Security Bancorp Anticipates Loss
SOUTHGATE, Mich. -- Security Bancorp said it expects to take an after-tax charge to earnings of about $19 million, and hence a loss for the third quarter, to reflect a decline in market value of its investment in Student Loan Marketing Association shares.
The charge is required because the decline in Sallie Mae adjustable-rate preferred stock is deemed "other than temporary."
Security Bancorp, a five-bank holding company with $2.8 billion in assets, said the move will not affect the share-exchange formula or other terms of its recently announced merger with First of America Bank Corp., Kalamazoo, which had an indicated value of $552 million.
Unsurprising Loss Recognition
Security, based in Southgate, said the disparity between cost and fair market value of the Sallie Mae preferred was known before the merger agreement and the possible recognition of the loss was anticipated.
"This charge to earnings will be offset by a corresponding adjustment to the already established valuation allowance in shareholders' equity and, accordingly, will not affect the company's capital, capital ratios, book value, book value per share, future earnings, or dividends," Security said in a statement released Friday.
Were it not for the charge, Security Bancorp said it would have reported record earnings for the third quarter and the nine months of 1991. The company earned $14.6 million in the first half, 2% better than in 1990.
Security's share price was down 12.5 cents to $34 early Friday. First of America's buyout offer on Sept. 12 was $40.50 a share.