UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
__X__Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2001
or
_____Transition report pursuant to Section 13 or 15(d) of the Exchange Act
Commission File Number 333-33350
First Security Bancorp, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Kentucky 61-1364206
-------- ----------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 East Main Street, Lexington, KY 40507
(Address of Principal Executive Offices)
(859)- 367-3700
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
_X_ Yes ___ No
The number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: Common stock, no par value - 1,456,250
shares outstanding as of July 15, 2001.
Transitional Small Business Disclosure Format (check one):
___Yes _X_No
FIRST SECURITY BANCORP, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.................................................4
Item 2. Management's Discussion and Analysis or Plan of Operation............10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................18
PART I - Financial Information
Item 1. Financial Statements
First Security Bancorp, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands)
June 30 December 31
Assets 2001 2000
Cash & due from banks $ 3,360 $3,774
Federal funds sold 1,112 4,524
------ ------
Total cash & cash equivalents 4,472 8,298
Securities available for sale 22,807 13,240
Loans 126,598 107,098
Less allowance for loan losses (1,373) (1,221)
------ ------
Net loans 125,225 105,877
FHLB stock 324 224
Premises, equipment, and leasehold
improvements, net 5,967 5,590
Accrued interest receivable 1,138 1,062
Other assets 199 168
------- ------
Total Assets $160,132 $134,459
======= =======
Liabilities & Shareholders' Equity
Liabilities
Deposits
Non-interest bearing $ 7,771 $ 8,274
Time deposits $100,000 and over 29,426 21,750
Other interest bearing 94,370 85,519
------- ------
Total Deposits 131,567 115,543
Securities sold under agreements
to repurchase 9,882 1,393
Federal Home Loan Bank Advances 1,044 1,049
Accrued interest payable 678 624
Other liabilities 178 238
------- ------
Total Liabilities 143,349 118,847
Shareholders' Equity
Common stock no par value 8,385 8,071
Paid-in Capital 8,385 8,071
Accumulated defecit (60) (639)
Accumulated other comprehensive
Income 73 109
------- ------
Total Shareholders' Equity 16,783 15,612
------- ------
Total Liabilities and Shareholders' Equity $160,132 $134,459
======= ======
First Security Bancorp, Inc.
Consolidated Statements of
Income and Comprehensive Income (Unaudited)
(three months ended and six months ended)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
2001 2000 2001 2000
Interest Income
Loans, including fees $2,553 $2,063 $4,965 $3,920
Securities - taxable 254 52 483 115
Securities - non-taxable 68 - 75 -
Federal funds sold 30 162 164 233
Other 7 4 23 6
----- ----- ---- ----
2,912 2,281 5,710 4,274
Interest Expense
Deposits 1,737 1,377 3,469 2,469
Other Borrowings 74 13 106 26
----- --- ----- -----
1,811 1390 3,575 2,495
----- --- ----- -----
Net Interest Income 1,101 891 2,135 1,779
Provision for loan losses 101 101 201 201
----- --- --- -----
Net interest income after
provision for loan loss 1,000 790 1,934 1,578
Noninterest Income
Service charges and
fees on deposits 50 30 83 59
Securities Gains 88 - 95 -
Real Estate lease 39 - 101 -
Loss Sale of Land (17) - (17) -
Other 29 15 55 27
-- -- -- --
189 45 317 86
Noninterest expense
Salaries and
employee benefits 429 323 836 625
Occupancy & Equipment 151 83 293 164
Data Processing 55 38 101 72
Advertising 40 33 73 57
Professional Fees 42 99 68 139
Taxes other than payroll,
property and income 33 41 67 84
Other 113 101 234 188
--- --- ---- ----
863 718 1,672 1,329
--- --- ----- -----
Net Income $326 $117 579 335
=== ==== ===== ====
Other Comprehensive Income (Loss)
Other comprehensive income (loss) (189) (5) 1 (17)
---- ----
Comprehensive income $137 $ 112 580 318
=== ====
Weighted average shares common outstanding:
Basic 1,456 1,000 1,455 1,000
Diluted 1,489 1,028 1,489 1,026
Earnings per share:
Basic $.22 $.12 $.40 $ .34
Diluted .22 .11 .39 .33
First Security Bancorp, Inc.
Consolidated Statement of Changes In Shareholders' Equity
(in thousands) (unaudited)
Accumulated
Additional Other Total
--Common Stock-- Paid-In Retained Comprehensive Shareholders'
Shares Amount Capital Earnings Income (Loss) Equity
Balance January 1, 2001 1,415 $8,071 $8,071 $(639) $ 109 $15,612
Net change in accumulated
other comprehensive income
(Loss) (36) (36)
Issuance of Common Stock 41 314 314 628
Net Income 579 579
----- ----- ------ ------ ---- -----
Balance June 30, 2001 1,456 $8,385 $8,385 $ (60) $ 73 $ 16,783
===== ===== ====== ======= ===== ======
First Security Bancorp, Inc.
Statements of Cash Flows (unaudited)
Six Months Ended June 30, 2001 and 2000
(in thousands)
2001 2000
Cash flows from Operating Activities:
Net income (loss) $579 $ 335
Adjustments to reconcile net income to net
cash from operating activities
Depreciation 114 62
Amortization and accretion on available
for sale securities, net (27) 2
Provision for loan losses 201 201
Federal Home Loan Bank Stock dividends (9) (6)
Securities gains (95) -
Loss Sale of Land 17 -
Change in assets and liabilities:
Accrued interest receivable (76) (186)
Other assets (31) 1
Accrued interest payable 54 129
Other liabilities (5) (40)
--- ----
Net cash from operating activities 732 498
Cash flows from investing activities
Net change in loans (19,549)(17,504)
Activity in available for sale securities
Maturities,Calls, and principal repayments 4,591 1554
Purchases (21,112) (980)
Sales 6,975 -
Leasehold improvements and net purchases of
premises and equipment (508) (97)
Purchases Federal Home Loan Bank stock (91) (93)
------ ------
Net cash from investing activities (29,694)(17,120)
Cash flows from financing activities
Net change in deposits 16,024 19,268
Proceeds from issuance short term debt - 600
Net changes in securities sold under
agreements to repurchase 8,489 176
Payments on Federal Home Loan Bank advances (5) -
Issuance of common stock 628 -
----- -----
Net cash from financing activities 25,136 20,044
------ ------
Net change in cash and cash equivalents (3,826) 3,422
Cash and cash equivalents at beginning of period 8,298 11,272
------ ------
Cash and cash equivalents at end of period $ 4,472 $14,694
====== ======
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for: Interest $3,521 $ 2,366
NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation:
The accounting and reporting policies of First Security Bancorp, Inc. (the
"Company") and its wholly-owned subsidiary First Security Bank of Lexington
(the"Bank") conform to generally accepted accounting principles and to
predominant practices within the banking industry. The significant policies are
described within First Security Bancorps 10KSB filing dated December 31, 2000.
The Bank is a Kentucky corporation incorporated to operate as a commercial
bank under a state bank charter. The Bank generates commercial, mortgage, and
installment loans, and receives deposits from customers located primarily in the
Fayette County, Kentucky area. The majority of the Bank's income is derived from
lending activities. The majority of the Bank's loans are secured by specific
items of collateral including business assets, real estate, and consumer assets,
although borrower cash flow may also be a primary source of repayment. All of
the Bank's operations are considered by management to be aggregated into one
reportable operating segment.
Recent Accounting Pronouncements: Beginning January 1, 2001, a new standard
required all derivatives to be recorded at fair value. Unless designated as
hedges, change in these fair values will be recorded in the income statment.
Fair value changes involving hedges will generally be recorded by offsetting
gains and losses on the hedge and on the hedged item, even if the fair value of
the hedged item is not otherwise recorded. The adoption of this standard did not
have a material effect.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they 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 normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six-month period ending June 30, 2001
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2001.
NOTE 2 - SECURITIES
Securities were as follows: Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
(in thousands)
Available for Sale
June 30, 2001
U.S. Government agency securities $5,228 $53 $(6) $5,275
Mortgage-backed 10,161 92 (4) 10,249
Municipal securities 6,812 5 (37) 6,780
Other debt securities 496 7 - 503
------ --- ------ ------
Total debt securities $22,697 $157 $(47) $22,807
===== === ====== ======
December 31, 2000
U.S. Treasury securities $ 250 $ - $ - $ 250
U.S. Government agency securities 10,628 121 (54) 10,695
Mortgage-backed 2,253 48 (6) 2,295
----- --- ---- -----
Total debt securities $13,131 $169 $(60) $13,240
===== === ==== =====
Securities pledged at June 30, 2001 and year-end 2000 had carrying amounts of
$11.6 million, and $2.4 million, respectively, and were pledged to secure
customer repurchase agreements and to the Federal Reserve Discount window.
Proceeds from securities sold during the six months ended June 30, 2001 totaled
$7.0 million and resulted in a net gain of $95,000.
NOTE 3 - LOANS
Loans were as follows:
June 30 December 31
2001 2000
---- ----
(in thousands)
Commercial $34,289 $31,257
Mortgage loans on real estate:
Commercial 64,932 53,058
Residential 15,859 11,663
Consumer 11,518 11,120
------ -----
$126,598 $107,098
====== ======
Changes in the allowance for loan losses were as follows:
Six Months Ended
June 30
2001 2000
---- ----
(in thousands)
Beginning balance $1,221 $819
Loans charged off (49) (23)
Recoveries - -
Provision for loan losses 201 201
---- ----
Ending Balance $ 1,373 $997
===== ====
NOTE 4 - EARNINGS PER SHARE
The factors used in the earnings per share computation follow.
Three Months Ended Six Months Ended
June 30 June 30
2001 2000 2001 2000
---- ---- ---- ----
(in thousands, except per share data)
Basic
Net Income $ 326 $ 117 $ 579 $ 335
Weighted average common shares 1,456 1,000 1,455 1,000
Basic earnings per common share .22 .12 .40 .34
Diluted
Net income $326 $117 579 335
Weighted average common shares 1,456 1,000 1,455 1,000
Add: Dilutive effects of assumed exercises
of stock warrents 33 28 34 26
----- ----- ---- ---
Average shares and dilutive potential
common shares 1,489 1,028 1,489 1,026
===== ===== ===== =====
Diluted earnings per common share .22 .11 .39 .33
NOTE 5 - STOCK OFFERING
On September 29, 2000,the Company initiated the sale of 456,250 shares of common
stock at $16 per share though a public offering. Through December 31, 2000, the
Company sold 414,778 shares which, net of direct costs of issuance, increased
shareholders' equity $6.3 million. The remaining 41,472 shares in the offering
were sold in January 2001 which, net of direct costs of issuance, increased
shareholder's equity an additional $628,000.
Part I Item 2.
Management's Discussion and Analysis or Plan of Operation
General.
The Bank is a commercial banking organization organized under the laws of
the Commonwealth of Kentucky, and is a wholly owned subsidiary of the Company.
The Bank offers a variety of products and services through three full service
offices including the acceptance of deposits for checking, savings and time
deposit accounts; extension of secured and unsecured loans to corporations,
individuals and others; issuance of letters of credit; and rental of safe
deposit boxes. The Bank's lending activities include commercial and industrial
loans, real estate, installment, and other consumer loans and revolving credit
plans. Operating revenues are derived primarily from interest and fees on loans
and from interest on investment securities.
We have made, and may continue to make, various forward-looking statements
with respect to credit quality (including delinquency trends and the allowance
for loan losses), corporate objectives and other financial and business matters.
When used in this discussion the words "anticipate," "project," "expect,"
"believe," and similar expressions are intended to identify forward-looking
statements. In addition to factors disclosed by the Company, the following
factors, among others, could cause actual results to differ materially from such
forward-looking statements: pricing pressures on loan and deposit products;
competition; changes in economic conditions both nationally and in our market;
the extent and timing of actions of the Federal Reserve Board; customers'
acceptance of our products and services; and the extent and timing of
legislative and regulatory actions and reforms.
Overview
The mission of First Security Bank is to firmly establish itself in Lexington,
Kentucky as a full-service bank providing traditional products and services
typically offered by commercial banks. The Lexington banking market is highly
competitive with 17 commercial banks and thrift institutions currently serving
the market. Most of the banks in Lexington are part of larger bank holding
companies headquartered outside of the Lexington /Fayette County market and
Kentucky. Promoting local management has proven effective for First Security
Bank in attracting customers, fostering loyalty and establishing and maintaining
strong asset quality.
In order to support continued growth, First Security Bancorp made an offering of
common stock that commenced on September 29, 2000 at a price of $16.00 per
share. First Security Bancorp sold 414,778 shares through December 31, 2000 and
an additional 41,472 shares were sold in January, 2001, for total gross proceeds
of $7.3 million,($6.9 million net of direct costs of issuance). Shareholders'
equity to total assets increased to 11.6% at year-end as compared to 8.7% at
year-end 1999.
Net income for the six months ending June 30, 2001 was $579,000,up from $335,000
for the same period in 2000. Earning assets increased from $125.1 million as of
December 31, 2000, to $149.5 million as of June 30, 2001 contributing to the
increase in net income. Net loans increased from $105.9 million as of December
31, 2000 to $125.2 million as of June 30, 2001. Funding earning asset growth,
were deposit increases of $16.1 million from $115.5 million as of December 31,
2000, to $131.6 million as of June 30, 2001, and increases in customer
repurchase agreements of $8.5 million from $1.4 million to $9.9 million for the
same periods respectively.
In December, 2000 First Security Bank purchased a former banking facility at
318-320 East Main Street in downtown Lexington for $3.5 million to replace its
current main office. The new Main Office will significantly increase First
Security Bank's downtown presence and visibility and includes the added
convenience of drive-thru windows and an ATM, which the present main office does
not have. It is expected that an additional $990,000 will be invested to prepare
this facility for use by September 2001. A fourth branch location will be opened
during the fourth quarter of 2001. A building has been purchased and will be
renovated for this purpose,at an anticipated cost of $750,000. The land for this
facility will be leased for $5,600 per month. The impact of these new locations
will cause an increase in non-earning assets which may slow near-term growth in
net interest income. Further, growth in net income and book value per share will
be negatively impacted until the growth in earnings associated with these new
locations covers the additional costs. First Security Bancorp believes however,
that the potential longer term benefits, incuding prospects for new loan and
deposit growth, outweigh the potential near term costs.
First Security Bancorp and First Security Bank have not needed to record income
tax expense since inception as the result of losses generated in First Security
Bank's first years of operation and uncertainty about becoming profitable.
Having fully utilitzed its remaining deferred tax valuation allowance in the
quarter ended June 30, 2001, recording income tax expense, approximately 34% of
prospective pre-tax income, will begin in July of 2001.
Results of Operations
Net Interest Income
Net interest income was $2.135 million for the six months ended June 30, 2001,
compared to $1.779 million in 2000, resulting in an increase of $356,000 or
20.0%. Net interest income was $1.101 million for the three months ended June
30, 2001, compared to $891,000 for the three months ended June 30, 2000,
resulting in an increase of $210,000 or 23.6%. The increase in net interest
income was primarily the result of volume increases in earning assets.
Year-to-date earning assets were up $24.4 million, or 19.5% from 2000 to 2001.
The general level of interest rates declined significantly for the six month
period ending June 30, 2001, causing rate sensitive assets to reprice at lower
rates faster than interest bearing liabilities, resulting in a decreased net
interest margin. Net interest margin was decreased to 3.14% for the six months
ended June 30, 2001, from 3.52% for the same period in 2000. Quarterly net
interest margin was 3.12% for the period ending June 30, 2001, decreaseing from
3.80% for the same period in 2000.
In order to improve net interest margin going forward, we have deployed
available funding by investing in investments such as mortgage backed securities
and in response to market conditions, have lowered interest bearing deposit
rates. While we anticipate some additional downward rate movement, which could
further reduce margin and earnings, the actions discussed above in conjunction
with lower deposit costs, should have a positive impact on earnings.
Non Interest Income and Expenses
Non interest income increased from $86,000 to $317,000 for the first six months
ending June 30, 2000 and 2001, respectively. Amounts were $45,000 and $189,000
for the quarters ending June 30, 2000 and 2001, respectively. Components of
noninterest income include service charges and fees on deposit accounts,
securities gains, lease income on real property and other fees. Securities gains
were $95,000 for the six months ended June 30, 2001 , and $88,000 for the three
months ended June 30, 2001. Lease income was $101,000 and $39,000 for the same
periods respectively. Securities gains resulted from the sale of a number of
investments in order to reinvest as previously discussed and to a lesser degree,
for liquidity. Gains of this nature are infrequent and irregular in amount, and
are not anticipated to regularly increase earnings in significant amounts such
as these going forward. The new main office is larger than our current needs,
but will also allow room for future growth. We are in the process of securing
tenants for the excess space which once fully leased, it should provide annual
rents of approximately $200,000. Lease revenue was $62,000 in the first quarter
and #39,000 in the second. Lease revenues should increase and stabilize in
conjunction with the relocation of the main office in September, 2001. Non
interest income also included the loss of sale of land of $17,000. We anticipate
that service charge income on deposit accounts will continue to grow comensurate
with our deposit base, and as a result of the introduction of a new checking
product.
Non Interest Expense
Total non interest expense was $1.7 million for the six months ended June 30,
2001, versus $1.3 million for the six months ended June 30, 2000. Total non
interest expense for the quarter ending June 30, 2001, was $863,000 versus
$718,000 for the quarter ending June 30,2000. The primary components of non
interest expense are salaries and benefits and costs associated with occupancy
and equipment.
Salaries and benefits were $836,000 and $625,000 for the six months ended June
30, 2001, and 2000, respectively. The quarterly amounts were $429,000 and
$323,000 respectively. The number of full time equivalent employees increased
from 24 at June 30, 2000, to 32 at June 30,2001. The increase in the number of
full time equivalent employees and related expenses resulted primarily from the
addition of a third branch office in 2000 and the anticipated occupancy of a new
main office facilty in the third quarter of 2001.
Occupancy and equipment expenses increased $129,000 for the six months ended
June 30, 2000, versus the six months period ended June 30, 2000, at $293,000 and
$164,000 respectively. These expenses increased $68,000 to $151,000 from
$83,000, for the quarters ending June 30, 2001 and 2000, respectively. The
increased resulted primarily from operating costs associated with the third
branch office and to a lesser extent, the indirect costs associated with the new
main office.
Securities Available for Sale
The amortized cost of investment securities increased from $13.1 million as of
December 31, 2000 , to $22.7 million as of June 30, 2001. Investment Security
purchases were designed to attain better yields leading to an improvement in
margin, slow the rate of repayment by increasing the proportion of mortgage
backed securities versus callable securities, and to increase the amount of
municipal securities offering earnings not subject to federal taxation.
Loans
Net loans increased $19.3 million, or 18.2%, from December 31, 2000 to June 30,
2001. Loan growth was experienced among all categories with commercial real
estate loans increasing $11.9 million and residential real estate loans
increasing $4.2 million.
We have a significant amount of our loans to commercial and commercial real
estate borrowers. Approximately 78.3% of our loan portfolio was in loans to
commercial businesses and commercial real estate borrowers. The growth of
commercial loans and commercial real estate loans is a result of increased
marketing and and outreach efforts in our primary market. We anticipate that the
rate of growth in the commercial sector of the portfolio will decrease as
penetration in the consumer loan market increases, precipitated by the continued
development of our branch network.
Allowance and Provision for Loan Losses
The provision for loan losses was $201,000 for the first six months of 2001 and
2000. Year to date net charge offs were low at $49,000 and $23,000 for the six
month periods ending June 30, 2001, and 2000, respectively. The levels of
delinquent and non-accrual loans have been and continue to be minimal. The loan
loss reserve to total loans was 1.08% as of June 30, 2001.
The allowance for loan losses is regularly evaluated by management and
reported quarterly to our board of directors. Our management and board of
directors maintain the allowance for loan losses at a level believed to be
sufficient to absorb inherent losses in the portfolio at a point in time.
Management's allowance for loan loss estimate consists of specific and general
reserve allocations as influenced by various factors. Such factors include
changes in lending policies and procedures; underwriting standards; collection,
charge-off and recovery history; changes in national and local economic and
business conditions and developments; changes in the characteristics of the
portfolio; ability and depth of lending management and staff; changes in the
trend of the volume and severity of past due, non-accrual and classified loans;
troubled debt restructuring and other loan modifications; and results of
regulatory examinations. To evaluate the loan portfolio, management has also
established loan grading procedures. These procedures establish a grade for each
loan upon origination which is periodically reassessed throughout the term of
the loan. Grading categories include prime, good, satisfactory, fair, watch,
substandard, doubtful, and loss. Specific reserve allocations are calculated for
individual loans having been graded watch or worse based on the specific
collectability of each loan. Loans graded watch or worse also include loans
severely past-due and those not accruing interest. Loss estimates are assigned
to each loan, which results in a portion of the allowance for loan losses to be
specifically allocated to that loan.
The general reserve allocation is computed by loan category reduced by
loans with specific reserve allocations and loans fully secured by certificates
of deposit with us. Loss factors are applied to each category for which the
cumulative product represents the general reserve. These loss factors are
typically developed over time using actual loss experience adjusted for the
various factors discussed above. As we are a newly organized bank, our
historical loss experience is less reliable as a future predictor of inherent
losses than that of a bank with a mature loss history. Until our own experience
becomes fully developed, we have computed these factors utilizing local and
Kentucky peer data from the Uniform Bank Performance Reports which we believe is
representative of our loan customer base and is therefore a reasonable predictor
of inherent losses in our portfolio.
We believe the allowance for loan losses at June 30, 2001 was adequate. The
relationship between the allowance for loan losses and loans did not change
signficiantly during the periods presented as, based on the best information
available, the overall credit quality of our loan portfolio has not changed.
Alos, the levels of charge-off and delinquent loans have remained historically
low in spite of gains in loan volume. Although we believe we use the best
information available to make allowance provisions, future adjustments which
could be material may be necessary if the assumptions used to determine the
allowance differ from future loan portfolio performance.
Deposit and Other Borrowings
The deposit base provides the major funding source for earning assets. Total
deposits increased by $16.0 million from December 31, 2000 to June 30, 2001.
Deposits have grown at historically consistent levels. The mix of deposits
remained substantially the same for both periods.
The table below illustrates our deposits by major categories as of June 30,
2001, and December 31, 2000;
DEPOSITS
June 30 December 31
2001 2000
--------- ------------
(in thousands)
Interest-bearing demand deposits $13,600 $15,028
Savings deposits 16,070 12,784
Time deposits less than $100,000 64,700 57,707
Time deposits $100,000 and over 29,426 21,750
-------- -----------
Total interest-bearing deposits 123,796 107,269
Total noninterest-bearing deposits 7,771 8,274
-------- -----------
Total $131,567 $115,543
======== ===========
Liquidity.
Liquidity management is the process by which management attempts to insure that
adequate liquid funds are available for withdrawals by depositors, to fund
borrower credit needs, to pay operating expenses, fund capital expenditures,
service long term obligations, and meet reserve requirements. Liquidity is
monitored by the Asset/Liability Management Committee, which develops and
implements appropriate funding and balance sheet strategies.
First Security Bank has several alternative funding sources which may supplement
the deposit base, in meeting ongoing liquidity needs. The alternative sources
include unsecured federal funds lines of credit aggretating approximately $12.9
million; a secured repurchase agreement line from a correspondent bank; and a
secured line of credit from the Federal Reserve Bank of approximately $177,000.
Based upon its membership with the Federal Home Loan Bank of Cincinnati, the
Bank could borrow an additional $15.6 million, as of June 30, 2001.
Short term borrowings as of June 30, 2001, consisted of $9.9 million in
overnight customer repurchase agreements and $1.0 million in Federal Home Loan
Bank advances. The level of consumer repurchase agreements increased
significantly due to the establishment of several new customer relationships.
Federal funds were purchased ten days during the quarter ending June 30, 2001.
The average purchased balance was $1.045 million. Loan demand was strong during
the quarter and the interest rate environment helped to create an irregular flow
of deposits. These conditions precipitated the need to borrow. Should these
conditions continue, additional temporary borrowing may be necessary.
Management believes that there is sufficient liquidity to meet all reasonable
depositors' and creditors' needs at the present time.
Capital.
On September 29, 2000, First Security Bancorp initiated the sale of 456,250
shares of common stock at $16 per share through a public offering. Through
December 31, 2000, 414,778 shares had been sold, which, net of direct costs of
issuance, increased shareholders' equity by $6.3 million. The reamining 41,472
shares in the offering were sold in January, 2001 which, net of direct costs of
issuance, increased sharedolders' equity an additional $628,000.
Regulatory agencies measure capital adequacy within a framework that makes
capital requirements, in part, dependent on the individual risk profiles of
financial institutions. Total capital was $16.8 million as of June 30, 2001,
increasing $1.2 million from $15.6 million as of December 31, 2000.
Shareholders' equity to assets was 10.48% as of June 30, 2001, and 11.61% as of
December 31, 2000.
The increase in total capital was attributable to the sale of common stock
discussed above and net income year to date through June 30, 2001. First
Security Bancorp and its wholly owned subsidiary, First Security Bank of
Lexington, are allowed to distribute earnings in the form of dividends to
shareholders. At the present time, we have chosen not to pay dividends in order
to retain capital to sustain current and future growth. As of June 30, 2001,
First Security Bank exceeded all of the regulatory minimums for a "well
capitalized" institution.
SIGNATURES
In accordance with the requirements of the Exchange Act , the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
First Security Bancorp, Inc.
/s/John S. Shropshire
Date: August 14, 2001 John S. Shropshire
Chairman, President and CEO
(Principal Executive Officer)
/s/Ben A. New
Date: August 14, 2001 Ben A. New
Vice President/Controller
(Principal Financial and
Accounting Officer)
Exhibit 11 Statment regarding Computation of Per Share Earnings
See Item 1, Note 4 "Earnings Per Share" for calculations