1,000 1,000
$8,000 12,500
At December 31, 1993, stock owned by OMNIBANK in the FHLB ($2,220) was pledged
to secure these advances. Security Capital's savings bank subsidiaries have
also entered into blanket collateral agreements with the FHLB whereby they
maintain, free of other encumbrances, qualifying mortgages (as defined) with
unpaid principal balances at least equal to, when discounted at 65% of the
unpaid principal balance, 100% of the total FHLB advances.
Security Capital's savings bank subsidiaries have unused lines of credit with
the FHLB totaling approximately $60,000 at December 31, 1993. If drawn, the
advanced funds would be at market rates of interest and would be collateralized
by the aforementioned blanket collateral agreements, all stock of the borrowing
subsidiary in the FHLB, and any other collateral as deemed necessary by the
FHLB.
(8) INCOME TAXES
As discussed in the Summary of Significant Accounting Policies, Security
Capital adopted Standard No. 109 as of January 1, 1993. The cumulative
effect of this change in accounting for income taxes of $388 as of January
1, 1993 is reflected in the 1993 financial statements as a reduction of
income tax expense. Financial statements for the periods prior to 1993 have
not been restated to apply the provisions of Standard No. 109. The effect
of adoption of Standard No. 109 for the year ended December 31, 1993 was a
reduction in tax liability of approximately $94.
Income tax expense (benefit) for the years ended December 31, 1993, 1992,
and 1991, was as follows:
Current Deferred Total
(DOLLARS IN THOUSANDS)
1993:
FEDERAL $7,019 (132) 6,887
STATE 403 (17) 386
$7,422 (149) 7,273
1992:
Federal 6,745 (839) 5,906
State 417 -- 417
$7,162 (839) 6,323
1991:
Federal 5,452 (131) 5,321
State 313 8 321
$5,765 (123) 5,642
The income tax expense of Security Capital for the years ended December 31,
1993, 1992, and 1991, was different from the amount computed by applying the
federal income tax rate to income before income taxes because of the following:
[CAPTION]
1993 1992 1991
Amount Percent Amount Percent Amount Percent
(DOLLARS IN THOUSANDS)
Income tax expense at federal rate $7,739 35.0% $5,537 34.0% $5,752 34.0%
Increase (decrease) in income taxes
resulting from:
Adjustment to deferred tax assets and
liabilities for enacted changes in tax
laws and rates (48 ) (.2) -- -- -- --
Change in beginning-of-the-year deferred
tax assets valuation allowance (46 ) (.2) -- -- -- --
Tax-exempt interest (301 ) (1.3) (361 ) (2.2) (346 ) (2.0)
Thrift bad debt provision for financial
reporting purposes in excess of current
year loan losses -- -- 504 3.1 242 1.4
State income tax expense, net of federal
income tax benefit 251 1.1 275 1.7 212 1.2
Other, net (322 ) (1.5) 368 2.2 (218 ) (1.3)
$7,273 32.9% $6,323 38.8% $5,642 33.3%
For the years ended December 31, 1992 and 1991, deferred income tax expense
(benefits) result from timing differences in the period in which revenues and
expenses are recognized for income tax and financial statement purposes. The
sources of these differences and the tax effects of each are presented below:
[CAPTION]
1992 1991
(DOLLARS IN THOUSANDS)
Deferred compensation $(327) (198)
Accrued expenses, not deductible until paid (258) --
Other, net (254) 75
$(839) (123)
The sources and tax effects of temporary differences that give rise to
significant portions of the deferred tax liabilities (assets) at December 31,
1993, are presented below:
Deferred tax liabilities:
Depreciation $ 987
FHLB Stock -- book basis greater than tax basis 869
Prepaid pension expense 232
Bank bad debt recapture 204
FHLMC discount accretion 207
Other 98
Total gross deferred tax liabilities 2,597
Deferred tax assets:
Provision for loan losses, net (1,687)
Net deferred loan fees (603)
Accrued expenses, deductible when paid (1,711)
Other (298)
Total gross deferred tax assets (4,299)
Deferred tax assets valuation allowance 201
Net deferred tax asset $(1,501)
The realization of net deferred tax assets may be based on utilization of
carrybacks to prior taxable periods, anticipation of future taxable income in
certain periods, and the utilization of tax planning strategies. Management has
determined that it is more likely than not that the net deferred tax asset can
be supported by carrybacks to federal taxable income in excess of $52,000 in
the three-year federal carryback period and by expected future taxable income
which will far exceed amounts necessary to fully realize remaining deferred tax
assets resulting from the scheduling of temporary differences. The valuation
allowance primarily relates to certain state temporary differences. At January
1, 1993, the valuation allowance was $247. The change in the valuation
allowance during 1993 was a net decrease of $46.
Under the Internal Revenue Code of 1986, Security Capital's savings bank
subsidiaries are allowed a special bad debt deduction related to additions to
tax bad debt reserves established for the purpose of absorbing losses. A
reduction of such reserves for purposes other than bad debt losses will create
income for tax purposes only, which will be subject to the then current
corporate income tax rates. Under the provisions of APB Opinion 23, a deferred
tax liability is not currently recognized for temporary differences resulting
from a savings bank's base year tax bad debt reserve. At December 31, 1993, the
potential deferred tax liability related to the recapture of this portion of
the tax bad debt reserve is approximately $5,600.
Income tax returns subsequent to 1989 are subject to examination by the taxing
authorities.
(9) STOCKHOLDERS' EQUITY
Retained earnings at December 31, 1993, includes approximately $14,016 for
which no provision for federal income tax has been made. This amount
represents allocations of income to bad debt deductions for tax purposes
only. Reduction of such amount for purposes other than tax bad debt losses
will create income for tax purposes only, which will be subject to the then
current corporate income tax rate.
At the time of their conversions to stock ownership, liquidation accounts
were established for each of Security Capital's savings bank subsidiaries
in amounts equal to their respective regulatory capital. Each eligible
deposit account holder, as described in the respective plans of conversion,
is entitled to a proportionate share of this account in the event of a
complete liquidation of any of these subsidiaries, and only in such event.
This share will be reduced if the account holder's balance in the related
deposit account falls below the amount in such account on the date(s) of
record, and will cease to exist if the account is closed. The liquidation
accounts will never be increased despite any increase after the conversions
in the related balance of an account holder.
Security Capital and its banking subsidiaries must comply with certain
regulatory capital requirements established by the FRB and the FDIC. At
December 31, 1993, these standards required Security Capital and its
banking subsidiaries to maintain minimum ratios of Tier 1 capital (as
defined) to total risk-weighted assets and total capital (as defined) to
risk-weighted assets of 4.00% and 8.00%, respectively, and a minimum ratio
of Tier 1 capital to total assets (as defined) of 3.00% to 5.00%, depending
upon the specific institution's composite ratings as determined by its
regulators. At December 31, 1993, Security Capital and its banking
subsidiaries were in compliance with all of the aforementioned capital
requirements.
Security Capital also has authorized 5,000,000 shares of no par value
preferred stock, none of which is issued and outstanding at December 31,
1993.
(10) PENSION, PROFIT SHARING, AND INCENTIVE COMPENSATION PLANS
Security Capital had a profit sharing plan (the Profit Sharing Plan)
covering certain of Security Bank's employees. In 1993 Security Capital
merged the Profit Sharing Plan into an Employees' Incentive Profit Sharing
and Savings (401k) Plan (the Incentive Plan) for the benefit of the
eligible employees of Security Capital and its subsidiaries. As a result,
Security Capital made contributions to the Incentive Plan in 1993 rather
than to the Profit Sharing Plan. Contributions to the Incentive Plan are
based on a percentage of Security Capital's profits, as computed by a
formula set by the Board of Directors. The maximum allowable contribution
is 15% of the participating employee's compensation. Profit sharing costs
charged to expense approximated $694 in 1993, $329 in 1992, and $305 in
1991.
Security Bank sponsored a noncontributory defined benefit plan which covered
substantially all the employees of Security Bank and Security Capital sponsored
a noncontributory defined benefit plan for the benefit of the employees of the
savings bank subsidiaries (the Plans). The Plans were merged into one defined
benefit pension plan covering all eligible employees of Security Capital and
its subsidiaries as of January 1, 1993. Benefits for the Plan are based on
years of service and the employee's annual compensation during his or her term
of employment. Security Capital's funding policy is to contribute annually to
the Plan the maximum amount that can be deducted for federal income tax
purposes. Contributions are intended to provide for benefits attributed to
service to date but also for those expected to be earned in the future.
The following table sets forth the Plans' funded status and amounts recognized
in the consolidated balance sheets at December 31, 1993 and 1992.
[CAPTION]
1993 1992
(DOLLARS IN THOUSANDS)
Plans' assets at fair value, primarily short-term investments and U.S.
Treasury securities $ 7,028 6,550
Actuarial present value of projected benefit obligation for service rendered
to date 9,503 6,121
Plans' assets (less than) in excess of projected benefit obligation (2,475) 429
Unrecognized net transition asset being recognized over 18 years (487) (532)
Unrecognized net (gain) loss 1,693 (477)
Unrecognized prior service cost 1,628 822
Prepaid pension cost included in other assets $ 359 242
The actuarial present value of the accumulated benefit obligation amounted to
$6,341 in 1993 and $5,025 in 1992, including vested benefits of $6,135 in 1993
and $4,901 in 1992.
Net periodic pension cost for the Plans for the three years ended December 31,
1993 included the following components:
[CAPTION]
1993 1992 1991
(DOLLARS IN THOUSANDS)
Service cost -- benefits earned during the period $ 374 403 361
Interest cost on projected benefit obligation 586 367 383
Return on Plans' assets (467) (390) (593)
Net amortization and deferral 14 -- 206
Net periodic pension cost $ 507 380 357
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.0% in 1993, 7.75% in 1992 and
7.75% to 8% in 1991. The expected rate of increase in future compensation
levels was 6.0% in 1993 and 6.5% to 8% for the two years ended December 31,
1992. The expected long-term rate of return on assets was 8.0% in 1993 and 7.0%
to 8.0% in 1992 and 1991.
(11) STOCK OPTION PLANS
Security Capital has continued in effect the Omni Capital Group, Inc. 1988
Incentive Stock Option Plan pursuant to which options to purchase Security
Capital common stock may be granted to certain full-time officers and
employees at an exercise price equal to the fair market value of the stock
on the date of grant. Such options are exercisable for a ten year period.
An aggregate of 675,000 shares of common stock is reserved for issuance
under this plan. In the case of an employee who owns more than 10% of
Security Capital's outstanding common stock at the time the option is
granted, the option price may not be less than 110% of the fair market
value of the shares on the date of grant, and shall be exercisable after
the expiration of six months and before the expiration of five years from
the date of grant.
Security Capital has also continued in effect the Omni Capital Group, Inc.
1988 Directors' Non-Qualified Stock Option Plan, pursuant to which certain
non-employee members of the boards of directors of Security Capital and its
subsidiaries have been granted options to purchase Security Capital common
stock at an exercise price equal to the fair market value of the common
stock on the date of grant. Options granted under this plan must be
exercised within five years from the date of grant.
On March 15, 1988, OMNIBANK adopted two stock option plans, the Home
Federal Savings Bank 1988 Amended and Restated Directors' Non-Qualified
Stock Option Plan and the Home Federal Savings Bank 1988 Incentive Stock
Option Plan (the Home Option Plans), which plans became effective upon the
completion of its conversion from a mutual savings and loan association to
a capital stock savings bank. Home Federal Savings Bank was subsequently
renamed OMNIBANK. Security Capital has continued the Home Option Plans. An
aggregate number of shares amounting to 337,500 has been reserved by
Security Capital to be issued upon the exercise of stock options which have
been granted to certain directors, officers, and employees of Security
Capital under the Home Option Plans. No more options may be granted under
the Home Option Plans.
All stock options outstanding at the time of the Merger were converted into
options to acquire common stock of Security Capital.
The following table reflects the combined status of all of the above stock
option plans at December 31, 1993:
Available Shares
for Subject to Price
Future Outstanding per
Grants Options Share
Directors' Non-Qualified Stock Option Plans: (1)
Balance outstanding at December 31, 1991 72,947 110,471 $ 3.56-7.67
Granted -- -- --
Exercised -- (2,455) 4.08
Balance outstanding at December 31, 1992 72,947 108,016 3.56-7.67
GRANTED -- -- --
EXERCISED -- (65,834) 3.56-5.78
BALANCE OUTSTANDING AT DECEMBER 31, 1993 72,947 42,182 $ 3.56-7.67
Incentive Stock Option Plans: (2)
Balance outstanding at December 31, 1991 247,500 471,375 $ 3.56-7.11
Granted -- -- --
Exercised -- (35,439) 4.08-5.78
Balance outstanding at December 31, 1992 247,500 435,936 3.56-7.11
GRANTED -- -- --
EXERCISED -- (71,031) 3.56-7.11
BALANCE OUTSTANDING AT DECEMBER 31, 1993 247,500 364,905 $ 3.56-7.11
(1) INCLUDES THE HOME FEDERAL SAVINGS BANK AMENDED AND RESTATED 1988
DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN AND THE OMNI CAPITAL GROUP,
INC. 1988 DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN.
(2) INCLUDES THE HOME FEDERAL SAVINGS BANK 1988 INCENTIVE STOCK OPTION PLAN
AND THE OMNI CAPITAL GROUP, INC, 1988 INCENTIVE STOCK OPTION PLAN.
(12) EMPLOYEE STOCK OWNERSHIP PLAN
Security Capital has continued Omni's Employee Stock Ownership Plan (the
ESOP) for the benefit of the former employees of Omni and its subsidiaries.
Contributions to the ESOP are made on a discretionary basis and are
allocated to each eligible employee based on his/her salary in relation to
total employee compensation expense. At retirement or termination of
employment, each employee will receive an amount equal to his/her vested
interest in the ESOP in the form of cash or common stock.
In connection with the mutual to stock conversions of the savings bank
subsidiaries, the ESOP borrowed funds to purchase Omni common stock for the
ESOP. Upon the Merger, the shares of Omni common stock held in the ESOP
were exchanged for shares of Security Capital common stock. During 1992,
Security Capital repurchased sufficient remaining unallocated shares of
Security Capital common stock held by the ESOP to eliminate the remaining
balance of the related debt. In 1993, Security Capital made contributions
to the Incentive Plan discussed in Note 10 rather than to the ESOP.
Security Capital plans to terminate the ESOP in 1994.
ESOP costs charged to expense amounted to $10, $334 and $293 in 1993, 1992
and 1991, respectively.
(13) COMMITMENTS, CONTINGENCIES AND OFF BALANCE SHEET RISK
Security Capital is a defendent in various litigation arising in the normal
course of business. In the opinion of management, resolution of these
matters will not result in a material adverse effect on Security Capital's
financial position.
In the normal course of business, there are outstanding various commitments
to extend credit which are not reflected in the consolidated financial
statements. At December 31, 1993, outstanding loan commitments approximated
$8,507 (Fixed Rate -- $5,737, Variable Rate -- $2,770), preapproved but
unused lines of credit for loans totalled $90,934 and standby letters of
credit aggregated $268. These amounts represent Security Capital's exposure
to credit risk, and in the opinion of management have no more than the
normal lending risk that Security Capital's banking subsidiaries commit to
their borrowers. If these commitments are drawn, Security Capital's banking
subsidiaries will obtain collateral if it is deemed necessary based on
management's credit evaluation of the borrower. Collateral held varies but
may include accounts receivable, inventory, and commercial or residential
real estate. Management expects that these commitments can be funded
through normal operations. In addition, Security Capital has no off-balance
sheet derivative commitments.
Security Capital's banking subsidiaries make primarily commercial, real
estate and installment loans to customers throughout their market areas,
which consists primarily of the south central and western Piedmont regions
of North Carolina. These subsidiaries' real estate loan portfolios can be
affected by the condition of the local real estate markets and their
commercial and installment loan portfolios can be affected by local
economic conditions.
Average daily Federal Reserve balance requirements for the savings bank
subsidiaries for the year ended December 31, 1993 amounted to $525.
Security Bank is required to maintain noninterest bearing cash reserve
balances with the Federal Reserve. The average amount of cash reserve
balances required for the two-week period ended January 5, 1994
approximated $2,165.
(14) SUMMARY OF QUARTERLY INCOME STATEMENT INFORMATION (UNAUDITED)
A summary of quarterly income information for the years ended December 31,
1993 and 1992, follows:
YEAR ENDED DECEMBER 31, 1993
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
INTEREST INCOME $ 16,498 16,279 15,933 15,513
INTEREST EXPENSE 7,248 7,104 6,986 6,797
NET INTEREST INCOME 9,250 9,175 8,947 8,716
PROVISION FOR LOAN LOSSES 184 153 170 146
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 9,066 9,022 8,777 8,570
OTHER INCOME 2,611 2,600 2,785 2,523
OTHER EXPENSE 6,163 6,200 6,037 5,442
INCOME BEFORE INCOME TAXES 5,514 5,422 5,525 5,651
INCOME TAXES 1,545 1,770 2,017 1,941
NET INCOME $ 3,969 3,652 3,508 3,710
NET INCOME PER SHARE $ .33 .31 .30 .32
Year Ended December 31, 1992
Three Months Ended
March 31 June 30 September 30 December 31
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Interest income $ 18,718 18,501 17,754 16,880
Interest expense 9,813 9,031 8,448 7,837
Net interest income 8,905 9,470 9,306 9,043
Provision for loan losses 246 1,296 159 147
Net interest income after provision for loan
losses 8,659 8,174 9,147 8,896
Other income 2,221 2,258 1,945 2,524
Other expense 6,618 8,685 6,050 6,187
Income before income taxes 4,262 1,747 5,042 5,233
Income taxes 1,445 1,528 1,616 1,734
Net income $ 2,817 219 3,426 3,499
Net income per share $ .24 .02 .29 .29
(15) PARENT COMPANY FINANCIAL DATA
The primary assets of Security Capital (the Parent Company) are its
investments in subsidiaries and its principal source of income is dividends
from these subsidiaries. Certain regulatory and other requirements restrict
the lending of funds by the subsidiaries to the Parent Company and the
amount of dividends which can be paid to the Parent Company. At December
31, 1993, the subsidiaries had available undivided profits of approximately
$25,038 for payments of dividends without obtaining prior regulatory
approval. At December 31, 1993, approximately $85,724 of the Parent
Company's investment in its subsidiaries is restricted as to transfer to
the Parent Company without obtaining prior regulatory approval.
The following is a summary of selected financial information for the Parent
Company:
Balance Sheets December 31,
1993 1992
(DOLLARS IN THOUSANDS)
Assets:
Cash on deposit with subsidiaries $ 13,488 3,610
Investments in and advances to subsidiaries 110,762 113,210
Investment securities (market value of $86 at December 31, 1993) 66 --
Other assets -- 158
Total assets $124,316 116,978
Liabilities and stockholders' equity:
Other liabilities 96 50
Total liabilities 96 50
Stockholders' equity:
Common stock 51,167 54,120
Retained earnings, substantially restricted 73,053 62,808
Total stockholders' equity 124,220 116,928
Total liabilities and stockholders' equity $124,316 116,978
Statements of Income Years Ended December 31,
1993 1992 1991
(DOLLARS IN THOUSANDS)
Dividends from subsidiaries $15,184 5,434 5,756
Management income from subsidiaries 639 1,552 436
Equity in undistributed net (loss) income of subsidiaries (233) 4,393 5,694
Other income 165 145 103
Total income 15,755 11,524 11,989
Expenses 916 1,563 712
Net income $14,839 9,961 11,277
Statements of Cash Flows Years Ended December 31,
1993 1992 1991
(DOLLARS IN THOUSANDS)
Cash flows from operating activities:
Net income $14,839 9,961 11,277
Adjustments to reconcile net income to net cash provided by operating
activities:
Loan to ESOP -- -- 20
Decrease (increase) in other assets 158 1,654 (1,400)
Equity in undistributed net loss (income) of subsidiaries 233 (4,393) (5,694)
Increase in other liabilities 46 50 --
Net cash provided by operating activities 15,276 7,272 4,203
Cash flows from investing activities:
Decrease (increase) in advances to subsidiaries 2,215 (2,532) (1,453)
Purchases of investment securities (66) -- --
Net cash provided (used) by investing activities 2,149 (2,532) (1,453)
Cash flows from financing activities:
Purchase and retirement of common stock (3,559) (509) (102)
Proceeds from stock options exercised 606 158 78
Dividends paid to stockholders (4,594) (3,712) (2,731)
Net cash used by financing activities (7,547) (4,063) (2,755)
Net increase (decrease) in cash and cash equivalents 9,878 677 (5)
Cash and cash equivalents at beginning of year 3,610 2,933 2,938
Cash and cash equivalents at end of year $13,488 3,610 2,933
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments (Statement No. 107) was issued by the FASB
in December 1991. Statement No. 107 requires disclosures about the fair
value of all financial instruments. Fair value estimates, methods, and
assumptions are set forth below for each type of financial instrument.
CASH, FEDERAL FUNDS SOLD AND SHORT-TERM BORROWINGS
The carrying amount of cash, federal funds sold, short-term borrowings, and
accrued interest receivable or payable on all financial instruments approximate
fair value because of the short terms to maturity of these financial
instruments.
INVESTMENT SECURITIES
The following table presents the carrying value and estimated fair value of
investment securities at December 31, 1993 and 1992:
At December 31,
1993 1992
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
(DOLLARS IN THOUSANDS)
US Government obligations:
Due in one year or less $ 94,356 95,719 72,729 78,021
Due after one year through five years 210,824 215,040 217,954 219,938
Due after five years through ten years -- -- 2,165 2,156
US Government agency obligations:
Due in one year or less 500 505 500 502
Due after one year through five years 34,947 34,724 6,484 6,533
Due after five years through ten years 4,962 5,139 2,982 2,961
Mortgage-backed securities 12,676 13,135 19,298 19,769
State and municipal obligations:
Due in one year or less 1,002 1,018 -- --
Due after one year through five years 9,020 9,680 15,592 16,570
Other:
Due after one year through five years -- -- 900 900
Due after ten years 66 86 -- --
$368,353 375,046 338,604 347,350
The fair value of debt securities, except certain state and municipal
obligations, is estimated based on bid prices published in financial newspapers
or bid quotations received from securities dealers. The fair value of certain
state and municipal obligations is not readily available through market sources
other than dealer quotations, so fair value estimates are based on quoted
market prices of instruments similar to those being valued, adjusted for
differences between the quoted instruments and the instruments being valued.
LOANS
For purposes of estimating fair value of loans, the portfolio is segregated by
type based on similar characteristics such as real estate mortgage, real estate
construction and installment and equity lines of credit.
The fair value of loans is calculated by discounting estimated cash flows using
current rates at which similar loans would be made to borrowers with similar
credit risk. Cash flows for fixed rate loans are based on the weighted average
maturity of the specific loan category. Adjustable rate loans are either prime
based and are repriced immediately or monthly as prime changes, or are based on
published indices and have relatively short terms to their repricing dates.
The following table presents fair value information for loans:
1993 1992
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(DOLLARS IN THOUSANDS)
Loans, net $465,975 472,092 503,520 509,181
Loans held for sale $ 18,409 18,411 2,264 2,273
DEPOSIT LIABILITIES
The fair value of demand deposits, savings accounts and money market deposits
is the amount payable on demand. The fair value of certificates of deposit is
based on the discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of similar remaining
maturities.
The following table presents fair value information for deposits:
At December 31,
1993 1992
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(DOLLARS IN THOUSANDS)
Demand deposit-noninterest-bearing $ 67,830 67,830 60,639 60,639
Demand deposit-interest bearing 76,130 76,130 67,202 67,202
Insured money market accounts 79,711 79,711 85,943 85,943
Savings deposits 151,360 151,360 143,000 143,000
Certificates of deposit 409,425 411,365 416,851 420,468
$784,456 786,396 773,635 777,252
ADVANCES FROM THE FEDERAL HOME LOAN BANK AND OTHER BORROWED MONEY
The fair value of advances from the FHLB is based on quoted market prices for
the same or similar issues or on the current rates offered to Security Capital
for debt of the same remaining maturities. At December 31, 1993 and 1992, the
carrying value of advances from the FHLB was $8,000 and $12,500, respectively,
and the fair value was $8,539 and $13,317, respectively.
The fair value of other borrowed money, consisting of securities sold under
agreements to repurchase, bearing a short term to maturity, is considered to
approximate carrying value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The large majority of commitments to extend credit and standby letters of
credit are at variable rates and/or have relatively short terms to maturity.
Therefore, the fair value for these financial instruments is considered to
approximate the carrying value.
LIMITATIONS
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time Security Capital's entire holdings of a
particular financial instrument. Because no market exists for a significant
portion of Security Capital's financial instruments, fair value estimates are
based on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-and-off balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. For example, a significant asset not considered a
financial asset is premises and equipment. In addition, tax ramifications
related to the realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been considered in any
of the estimates.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Security Capital Bancorp
Salisbury, North Carolina
We have audited the accompanying consolidated balance sheets of Security Capital
Bancorp and subsidiaries (Security Capital) as of December 31, 1993 and 1992,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1993, included on pages 8 through 26 herein. These consolidated financial
statements are the responsibility of Security Capital's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Security Capital
Bancorp and subsidiaries at December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick
Charlotte, North Carolina
January 28, 1994
SECURITY BANK & TRUST COMPANY
SALISBURY, NORTH CAROLINA
DIRECTORS
Ralph A. Barnhardt
VICE CHAIRMAN
SECURITY CAPITAL BANCORP
Edward A. Brown
PRESIDENT
W. A. BROWN & SON, INC
Henry B. Gaye
PRESIDENT
GAYE CHEVROLET, INC.
Lloyd G. Gurley
PRESIDENT/CHIEF EXECUTIVE OFFICER
SECURITY BANK AND TRUST COMPANY
David B. Jordan
VICE CHAIRMAN
SECURITY CAPITAL BANCORP
William C. Kluttz, Jr.
ATTORNEY-AT-LAW
KLUTTZ, REAMER, BLANKENSHIP & HAYES
F. Taft McCoy, Jr.
OWNER
MCCOYS REALTY
J. G. Rutledge, III
RETIRED CHAIRMAN
FIRST SECURITY FINANCIAL CORPORATION
Miles J. Smith, Jr.*
CHAIRMAN
SECURITY CAPITAL BANCORP
Fred J. Stanback, Jr.
PRIVATE INVESTOR
Jimmy K. Stegall
PRESIDENT
STEGALL BUILDERS MART, INC.
E. William Wagoner
CHAIRMAN
WAGONER CONSTRUCTION COMPANY
*Chairman of the Board
OFFICERS
Lloyd G. Gurley
PRESIDENT/CHIEF EXECUTIVE OFFICER
A. Lewis Bass, III
SENIOR VICE PRESIDENT
Bobby W. Chandler
SENIOR VICE PRESIDENT
J. Parks Helms
SENIOR VICE PRESIDENT
O. M. Hough, Jr.
SENIOR VICE PRESIDENT
R. Alex Miller, Jr.
SENIOR VICE PRESIDENT
Benjamin F. Wright
SENIOR VICE PRESIDENT
Kenneth W. Banner
VICE PRESIDENT
Peggy H. Bollinger
SECRETARY
Dennis H. Burnette
VICE PRESIDENT
Larry V. Clark
VICE PRESIDENT
Benjamin W. McKenzie, III
VICE PRESIDENT
Pressley A. Ridgill
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
Fred L. Rodenbeck, Jr.
SENIOR TRUST OFFICER
Patrick M. Vallandingham
VICE PRESIDENT
Lynn H. Weisler
TREASURER/CONTROLLER
SECURITY BANK & TRUST COMPANY
LOCAL BOARDS OF MANAGERS AND EXECUTIVE OFFICERS
ALBEMARLE
CLIFFORD E. BURRIS
JAMES W. CARPENTER
C. WAYNE SASSER
CRIS D. TURNER -- VICE PRESIDENT
BELMONT
CHARLES E. CATO
ROBERT R. HILKER
HARRY MELTON
DR. JOSEPH M. MOSES
DR. SAMUEL L. SHAVER
VICKIE L. WHITLEY
BRIAN D. HERRE -- VICE PRESIDENT
CHARLES R. HUDSON -- VICE PRESIDENT
CHARLOTTE
LLOYD F. BAUCOM
DR. BRUCE BERRYHILL
J. RONALD MARTIN
JOHN A. POLITES
B. D. RODGERS
LARRY W. STROUD
BOBBY W. CHANDLER -- SENIOR
VICE PRESIDENT
CONCORD
JOHNNY F. CLINE
T. LARRY TORRENCE
LOYE T. WHIDDEN, JR.
J. CLARENCE WILLIFORD --
VICE PRESIDENT
KANNAPOLIS
JAMES D. BASSINGER
ROBERT D. MISENHEIMER
WALTER M. SAFRIT, II
LESTER W. STOCKS
D. W. HODGE, JR. -- SENIOR
VICE PRESIDENT
JOE B. WILLIAMS -- VICE PRESIDENT
LANDIS
CHARLES D. BROWN
BENNETT D. HESTER, SR.
CRYSTAL B. JULIAN
GEORGE L. PLESS
FRANK T. TADLOCK
FRANK HAAS -- VICE PRESIDENT
LEXINGTON
DAVID HEDRICK
STEVE REGAN
CLARK EUGENE SMITH
JAMES SNYDER, JR.
JOSEPH D. STAMEY
LINDA S. BRYAN -- VICE PRESIDENT
MARSHVILLE
OLIN LEE BROOME
J. GREG GRIFFIN, DDS
TED HARGETT
GARY HENRY, MD
BARRY W. MILLS
J. PARKS MORGAN
TOM E. STEGALL
MATTHEWS
R. GENE ESTRIDGE
TERRY M. HILL
CAROL I. NOE
DR. RUSSELL J. ROGERS, JR.
DAVID L. MARLOWE --
VICE PRESIDENT
MOCKSVILLE
DOUGLAS S. HUNTLEY --
VICE PRESIDENT
MONROE
ANGELA T. BOWER
BILL G. BRASWELL, JR.
QUILLIAN JUNIOR CAUTHEN
DR. J. R. GIBSON
HARRY MYERS
HENRY J. NEWGARD
JOHNNY O. PIGG
BILLY IVAN SECREST
KARL G. CAHOON -- VICE PRESIDENT
CAROLYN F. DUNCAN --
VICE PRESIDENT
EDD M. LITTLE -- VICE PRESIDENT
JOHN H. WALTERS -- VICE PRESIDENT
MOORESVILLE
B. K. BARRINGER, JR.
DR. BRIAN B. BLACKBURN
ROGER L. EDWARDS
JOHN C. NEILL
WAYNE WESTMORELAND
DANIEL F. BEAVER --
VICE PRESIDENT
NORWOOD
MITCHELL D. EDWARDS
DAVID A. LEE
BERT MCCOLLUM
JOHN PARKER MCNEILL
JACKIE R. PHILLIPS
JAMES E. CAMERON --
VICE PRESIDENT
FIRST SECURITY CREDIT
CORPORATION
HOWARD W. HOLT --
SENIOR VICE PRESIDENT
JERRY SIDES -- VICE PRESIDENT
CAROLINA INSURANCE AGENCY
C. C. FREEMAN -- MANAGER
OAKBORO
DAN C. BROOKS
J. B. EDWARDS, JR.
ROSCOE N. HATLEY
ROBERT L. HILL, JR.
C. F. HINSON
ROY HINSON
J. PARKS HELMS -- SENIOR
VICE PRESIDENT
POLKTON
KENNETH CARPENTER
LARRY CAUDLE
AARON EFIRD
FELECIA C. RICHARDSON -- BANKING OFFICER
SALISBURY
JERRY H. BARGER
JAMES F. FOWLER
CHARLES R. ISENHOUR
WILLIAM R. KENNEDY
NORMAN C. LENTZ
REID G. LEONARD
R. PAUL PROPST
DR. JOHN O. REYNOLDS, JR.
R. A. MILLER, JR. -- SENIOR
VICE PRESIDENT
W. STURGES BRYAN --
VICE PRESIDENT
JAMES J. ROHRER -- VICE PRESIDENT
SPENCER
T. E. AGNER
DR. JAMES C. EAGLE, JR.
EDGAR W. GETTYS
ROBERT M. MAULDIN
SUSAN L. MORRIS
DR. DAVID N. SMITH
TOM W. AYERS -- SENIOR
VICE PRESIDENT
STANLEY
JOHN H. WILLIAMSON, JR. --
VICE PRESIDENT
WADESBORO
GEORGE C. BOWER, JR.
WILLIAM E. HUNTLEY
HARRY LEAVITT, III
WILLIAM G. MARTIN
RONALD B. TURNER --
VICE PRESIDENT
WEST DAVIDSON
PATTIE R. BRINKLE -- BANKING OFFICER
WINGATE
MARJORIE P. PENNIGAR --
ASSISTANT VICE PRESIDENT
OMNIBANK, SSB
SALISBURY, NORTH CAROLINA
DIRECTORS
Ralph A. Barnhardt
VICE CHAIRMAN
SECURITY CAPITAL BANCORP
Lloyd G. Gurley
PRESIDENT/CHIEF ADMINISTRATIVE OFFICER
SECURITY CAPITAL BANCORP
David B. Jordan
PRESIDENT/CHIEF EXECUTIVE OFFICER
OMNIBANK, SSB
Ervin E. Lampert, Jr.
RETIRED PRESIDENT
R. W. NORMAN COMPANY
William G. Loeblein*
RETIRED PRESIDENT
LOEBLEIN BROTHERS, INC.
Clyde B. Mickle, Jr.
PRESIDENT
MICKLE TIRE COMPANY, INC.
Harold Mowery
VICE PRESIDENT
WAGONER CONSTRUCTION COMPANY
Robert L. Pierce, III
PRESIDENT
HOME CONCRETE & SUPPLY COMPANY
Carl M. Short, Jr.
WOODSON, FORD, SAYERS, LAWTHER, SHORT, PARROTT & HUDSON
Miles J. Smith, Jr.
CHAIRMAN
SECURITY CAPITAL BANCORP
James H. West, Jr.
REAL ESTATE INVESTOR
*Chairman of the Board
OFFICERS
David B. Jordan
PRESIDENT/CHIEF EXECUTIVE OFFICER
Gunnar N. R. Fromen
SENIOR VICE PRESIDENT
Julian M. Sides
SENIOR VICE PRESIDENT
Kenneth W. Banner
VICE PRESIDENT -- SECONDARY MARKETING/INVESTMENTS
A. Lewis Bass, III
VICE PRESIDENT -- LOAN ADMINISTRATION
Dennis H. Burnette
VICE PRESIDENT -- AUDIT
Larry V. Clark
VICE PRESIDENT -- BANK SERVICES
Norwood C. Edgeworth
VICE PRESIDENT -- CORRESPONDENT LENDING
Benjamin W. McKenzie, III
VICE PRESIDENT -- PERSONNEL
J. Eric Norris
VICE PRESIDENT -- APPRAISALS
Pressley A. Ridgill
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
Patrick M. Vallandingham
VICE PRESIDENT -- COMPLIANCE/SECURITY
Lynn H. Weisler
TREASURER/CONTROLLER
BRANCH LOCATIONS
507 West Innes Street (Main Office)
Salisbury, North Carolina
105 Avalon Drive
Salisbury, North Carolina
2070 Statesville Boulevard
Salisbury, North Carolina
CITIZENS SAVINGS, SSB
CONCORD, NORTH CAROLINA
DIRECTORS
John M. Barnhardt
PRESIDENT
BARNHARDT, WALKER & STRICKLAND, INC.
Ralph A. Barnhardt*
PRESIDENT/CHIEF EXECUTIVE OFFICER
CITIZENS SAVINGS, SSB
Dan L. Gray
EXECUTIVE DIRECTOR
THE CANNON FOUNDATION, INC.
Lloyd G. Gurley
PRESIDENT
SECURITY CAPITAL BANCORP
Daniel B. Harrell, Jr.
DENTIST
HARRELL & MASHBURN, P.A.
David B. Jordan
VICE CHAIRMAN
SECURITY CAPITAL BANCORP
Miles J. Smith, Jr.
CHAIRMAN
SECURITY CAPITAL BANCORP
W. Erwin Spainhour
PRESIDENT
HARTSELL, HARTSELL & MILLS, P.A.
James H. Wilkinson, Jr.
PRESIDENT
WILKINSON'S FUNERAL HOME, INC.
*Chairman of the Board
OFFICERS
Ralph A. Barnhardt
PRESIDENT/CHIEF EXECUTIVE OFFICER
E. K. Prewitt, Jr.
VICE PRESIDENT/SECRETARY
Kenneth W. Banner
VICE PRESIDENT -- SECONDARY MARKETING/INVESTMENTS
A. Lewis Bass, III
VICE PRESIDENT -- LOAN ADMINISTRATION
Dennis L. Barger
VICE PRESIDENT
Dennis H. Burnette
VICE PRESIDENT -- AUDIT
Larry V. Clark
VICE PRESIDENT -- BANK SERVICES
Benjamin W. McKenzie, III
VICE PRESIDENT -- PERSONNEL
Pressley A. Ridgill
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
J. Phillip Smith
VICE PRESIDENT -- LENDING
Patrick M. Vallandingham
VICE PRESIDENT -- COMPLIANCE/SECURITY
Lynn H. Weisler
TREASURER/CONTROLLER
BRANCH LOCATIONS
31 Union Street, North (Main Office)
Concord, North Carolina
818 Church Street, North
Concord, North Carolina
4720 Highway 49, South
Harrisburg, North Carolina
276 U.S. Highway 29, North
Concord, North Carolina
970 South Cannon Boulevard
Kannapolis, North Carolina
HOME SAVINGS BANK, SSB
KINGS MOUNTAIN, NORTH CAROLINA
DIRECTORS
Ralph A. Barnhardt
VICE CHAIRMAN
SECURITY CAPITAL BANCORP
Charles D. Blanton
PHARMACIST
ECKERD DRUGS
Lloyd G. Gurley
PRESIDENT
SECURITY CAPITAL BANCORP
David B. Jordan
VICE CHAIRMAN
SECURITY CAPITAL BANCORP
B. S. Peeler, Jr.
RETIRED
KINGS MOUNTAIN DISTRICT
SCHOOL SYSTEM
Nancy S. Scism
EXECUTIVE VICE PRESIDENT/CEO
HOME SAVINGS BANK, SSB
Miles J. Smith, Jr.
CHAIRMAN
SECURITY CAPITAL BANCORP
Thomas A. Tate, Sr.*
PRESIDENT
HOME SAVINGS BANK, SSB
Wade H. Tyner, Jr.
OWNER
WADE FORD, INC.
James L. Williamson
RETIRED PARTNER
KPMG PEAT MARWICK
*Chairman of the Board
OFFICERS
Thomas A. Tate, Sr.
PRESIDENT
Nancy S. Scism
EXECUTIVE VICE PRESIDENT/
SECRETARY/CEO
Kenneth W. Banner
VICE PRESIDENT -- SECONDARY MARKETING/INVESTMENTS
A. Lewis Bass, III
VICE PRESIDENT -- LOAN ADMINISTRATION
Dennis H. Burnette
VICE PRESIDENT -- AUDIT
Larry V. Clark
VICE PRESIDENT -- BANK SERVICES
Benjamin W. McKenzie, III
VICE PRESIDENT -- PERSONNEL
Pressley A. Ridgill
VICE PRESIDENT/CHIEF FINANCIAL OFFICER
Sandra F. Sellers
VICE PRESIDENT -- LENDING
Patrick M. Vallandingham
VICE PRESIDENT -- COMPLIANCE/SECURITY
Lynn H. Weisler
TREASURER/CONTROLLER
BRANCH LOCATIONS
700 West Kings Street (Main Office)
Kings Mountain, North Carolina
215 East Virginia Avenue
Bessemer City, North Carolina
257 West Main Avenue
Gastonia, North Carolina
SECURITY CAPITAL BANCORP
SALISBURY, NORTH CAROLINA
DIRECTORS
John M. Barnhardt
PRESIDENT
BARNHARDT, WALKER & STRICKLAND, INC.
Ralph A. Barnhardt
VICE CHAIRMAN
SECURITY CAPITAL BANCORP
Edward A. Brown
PRESIDENT
W. A. BROWN & SON, INC.
Henry B. Gaye
PRESIDENT
GAYE CHEVROLET, INC.
Dan L. Gray
EXECUTIVE DIRECTOR
THE CANNON FOUNDATION, INC.
Lloyd G. Gurley
PRESIDENT/CHIEF ADMINISTRATIVE OFFICER
SECURITY CAPITAL BANCORP
David B. Jordan
VICE-CHAIRMAN/CHIEF EXECUTIVE OFFICER
SECURITY CAPITAL BANCORP
William C. Kluttz, Jr.
ATTORNEY-AT-LAW
KLUTTZ, REAMER, BLANKENSHIP & HAYES
Ervin E. Lampert, Jr.
RETIRED PRESIDENT
R. W. NORMAN COMPANY
William G. Loeblein
RETIRED PRESIDENT
LOEBLEIN BROTHERS, INC.
F. Taft McCoy, Jr.
OWNER
MCCOYS REALTY
Harold Mowery
VICE PRESIDENT
WAGONER CONSTRUCTION COMPANY
J. G. Rutledge, III
RETIRED CHAIRMAN
FIRST SECURITY FINANCIAL CORPORATION
Carl M. Short, Jr.
ATTORNEY-AT-LAW
WOODSON, FORD, SAYERS, LAWTHER, SHORT, PARROTT & HUDSON
Miles J. Smith, Jr.*
CHAIRMAN
PREMTEC, INC.
W. Erwin Spainhour
PRESIDENT
HARTSELL, HARTSELL & MILLS, P.A.
Fred J. Stanback, Jr.
PRIVATE INVESTOR
Jimmy K. Stegall
PRESIDENT
STEGALL BUILDERS MART, INC.
Thomas A. Tate, Sr.
CHAIRMAN
HOME SAVINGS BANK, SSB
E. William Wagoner
CHAIRMAN
WAGONER CONSTRUCTION COMPANY
James L. Williamson
RETIRED PARTNER
KPMG PEAT MARWICK
*Chairman of the Board
OFFICERS
Miles J. Smith, Jr.
CHAIRMAN OF THE BOARD
Ralph A. Barnhardt
VICE CHAIRMAN
David B. Jordan
VICE CHAIRMAN/CHIEF EXECUTIVE OFFICER
Lloyd G. Gurley
PRESIDENT/CHIEF ADMINISTRATIVE OFFICER
Kenneth W. Banner
SENIOR VICE PRESIDENT
A. Lewis Bass, III
SENIOR VICE PRESIDENT
Larry V. Clark
SENIOR VICE PRESIDENT
Benjamin W. McKenzie, III
SENIOR VICE PRESIDENT
E. K. Prewitt, Jr.
SENIOR VICE PRESIDENT/SECRETARY
Pressley A. Ridgill
SENIOR VICE PRESIDENT/CFO/TREASURER
Dennis H. Burnette
VICE PRESIDENT
I. Scott Johnson, III
VICE PRESIDENT
R. Alex Miller, Jr.
VICE PRESIDENT
Norman H. Riddle
VICE PRESIDENT
Ralph K. Sedberry
VICE PRESIDENT
Patrick M. Vallandingham
VICE PRESIDENT
Lynn H. Weisler
VICE PRESIDENT/CONTROLLER
Benjamin F. Wright
VICE PRESIDENT
(Security Capital Bancorp logo)
507 WEST INNES STREET, POST OFFICE BOX 1387, SALISBURY, NC 28145-1387