Microsoft Word 10.0.2627;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 March 31, 2002
Or
__ Transition report pursuant to Section 13 or 15(d) of the Exchange Act
Commission File Number 000-49781
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.)
318 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 May 13, 2002.
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...........11
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 Sheet (Unaudited)
(in thousands)
Assets March 31, December 31,
2002 2001
---- ----
Cash and due from banks $ 6,085 $ 4,521
Federal funds sold 32 4,397
---------- ----------
Total cash and cash equivalents 6,117 8,918
Securities available for sale 45,163 32,309
Loans 155,908 152,422
Less allowance for loan losses (1,679) (1,538)
---------- ---------
Net loans 154,229 150,884
FHLB Stock 545 539
Leasehold improvements, premises
and equipment net 7,822 7,656
Accrued interest receivable 1,259 1,133
Other assets 840 831
---------- ---------
Total Assets $215,975 $202,270
====== ======
Liabilities and Shareholders' Equity
Liabilities
Deposits
Non-interest bearing $ 16,091 $ 12,575
Time deposits $100,000 and over 51,235 44,498
Other interest bearing 117,054 111,671
------------ -------------
Total Deposits 184,380 168,744
Repurchase agreements and
short term borrowing 8,981 12,957
Federal Home Loan Bank Advances 4,829 2,336
Accrued interest payable 788 832
Other liabilities 30 574
------------ -------------
Total Liabilities $ 199,008 $ 185,443
Shareholders' Equity
Common stock no par value 8,385 8,385
Paid-in Capital 8,385 8,385
Retained Earnings 543 383
Accumulated other comprehensive
Income (346) (326)
-------- ---------
Total Shareholders' Equity 16,967 16,827
-------- ---------
Total Liabilities and Shareholders' Equity $215,975 $202,270
====== ======
First Security Bancorp, Inc.
Consolidated Statements of
Income (Unaudited)
(in thousands, except per share data)
Three Months Ended
March 31,
2002 2001
---- ----
Interest Income
Loans, including fees $ 2,752 $ 2,412
Securities - taxable 326 229
Securities - non-taxable 159 7
Federal funds sold 11 134
Other 6 16
-------- --------
3,254 2,798
Interest Expense
Deposits 1,800 1,732
Other 89 32
--------- ---------
1,889 1,764
--------- --------
Net Interest Income 1,365 1,034
Provision for loan losses 157 100
--------- --------
Net interest income after
provision for loan losses 1,208 934
Non-interest Income
Service charges and
fees on deposits 125 33
Securities gains - 7
Other 39 26
-------- --------
$ 164 $ 66
Non-interest expense
Salaries and
employee benefits $ 587 $ 407
Occupancy and equipment 214 80
Data processing 38 46
Advertising 47 33
Professional fees 37 26
Taxes other than payroll,
property and income 49 34
Other 220 121
-------- --------
1,192 747
-------- --------
Income before income taxes 180 253
Provision for income taxes (20) -
-------- --------
Net income $ 160 $253
===== =====
Weighted average shares common outstanding:
Basic 1,456 1,454
Diluted 1,493 1,601
Earnings per share
Basic $ .11 $ .17
Diluted .11 .16
First Security Bancorp, Inc.
Consolidated Statement of Changes In Shareholders' Equity
(Unaudited) (in thousands)
Accumulated
Additional Other Total
--Common Stock-- Paid-In Retained Comprehensive Shareholders'
Shares Amount Capital Earnings Income (Loss) Equity
Balance January 1, 2002 1,456 $ 8,385 $ 8,385 $ 383 $ (326) $ 16,827
Net Income - - - 160 - 160
Net change in unrealized gain (loss)
on securities available for sale net
of reclassification and tax effects - - - (20) (20)
--------
Total comprehensive income - - - -- 140
------- -------- -------- -------- -------- --------
Balance March 31, 2002 1,456 $ 8,385 $ 8,385 $ 543 $ (346) $ 16,967
==== ===== ===== ===== ===== =====
First Security Bancorp, Inc.
Statements of Cash Flows
(Unaudited) (in thousands)
Three Months Ended
March 31,
2002 2001
---- ----
Cash flows from Operating Activities:
Net income $ 160 $ 253
Adjustments to reconcile net income to net
cash from operating activities
Depreciation 102 56
Amortization and accretion on available
for sale securities, net 63 (10)
Provision for loan losses 157 100
Federal Home Loan Bank Stock dividends (6) (4)
Investment securities gains, net 0 (7)
Change in assets and liabilities:
Accrued interest receivable (126) 64
Other assets (9) (20)
Accrued interest payable (44) 79
Other liabilities (534) (172)
-------- -------
Net cash from operating activities (237) 339
Cash flows from investing activities
Net change in loans (3,502) (7,704)
Activity in available for sale securities
Maturities, Calls,
and principal repayments 1,837 3,324
Purchases (14,784) (11,982)
Sales 0 2,310
Leasehold improvements and net purchases
of premises and equipment (268) (64)
----------- -----------
Net cash from investing activities (16,717) (14,116)
Cash flows from financing activities
Net change in deposits 15,636 16,666
Net changes in repurchase agreements
and short term borrowings (3,976) (210)
Proceeds from Federal Home Loan Advance 2,500 -
Payments on Federal Home Loan Bank advances (7) (3)
Issuance of common stock - 628
---------- ----------
Net cash from financing activities 14,153 17,081
---------- ----------
Net change in cash and cash equivalents (2,801) 3,304
Cash and cash equivalents at beginning of period 8,918 8,298
--------- ---------
Cash and cash equivalents at end of period $ 6,117 $ 11,602
===== =====
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for: Interest 1,933 $ 1,685
Income Taxes 450 -
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, Inc. (the "Bank") conform to accounting principles generally accepted
in the United States of America and to predominant practices within the banking
industry. The significant policies are described below.
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, 2002, two new
standards require all business combinations to be recorded using the purchase
method of accounting for any transaction initiated after June 30, 2001. Under
the purchase method, all identifiable tangible and intangible assets and
liabilities of the acquired company must be recorded at fair value at date of
acquisition and the excess of cost over fair value of net assets acquired is
recorded as goodwill. Identifiable intangible assets must be separated from
goodwill associated with identifiable intangible assets. Assets with finite
useful lives will be amortized under the new standard, whereas goodwill, both
amounts previously recorded and future amounts purchased, will cease being
amortized starting in 2002. Annual impairment testing will be required for
goodwill with impairment being recorded if the carrying amount of goodwill
exceeds its implied fair value. The impact of adopting these standards was not
material.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions for Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America 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 three-month period ending March 31,
2002 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2002.
NOTE 2 - SECURITIES
Securities were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- ------------- ------
(in thousands)
Available for Sale
March 31, 2002
U. S. Government Agency $ 614 - $ (17) $ 597
State and Municipal 17,651 16 (295) 17,372
Mortgage-backed 27,422 81 (309) 27,194
---------- ----- -------- ----------
Total debt securities $ 45,687 $ 97 $(621) $45,163
====== === ===== ======
December 31, 2001
U. S. Government Agency $ 500 $ 3 - $ 503
State and Municipal 13,381 1 (449) 12,933
Mortgage-backed 18,923 98 (148) 18,873
----------- ------- --------- -----------
Total debt securities $ 32,804 $ 102 $ (597) $ 32,309
====== ==== ===== ======
Securities pledged at March 31, 2002 and year-end 2001 had carrying
amounts of $12.8 million, and $13.0 million, respectively, and were pledged to
secure customer repurchase agreements and to the Federal Reserve Discount
window.
NOTE 3 - LOANS
Loans were as follows: March 31, 2002 December 31, 2001
-------------- ------------------
(in thousands)
Commercial $ 72,086 $ 68, 584
Mortgage loans on real estate:
Commercial 45,155 46,106
Residential 33,245 32,349
Other Consumer 5,422 5,383
------------ ------------
$ 155,908 $ 152,422
======= =======
Changes in the allowance for loan losses were as follows:
Three Months Ended
March 31
(in thousands)
2002 2001
---- ----
Beginning balance $ 1,538 $ 1,221
Loans charged off (18) (3)
Recoveries 2 0
Provision for loan losses 157 100
-------- ---------
Ending balance $ 1,679 $ 1,318
NOTE 4 - EARNINGS PER SHARE
The factors used in the earnings per share computation were as follows:
Three Months Ended
March 31
(in thousands, except per share data)
2002 2001
---- ----
Basic
Net Income $ 160 $ 253
Weighted average common shares 1,456 1,454
Basic earnings per common share $.11 $.17
Diluted
Net Income $160 $253
Weighted average common shares 1,456 1,454
Add: Dilutive effects of assumed
Exercises of stocks warrants & options 37 147
--------- ---------
Average shares and dilutive potential
common shares 1,493 1,601
===== =====
Diluted earnings per common share $.11 $.16
NOTE 5 - Acquisition
On March 15, 2002, the Bank entered into a definitive agreement to acquire
certain assets of First Mortgage Company, Inc., in Lexington, Kentucky. First
Mortgage originates mortgage loans for sale into the secondary market. The
agreement includes a purchase price of up to $476,000, $69,000 of which is due
at closing. The remainder of the purchase price is payable contingent upon First
Mortgage's earnings over the next four years. The agreement also requires the
Bank to enter into a four-year employment agreement with First Mortgage's
shareholder and president at a salary level similar to that of other executives
of the Bank. Subject to regulatory approval, the acquisition is scheduled to be
completed in the second quarter of 2002.
Part I Item 2.
Management's Discussion and Analysis or Plan of Operation
General
First Security Bank is a commercial banking organization organized
under the laws of the Commonwealth of Kentucky, and is a wholly-owned subsidiary
of the Company. First Security Bank offers a variety of products and services
through four 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. First Security 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 18 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 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.
On March 15, 2002, First Security Bank entered into a definitive
agreement to acquire certain assets of First Mortgage Company, Inc. in
Lexington, Kentucky. First Mortgage originates fixed and variable rate mortgage
loans fore sale in the secondary market. This will provide a new venue or
mortgage products, enhancing the Bank's presence in the Lexington market.
Subject to regulatory approval, the acquisition is scheduled to be completed in
the second quarter 2002. See Part I, Note 5 to the Financial Statements.
Result of Operations
Net income for the three months ending March 31, 2002 was $160,000,
down from $253,000 for the same period in 2001. Earning assets increased from
$189.7 million as of December 31, 2001 to $201.7 million as of March 31, 2002.
Net loans increased from $150.9 million as of December 31, 2001 to $154.2
million as of March 31, 2002. Total deposits increased from $168.7 million as of
December 31, 2001 to $184.4 million as of March 31, 2002.
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 main office. First Security Bank moved its downtown offices to the
new facility in September, 2001. The new location features drive-through
windows, an ATM and innovative interior design features. A total of $1.2 million
was invested on the new facility in addition to its purchase price. A fourth
location was also opened during the fourth quarter of 2001. A building was
purchased and was opened for this purpose at a total cost of $906,000. The land
for this facility was leased for $5,600 per month. Growth in net income and book
value per share will be negatively impacted until the growth in earnings
resulting from these new locations covers the additional costs. First Security
Bancorp believes, however, that the potential longer term benefits, including
prospects for new loan and deposit growth, outweigh the potential near term
costs.
Net Interest Income
First Security Bancorp's principal source of revenue is net interest
income. Net interest income is the difference between interest income on
interest-earning assets, such as loans and securities, and the interest expense
on liabilities used to fund those assets, such as interest-bearing deposits and
borrowings. Net interest income is impacted by both changes in the amount and
composition of interest-earning assets and interest-bearing liabilities as well
as market interest rates.
The change in net interest income is typically measured by changes in
net interest spread and net interest margin. Net interest spread is the
difference between the average yield on interest-earning assets and the average
cost of interest-bearing liabilities. Net interest margin is determined by
dividing net interest income by interest-earning assets.
Net interest income was $1.365 million for the three months ended March
31, 2002 compared to $1.034 million in 2001, resulting in an increase of
$331,000 or 32.01%. The increase in net interest income was primarily the result
of volume increases in earning assets. Net interest margin declined to 2.78% for
the quarter ending March 31, 2002 versus 3.08% for the quarter ending March 31,
2001. Net interest spread increased to 2.27% from 1.92% for the same periods.
The decrease in margin was caused by the repricing of rate sensitive assets
faster than rate sensitive liabilities, exacerbated by an extreme decline in the
general level of interest rates during 2001. Net interest spread increased due
to the rates paid on interest bearing liabilities decreasing at a faster rate
than the rates earned on interest earning assets. In order to improve net
interest margin and spread going forward, First Security Bank has deployed
available funding by investing in mortgage backed securities and federally tax
exempt bonds. In addition, loan pricing strategies have been adjusted and
features such as interest rate floors have been added.
Non-Interest Income and Expenses
Other non interest income increased from $66,000 to $164,000 for the
three months ended March 31, 2001, and 2002, respectively. Components of other
non-interest income include service charges, fees on deposit accounts and other
fees. Management anticipates that service charge income on deposit accounts will
continue to grow commensurate with First Security Bank's deposit base and as a
result of the introduction of a new checking product.
Total non-interest expense increased from $747,000 to $1,192,000 for
the three months ended March 31, 2001, and 2002, respectively.
Salaries and benefits increased from $407,000 to $587,000 for the same
periods, respectively. The number of full time equivalent employees increased
from 30 at March 31, 2001, to 41 at March 31, 2002. Staffing levels increased as
a result of the addition of a fourth branch office in the fourth quarter of
2001, and the relocation to the new main office facility, which offers expanded
customer services. The number of employees should increase during 2002, but at a
decreasing rate as compared with 2001.
Occupancy and equipment expenses, net of rental revenue, were $80,000
and $214,000 for the three months ended March 31, 2001, and 2002, respectively.
Building lease revenue was down from $62,000 to $9,015 for the three months
ended March 31, 2001 and 2002, respectively, though it is anticipated to
increase as new lease agreements are consummated.
In the third quarter of 2001, First Security Bancorp began recording
federal income tax expense, which for the three months ended March 31, 2002 was
$20,000. Income tax expense was not previously recorded due to both historical
accumulated losses and concern about First Security ability to utilize certain
deferred tax assets. Going forward, income tax expense will continue to recorded
at approximately 34% of taxable pre-tax income.
Investment Securities
First Security Bank's investment portfolio consists of state and
municipal bonds and mortgage backed bonds. The amortized cost of investment
securities increased from $32.8 million as of December 31, 2001 to $45.7 million
as of March 31, 2002. The increase in investment securities was to redeploy
excess liquidity into higher yielding assets and to purchase bank qualified
municipal securities, the earnings of which are largely not subject to federal
income tax.
Loans
Net loans increased $3.3 million from $150.9 million as of December 31,
2001, to $154.2 million as of March 31, 2002. As of the end of each period,
approximately 75% of First Security Bank's loan portfolio was in loans to
commercial businesses and commercial real estate borrowers. Loans in the
consumer sector of the portfolio, which includes consumer mortgage and other
consumer loans, comprised approximately 25% of the portfolio as of the end of
both periods. First Security Bank desires increased penetration within the
consumer loan market and believes the new locations should help build new
customer relationships.
Allowance and Provision for Loan Losses
The provision for loan losses was $100,000 and $157,000 for the periods
ending March 31, 2001, and 2002 respectively. Year to date net charge offs were
$3,000 for the three months ended March 31, 2001 and $16,000 for the three
months ended March 31, 2002. The levels of non-performing (loans past due 90
days or more) and nonaccrual loans increased from $789,000 or .52% of gross
loans as of December 31, 2001, to $2,144,000 or 1.37% of gross loans as of March
31, 2002. The loan loss reserve to total loans was 1.08% as of March 31, 2002.
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 First Security Bank. 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 First Security Bank is 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 selected peer data and 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 March 31, 2002 was
adequate. As previously discussed, the loan portfolio experienced a higher
percentage of non-performing loans when compared to the prior periods. We
believe this is a result of the seasoning of the portfolio and, to a lesser
degree, a weaker economy. 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.
Deposits and Other Borrowings
The deposit base provides the major funding source for earning assets.
Total deposits increased by $15.6 million from December 31, 2001 to March 31,
2002. Deposits have grown at historically consistent levels. Demand deposits
were up from 7.45% of total deposits as of December 31, 2001, to 8.72% of total
deposits as of March 3, 2002.
The table below illustrates our deposits by major categories as of
March 31, 2002 and December 31, 2001;
DEPOSITS
March 31, December 31,
2002 2001
---- ----
(in thousands)
Interest-bearing demand deposits $ 22,385 $ 18,886
Savings deposits 21,540 17,113
Time deposits less than $100,000 73,129 75,672
Time deposits $100,000 and over 51,235 44,498
------------- ------------
Total interest-bearing deposits 168,289 156,169
Total noninterest-bearing deposits 16,091 12,575
------------ ------------
Total $ 184,380 $ 168,744
======= =======
Liquidity
Liquidity management is the process by which management attempts to
insure that adequate liquid funds are available to meet financial commitments on
a timely basis. These commitments include withdrawals by depositors, funding
credit obligations to borrowers, servicing long-term obligations, paying
operating expenses, funding capital expenditures and maintaining reserve
requirements. Liquidity is monitored closely by the Asset/Liability Management
Committee of the First Security Bank Board of Directors, which monitors interest
rates and liquidity risk while implementing appropriate funding and balance
sheet strategies.
First Security Bank has established a limited number of alternative or
secondary sources to provide additional liquidity and funding sources when
needed to support lending activity or other liquidity needs. These alternative
funding sources currently include unsecured federal funds lines of credit from
five correspondent banks aggregating approximately $24 million; a secured
repurchase agreement line of credit from a correspondent bank based upon the
market value of pledged securities; and a secured repurchase agreement
arrangement with an agency of the Commonwealth of Kentucky. Additionally, First
Security Bank is a member of the Federal Home Loan Bank of Cincinnati which
allows First Security Bank to borrow based on the level of qualifying
residential loans which serve as collateral for this type of borrowing. At March
31, 2002, First Security Bank could borrow an additional $14.9 million based on
available collateral.
First Security Bank had total short-term borrowings of $15.3 million and $13.8
million as of December 31, 2001, and March 31, 2002 respectively. Borrowings at
March 31, 2002 were in the form of customer repurchase agreements in the amount
of $5.0 million, federal funds purchased of $4.0 million, and Federal Home Loan
Bank advances in the amount of $4.8 million. The need for future borrowing
arrangements above current levels will be evaluated by management with
consideration given to the growth prospects of the loan portfolio, liquidity
needs, costs of deposits, market conditions and other factors. Short-term
liquidity needs for periods of up to one year may be met through federal funds
lines of credit borrowings and short-term Federal Home Loan Bank advances. The
Federal Home Loan Bank additionally offers advance programs of varying
maturities for terms beyond one year.
Capital
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 as of December 31, 2001 was $16.8
million or 8.31% of assets. Total capital as of March 31, 2002 increased to
$17.0 million or 7.87% of assets. First Security Bank has enjoyed an abundance
of growth in total assets which has outpaced the growth in total capital.
First Security Bancorp and First Security Bank exceed the regulatory
requirements for all three capital ratios. First Security Bancorp intends to
maintain a capital position that meets or exceeds the "well capitalized"
requirements as defined by these regulations by exploring opportunities to raise
new capital or moderate our growth rate at levels sustaining a well capitalized
position. In addition to capital regulations, state banking regulations limit
First Security Bank's ability to pay dividends without prior approval. Under
these regulations, First Security Bank may pay dividends in any calendar year
only to the extent of current year's net profits plus the retained net profits
of the preceding two years and not in excess of the balance of retained earnings
then on hand. First Security Bancorp also has regulatory limits on dividends,
but less restrictive. First Security Bancorp does not anticipate paying
dividends to shareholders for at least the next several years as any earnings
generated will need to be retained to support future growth opportunities.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed on the Exhibit Index of this Form 10-QSB are
filed as a part of this report.
(b) Reports on Form 8-K
A report on Form 8-K dated January 28, 2002 was filed by the
registrant reporting the registrant's earnings for the year ending
December 31, 2002.
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: May 14, 2002 John S. Shropshire
Chairman, President and CEO
(Principal Executive Officer)
/s/Ben A. New
Date: May 14, 2002 Ben A. New
Chief Financial Officer
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
11 Statement re Computation of Per Share Earnings (see Item 1,
Note 4 "Earnings Per Share" for computation)