UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________.
Commission File Number 0-27951
SECURITY FINANCIAL BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 35-2085053
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
9321 WICKER AVENUE, ST. JOHN, INDIANA 46373
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(Address of principal executive offices)
(219) 365-4344
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changes since last report)
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of November 1, 2000,
Security Financial had 1,938,460 shares outstanding.
1
SECURITY FINANCIAL BANCORP, INC.
FORM 10-QSB
INDEX
Page
----
PART I: FINANCIAL INFORMATION FOR SECURITY FINANCIAL
BANCORP, INC
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at September 30, 2000
and June 30, 2000 3
Consolidated Statements of Income for the Three Months
Ended September 30, 2000 and 1999 4
Consolidated Statement of Changes in Stockholders' Equity
for the Three Months Ended September 30, 2000 5
Consolidated Statements of Cash Flows for the Three Months
Ended September 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 15
2
PART I--FINANCIAL INFORMATION FOR
SECURITY FINANCIAL BANCORP, INC.
Item 1. Financial Statements.
SECURITY FINANCIAL BANCORP, INC.
Consolidated Balance Sheets
September 30, 2000 and June 30, 2000
(Unaudited)
(Dollars in thousands, except per share data)
September 30, June 30,
2000 2000
---- ----
Assets:
Cash and due from financial institutions $ 5,080 $ 5,463
Interest-bearing deposits in financial institutions 5,925 4,391
--------- ---------
Cash and cash equivalents 11,005 9,854
Certificates of deposit in other financial institutions 7,000 7,000
Securities available for sale 28,859 27,097
Loans held for sale 783 357
Loans receivable, net of allowance for loan losses of $1,459 at
September 30, 2000 and $1,449 at June 30, 2000 126,930 131,693
Federal Home Loan Bank stock 5,300 5,300
Other real estate owned 102 347
Premises and equipment, net 5,519 5,483
Other assets 2,369 2,475
--------- ---------
Total assets $ 187,867 $ 189,606
========= =========
Liabilities and Stockholders' Equity:
Liabilities:
Demand, NOW and money market deposits $ 17,999 $ 18,394
Savings 40,149 41,914
Time deposits 91,050 91,281
--------- ---------
Total deposits 149,198 151,589
Borrowed funds 175 --
Advances from borrowers for taxes and insurance 630 491
Other liabilities 952 1,040
--------- ---------
Total liabilities 150,955 153,120
Stockholders' Equity:
Common stock 194 194
Additional paid-in capital 18,411 18,395
Unearned ESOP (1,473) (1,499)
Retained earnings, substantially restricted 19,939 19,570
Accumulated other comprehensive loss (159) (174)
--------- ---------
Total stockholders' equity 36,912 36,486
--------- ---------
Total liabilities and stockholders' equity $ 187,867 $ 189,606
========= =========
See accompanying notes to consolidated financial statements.
3
SECURITY FINANCIAL BANCORP, INC.
(Unaudited)
Consolidated Statements of Income
For the Three Months Ended September 30, 2000 and 1999
(In thousands)
September 30, September 30,
2000 1999
---- ----
Interest and dividend income:
Loans, including fees $ 2,725 $ 3,085
Securities 701 354
Other interest-earning assets 155 41
------- -------
Total interest income 3,581 3,480
Interest expense:
Deposits 1,597 1,553
Borrowed funds -- 74
------- -------
Total interest expense 1,597 1,627
Net interest income 1,984 1,853
Provision for loan losses 65 75
------- -------
Net interest income after provision for loan losses 1,919 1,778
Noninterest income:
Service charges and other fees 61 46
Gain on sale of loans from secondary market activities 20 42
Gain on sale of mortgage servicing rights -- 178
Other 165 212
------- -------
Total noninterest income 246 478
Noninterest expense:
Compensation and benefits 899 966
Occupancy and equipment 377 434
SAIF deposit insurance premium 8 38
Advertising and promotions 97 125
Data processing 105 129
Loss (gain) on sale of other real estate owned 40 (22)
Other 270 348
------- -------
Total noninterest expense 1,796 2,018
------- -------
Income before income taxes 369 238
Income taxes -- --
------- -------
Net income $ 369 $ 238
======= =======
Earnings per share - basic and diluted $ 0.21 N/A
Comprehensive income $ 384 $ 226
See accompanying notes to consolidated financial statements.
4
SECURITY FINANCIAL BANCORP, INC.
Statement of Changes in Stockholders' Equity
For the Three Months Ended September 30, 2000
(Unaudited)
(In thousands)
Accumulated Total
Additional Other Stock-
Common Paid-In Unearned Retained Comprehensive holders'
Stock Capital ESOP Earnings Income (Loss) Equity
----- ------- ---- -------- ------------- ------
Balance at June 30, 2000 $ 194 $18,395 $(1,499) $19,570 $ (174) $36,486
ESOP shares earned -- 16 26 -- -- 42
Comprehensive income:
Net income -- -- -- 369 -- 369
Change in unrealized loss
on securities available-
for-sale -- -- -- -- 15 15
-------
Total comprehensive
income 384
------- ------- ------- ------- ------- -------
Balance at September 30, 2000 $ 194 $18,411 $(1,473) $19,939 $ (159) $36,912
======= ======= ======= ======= ======= =======
See accompanying notes to consolidated financial statements.
5
SECURITY FINANCIAL BANCORP, INC.
Consolidated Statements of Cash Flows
For Three Months Ended September 30, 2000 and 1999
(Unaudited)
(In thousands)
September 30, September 30,
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 369 $ 238
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation 161 165
Provision for loan losses 65 75
Loss (gain) on other real estate owned 40 (22)
Origination and purchase of loans held for sale (2,196) (8,292)
Proceeds from sales of loans held for sale 1,790 6,430
Change in mortgage loan servicing rights -- 4,020
Gain on sale of loans for secondary market (20) (42)
Gain on sale of loans mortgage servicing rights -- (178)
ESOP expense 42 --
Amortization of mortgage servicing rights -- --
Accretion of discount on securities (72) (85)
Change in other assets 97 (3,554)
Change in other liabilities (88) 1,180
-------- --------
Net cash from operating activities 188 (65)
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 4,940 2,753
Principal payments on securities available for sale 322 702
Purchase of securities available for sale (6,928) (2,870)
Change in loans 4,698 5,964
Change in premises and equipment, net (197) (40)
Proceeds from sale of other real estate 205 139
-------- --------
Net cash from investing activities 3,040 6,648
Cash flows from financing activities:
Change in deposits (2,391) (2,006)
Change in advance payments by borrowers for taxes and insurance 139 74
Proceeds from borrowed funds 175 --
-------- --------
Net cash for financing activities (2,077) (1,932)
Net increase in cash and cash equivalents 1,151 4,651
Cash and cash equivalents at beginning of period 9,854 4,520
-------- --------
Cash and cash equivalents at end of period $ 11,005 $ 9,171
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,581 $ 1,639
Transfer from loans to foreclosed real estate -- 582
See accompanying notes to consolidated financial statements.
6
SECURITY FINANCIAL BANCORP, INC.
Notes to Consolidated Financial Statements
(1) Organization
Security Financial Bancorp Inc. ("Security Financial" or the "Company")
was incorporated under the laws of Delaware in September 1999 for the purpose of
serving as the holding company of Security Federal Bank & Trust ("Security
Federal" or the "Bank") as part of Security Federal's conversion from the mutual
to stock form of organization. The conversion, completed on January 5, 2000,
resulted in Security Financial issuing a total of 1,938,460 shares of its common
stock, par value $.01 per share, at a price of $10 per share. Prior to the
conversion, Security Financial had not engaged in any material operations and
had no assets or income. Security Financial is currently a savings and loan
holding company and is subject to regulation by the Office of Thrift Supervision
and the Securities and Exchange Commission. Prior to the conversion, Security
Federal was known as Security Federal Bank, a Federal Savings Bank.
(2) Accounting Principles
The accompanying unaudited financial statements of Security Financial,
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with instructions to Form 10-QSB and of
Regulation S-B. Accordingly, the financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of a normal recurring nature) considered necessary for a fair
presentation have been included. Operating results for the three months ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the current fiscal year.
These financial statements should be read in conjunction with the
consolidated financial statements included in Security Financial's June 30, 2000
Form 10-KSB.
(3) Earnings per Share
Earnings per share is computed under the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." Amounts reported
as earnings per share reflect earnings available to common stockholders divided
by the weighted average number of common shares outstanding since that date.
(4) Comprehensive Income
Three Months Ended
September 30,
2000 1999
---- ----
Net income $ 369 $ 238
Comprehensive income - net of taxes
Unrealized gain (loss) on securities available-for-sale
arising during period 15 (12)
----- -----
Comprehensive income $ 384 $ 226
===== =====
7
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following presents management's discussion and analysis of the results
of operations and financial condition of Security Financial as of the dates and
for the periods indicated. This discussion should be read in conjunction with
the Company's consolidated financial statements and the notes thereto and other
financial data appearing elsewhere in the annual report.
General
The Company is engaged primarily in attracting deposits from the general public
and using such deposits to originate one-to-four-family residential mortgage
and, to a lesser extent, consumer and other loans primarily in its market areas
and to acquire securities. The Company's revenues are derived principally from
interest earned on loans and securities, gains from sales of first mortgage
loans in the secondary market, and fees from other banking-related services. The
operations of the Company are influenced significantly by general economic
conditions and by policies of financial institution regulatory agencies,
primarily the Office of Thrift Supervision and the Federal Deposit Insurance
Corporation. The Company's cost of funds is influenced by interest rates on
competing investments and general market interest rates. Lending activities and
mortgage loan sales volumes are affected by the demand for financing of real
estate and other types of loans, which in turn is affected by the interest rates
at which such financings may be offered.
The Company's net interest income is dependent primarily upon the difference or
spread between the average yield earned on loans receivable and securities and
the average rate paid on deposits, as well as the relative amounts of such
assets and liabilities. The Company, like other thrift institutions, is subject
to interest rate risk to the degree that its interest-bearing liabilities mature
or reprice at different times or on a different basis than its interest-earning
assets.
On October 4, 2000, the Company announced that the Board of Directors had
adopted a stock repurchase plan subject to regulatory approval and that an
application had been submitted to the Office of Thrift Supervision on July 20,
2000, which was still pending. On November 7, 2000, the Company's request for
Permission to Repurchase shares during the first year following the Bank's
conversion from mutual to stock form was denied by the OTS. Based upon the OTS'
order denying the Company's Request for Wavier of Repurchase Liabilities and
Permission to Repurchase Stock, the Board believes that the earliest it will be
able to consider adopting a stock repurchase plan is January 6, 2001 (one year
following the Bank's conversion from mutual to stock form and acquisition by the
Company).
Forward-Looking Statements
This Interim Report contains certain forward-looking statements, which are based
on certain assumptions and describe future plans, strategies, and expectations
of the Company. These forward-looking statements are generally identified by use
of the words "believe," "expect," "intend," "anticipate," "estimate," "project,"
or similar expressions. The Company's ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors that could
have a material adverse effect on the operations of the Company and the
subsidiaries include, but are not limited to, changes in interest rates, general
economic conditions,
8
legislative/regulatory changes, monetary and fiscal policies of the U.S.
government including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Company's market area, and accounting principles and guidelines. These risks
and uncertainties should be considered in evaluating forward-looking statements,
and undue reliance should not be placed on such statements. The Company does not
undertake--and specifically disclaims any obligation--to publicly release the
result of any revisions that may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
The following analysis discusses changes in the financial condition and
results of operations at and for the three months ended September 30, 2000 and
should be read in conjunction with Security Financial's unaudited consolidated
financial statements and the notes thereto, appearing in Part I, Item 1 of this
document.
Comparison of Financial Condition at September 30, 2000 and June 30, 2000
Total assets decreased by $1.7 million from $189.6 million at June 30,
2000 to $187.9 million at September 30, 2000.
Total loans declined to $126.9 million at September 30, 2000 from $131.7
million at June 30, 2000, or 3.7%, primarily due to the decline in the
origination of residential mortgages due to the general slow-down in the housing
market; both new construction and purchases of existing homes. Consumer loans
declined as the Bank discontinued its indirect lending program due to high
overhead and excessive charge offs.
Total deposits decreased to $149.2 million at September 30, 2000, from
$151.6 million at June 30, 2000, a decline of 1.6%. Due to the decline in loans
held for sale and the decision to exit the mortgage banking business, the Bank
did not attempt to retain certain high cost certificates of deposit with
original maturities greater than one year that were due to mature by
competitively repricing those products, which resulted in funds being withdrawn
from the Bank as those certificates of deposit matured.
Total stockholders' equity at September 30, 2000 was $36.9 million
compared to $36.5 million at June 30, 2000. The increase resulted from Security
Financial's net income for the three months ended September 30, 2000 of $369,000
and a $15,000 increase in the fair value of securities available for sale.
Comparison of Operating Results for the Three Months Ended September 30, 2000
and 1999
General. Net income for the three-month period ended September 30, 2000
was $369,000 compared to net income of $238,000 for the comparable period in
1999, an increase of $131,000. The increase is primarily attributable to an
improved net interest margin and reduced compensation and benefits associated
with the significant reduction in the number of personnel employed in loan
servicing and other operations. The loan servicing portion of the business was
substantially reduced during the first quarter of fiscal year 2000.
9
Interest Income. Interest income for the quarter ended September 30, 2000
was $3.6 million compared to $3.4 million for the quarter ended September 30,
1999, an increase of $101,000, or 2.9%. The increase was primarily attributable
to an increase in the average balance of interest earning assets to $178.3
million for the three months ended September 30, 2000 from $177.2 million for
the same period in 1999. The yield on interest earning assets increased slightly
to 8.03% for the three-month period ended September 30, 2000 compared to 7.86%
for the same period in 1999.
Interest Expense. Interest expense for the quarter ended September 30,
2000 was substantially stable at $1.6 million compared to the same period in
1999, decreasing only $30,000, or 1.84%, for the quarter ended September 30,
2000, which is primarily attributable to a decline in the average balance of
interest-bearing liabilities to $147.3 million for the 2000 period from $170.9
million during the 1999 period. The decrease in the average balance of
interest-bearing liabilities was due primarily to the Company's efforts to
reduce various high-cost funding sources, including borrowings, which have been
eliminated, and high-yielding certificates of deposit. The cost of funds
increased to 4.34% for the three months ended September 30, 2000 from 3.81% for
the three months ended September 30, 1999, reflecting a general increase in
interest rates in 2000.
Net Interest Income. Net interest income increased to $2.0 million for the
three-month period ended September 30, 2000 from $1.9 million, an increase of
$131,000, or 7.1%. The net interest margin improved to 4.45% from 4.18% during
the same periods. The increase in the net interest margin is attributable
primarily to management's reduction of high cost funding sources, including
negotiated rate certificates of deposit and borrowings.
Provision for Loan Losses. The provision for loan losses was $65,000 for
the three months ended September 30, 2000 compared to $75,000 for the three
months ended September 30, 1999. Management increases the allowance for loan
losses through a provision charged to expense for loan growth based on a
statistical percentage developed considering past loss experiences, delinquency
trends, general economic conditions and other factors. The provision for the
quarter was reduced due to reduction in classified loans from $1.9 million at
June 30, 2000 to $1.8 million at September 30, 2000 and a reduction in total
loans outstanding.
Noninterest Income. Noninterest income was $246,000 for the three months
ended September 30, 2000 compared to $478,000 for the three-month period ended
September 30, 1999, a decline of $232,000, or 48.5%. The decrease is primarily
attributable to the elimination of the Bank's mortgage banking operation, which
resulted in no gains on the sale of mortgage servicing rights being realized for
the three months ended September 30, 2000, which compared to a $178,000 gain on
the sale of mortgage servicing rights for the period ended September 30, 1999,
and a reduction in the level of gains on the sale of loans into the secondary
market, which fell to $20,000 for the quarter ended September 30, 2000 from
$42,000 for the same period in 1999. Additionally, other noninterest income
declined to $165,000 for the 2000 period from $212,000 in 1999 due primarily to
a decline in commitment fees on construction loans and late charge fees
primarily on loans serviced for others.
Noninterest Expense. Noninterest expense for the quarter ended September
30, 2000 was $1.8 million compared to $2.0 million for the quarter ended
September 30, 1999, a decrease of $222,000, or 11.0%. The decline is primarily
attributable to a $67,000 reduction in compensation and benefits related to the
substantial reduction in the number of employees during 1999 as part
10
of management's plan to reduce operating expenses and Security Federal's
discontinuation of loan servicing activities. Also, impacting the noninterest
expense for the period ended September 30, 1999 were expenses related to the
subletting of a proposed site for the Merrillville office, which was
subsequently closed on April 30, 2000.
Income Taxes. There was no provision for income taxes for the three months
ended September 30, 2000 and September 30, 1999 due to the utilization of net
operating loss carryforwards. Security Federal had generated net operating
losses in prior years, which are being carried forward and will be used to
offset future tax liabilities until fully utilized. Management anticipates that
these carryforwards will be exhausted by the second quarter of fiscal 2001.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits and proceeds from
principal and interest payments on loans and mortgage-backed securities. While
maturities and scheduled amortization of loans and securities are predictable
sources of funds, deposit flows and mortgage prepayments are greatly influenced
by general interest rates, economic conditions, and competition. The Company
generally manages the pricing of its deposits to be competitive and to increase
core deposit relationships.
Federal regulations require the Bank to maintain minimum levels of liquid
assets. The required percentage has varied from time to time based upon economic
conditions and savings flows and is currently 4.0% of net withdrawable savings
deposits and borrowings payable on demand or in one year or less during the
preceding calendar month. Liquid assets for purposes of this ratio include cash;
certain time deposits; U.S. government, government agency, and corporate
securities; and other obligations generally having remaining maturities of less
than five years. The Bank has historically maintained its liquidity ratio for
regulatory purposes at levels in excess of those required. At September 30,
2000, the Bank's liquidity ratio for regulatory purposes was 26.46%.
The Company's cash flows are comprised of three primary classifications:
cash flows from operating activities, investing activities, and financing
activities. Cash flows provided by operating activities were $188,000 and
($65,000) for the three months ended September 30, 2000 and 1999, respectively.
Net cash from investing activities consisted primarily of disbursements for loan
originations and the purchase of securities and certificates of deposit with
other financial institutions, offset by principal collections on loans and
proceeds from maturation of securities. Net cash from financing activities
consisted primarily of the activity in deposit accounts.
The Company's most liquid assets are cash and short-term investments. The
levels of these assets are dependent on the Company's operating, financing,
lending, and investing activities during any given period. At September 30,
2000, cash and short-term investments totaled $11.0 million. The Company has
other sources of liquidity if a need for additional funds arises, including
securities maturing within one year and the repayment of loans. The Company may
also utilize the sale of securities available-for-sale, federal funds purchased,
and Federal Home Loan Bank advances as a source of funds. At September 30, 2000,
the Company had the ability to borrow a total of approximately $65.4 million
from the Federal Home Loan Bank of Indianapolis. On that date, the Company had
no outstanding advances.
11
At September 30, 2000, the Company had outstanding commitments to
originate loans of $2.7 million, all of which had fixed interest rates. These
loans are to be secured by properties located in its market area. The Company
anticipates that it will have sufficient funds available to meet its current
loan commitments. Loan commitments have, in recent periods, been funded through
liquidity or through FHLB borrowings. Certificates of deposit that are scheduled
to mature in one year or less from September 30, 2000 totaled $73.2 million.
Management believes, based on past experience, that a significant portion of
such deposits will remain with the Company. Based on the foregoing, in addition
to the Company's high level of core deposits and capital, the Company considers
its liquidity and capital resources sufficient to meet its outstanding
short-term and long-term needs.
Liquidity management is both a daily and long-term responsibility of
management. The Company adjusts its investments in liquid assets based upon
management's assessment of (i) expected loan demand, (ii) expected deposit
flows, (iii) yields available on interest-earning deposits and investment
securities, and (iv) the objectives of its asset/liability management program.
Excess liquid assets are invested generally in interest-earning overnight
deposits and short- and intermediate-term U.S. government and agency obligations
and mortgage-backed securities of short duration. If the Company requires funds
beyond its ability to generate them internally, it has additional borrowing
capacity with the Federal Home Loan Bank of Indianapolis.
The Bank is subject to various regulatory capital requirements imposed by
the OTS. At September 30, 2000, the Company was in compliance with all
applicable capital requirements.
Security Federal's actual and required capital amounts and rates are
presented below (in thousands).
Requirement
to be Well
Requirement Capitalized Under
for Capital Prompt Corrective
Adequacy Action
Actual Purposes Provisions
------ -------- ----------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of September 30, 2000:
Total capital
(to risk-
weighted
assets) $28,068 24.4% $ 9,195 8.0% $11,493 10.0%
Tier 1 capital
(to risk-
weighted
assets) 26,874 23.4 4,597 4.0 6,896 6.0
Core capital
(to adjusted
assets) 26,874 14.8 7,263 4.0 9,079 5.0
12
Requirement
to be Well
Requirement Capitalized Under
for Capital Prompt Corrective
Adequacy Action
Actual Purposes Provisions
------ -------- ----------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of September 30, 1999:
Total capital
(to risk-
weighted
assets) $20,076 15.5% $10,362 8.0% $12,952 10.0%
Tier 1 capital
(to risk-
weighted
assets) 18,830 14.6 5,159 4.0 7,738 6.0
Core capital
(to adjusted
assets) 18,830 9.9 7,608 4.0 9,510 5.0
Impact of Accounting Pronouncements and Regulatory Policies
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, issued in June 1998 (as amended
by SFAS No. 137), standardizes the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts. The
statement requires entities to carry all derivative instruments in the statement
of financial position at fair value. The accounting for changes in the fair
value, gains and losses, of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and, if so, on
the reasons for holding it. If certain conditions are met, entities may elect to
designate a derivative instrument as a hedge of exposures to changes in fair
value, cash flows, or foreign currencies. The Company was required to adopt this
statement as of July 1, 2000. The statement has not had any impact on the
consolidated financial statements and is currently not expected to have any
future impact, because the Company does not currently purchase derivative
instruments or enter into hedging activities.
13
PART II--OTHER INFORMATION FOR
SECURITY FINANCIAL BANCORP, INC.
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which the Company or
any of its subsidiaries is a party other than ordinary routine litigation
incidental to their respective businesses.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
On October 19, 2000, the annual meeting of stockholders was held. John P.
Hyland, Tula Kavadias, Phillip T. Rueth, and John W. Palmer were elected
to serve as directors with terms expiring in 2003. The stockholders also
ratified the appointment of Crowe, Chizek and Company LLP as the Company's
independent public accountants for the year ending June 30, 2001 and
approved the Security Financial Bancorp, Inc. 2000 Stock-Based Incentive
Plan.
There were 1,938,460 issued and outstanding shares of common stock at the
time of the annual meeting. 1,787,732 shares were voted at the meeting.
The voting on each item presented at the annual meeting was as follows:
Election of Directors:
For Withheld
--- --------
John P. Hyland 1,559,275 228,457
Tula Kavadias 1,560,200 227,532
Phillip T. Rueth 1,682,014 105,718
John W. Palmer 1,683,599 104,133
Security Financial Bancorp, Inc. 2000 Stock-Based Incentive Plan
For Against Abstain Broker Nonvotes
--- ------- ------- ---------------
1,122,235 337,989 9,347 318,161
14
Item 4. Submission of Matters to a Vote of Security Holders. (Continued)
Ratification of Independent Auditors:
For Against Abstain Broker Nonvotes
--- ------- ------- ---------------
1,630,971 45,412 111,347 --
The directors whose terms continued and the years their terms expire are as
follows: Mary Beth Bonaventura (2001), Lawrence R. Parducci (2001), Robert A.
Vellutini (2001), Howard O. Cyrus, Sr. (2002), Dr. Peter Ferrini (2002), Richard
J. Lashley (2002), and Robert L. Lauer (2002).
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(b) On September 12, 2000, the Company filed a Current Report on Form
8-K reporting that the Company and the PL Capital Group had entered
into an agreement resulting in the appointment of John Palmer and
Richard Lashley to the Board of Directors of the Company. In
addition, the Form 8-K reported that the Company had entered into an
agreement with Vincent Cainkar. Both agreements and the two press
releases announcing both agreements were attached as exhibits to the
Form 8-K.
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SECURITY FINANCIAL BANCORP, INC.
Date: November 13, 2000 By: /s/ John P. Hyland
----------------------------------------
John P. Hyland
President and Chief Executive
Officer
Date: November 13, 2000 By: /s/ James H. Foglesong
----------------------------------------
James H. Foglesong
Executive Vice President and Chief
Financial Officer
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Exhibits
3.1 Certificate of Incorporation of Security Financial Bancorp, Inc. (1)
3.2 Bylaws of Security Financial Bancorp, Inc. (1)
4.0 Form of Stock Certificates of Security Financial Bancorp, Inc. (1)
10.1 ESOP Loan Documents (2)
10.2 Employment Agreement between Security Federal Bank & Trust and John P.
Hyland (2)
10.3 Employment Agreement between Security Financial Bancorp, Inc. and John P.
Hyland (2)
10.4 Security Federal Bank & Trust Employee Severance Compensation Plan (2)
10.5 Security Financial Bancorp, Inc. Supplemental Executive Retirement Plan
(3)
10.6 Security Financial Bancorp, Inc. 2000 Stock-Based Incentive Plan (4)
27.0 Financial Data Schedule
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(1) Incorporate herein by reference from the exhibits to Form SB-2,
Registration Statement and amendments thereto, initially filed on
September 20, 1999, Registration No. 333-87397.
(2) Incorporated herein by reference from the exhibits to the Form 10-QSB for
the quarter ended March 31, 2000, filed May 12, 2000.
(3) Incorporated herein by reference from the exhibits to the Form 10-KSB for
the year ended June 30, 2000, filed September 28, 2000.
(4) Incorporated herein by reference from the Company's Definitive Proxy
Statement for the 2000 Annual Meeting of Stockholders, filed September 19,
2000.
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