SECURITY CAPITAL CORP/MS - FORM 10-K

Attached files

file	filename
EX-21 - EXHIBIT 21 - SECURITY CAPITAL CORP/MS	exhibit21.htm
EX-31.1 - EXHIBIT 31.1 - SECURITY CAPITAL CORP/MS	exhibit31_1.htm
EX-99.2 - EXHIBIT 99.2 - SECURITY CAPITAL CORP/MS	exhibit99_2.htm
EX-99.1 - EXHIBIT 99.1 - SECURITY CAPITAL CORP/MS	exhibit99_1.htm
EX-32.1 - EXHIBIT 32.1 - SECURITY CAPITAL CORP/MS	exhibit32_1.htm
EX-31.2 - EXHIBIT 31.2 - SECURITY CAPITAL CORP/MS	exhibit31_2.htm
EX-32.2 - EXHIBIT 32.2 - SECURITY CAPITAL CORP/MS	exhibit32_2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

[ ]	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: 000-50224

SECURITY CAPITAL CORPORATION

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(Exact Name of Registrant as specified in its Charter)

MISSISSIPPI 64-0681198

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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)

Incorporation or Organization)

295 Highway 6 West/P. O. Box 690, Batesville, Mississippi 38606 ---------------------------------------------------------------------------- --------------------------------------------

(Address of principal executive offices) (Zip Code)

Registrant's Telephone Number:

(662) 563-9311

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Securities registered under Section 12(b) of the Act:

Name of Each Exchange on

Title of Each Class Which Registered

None None

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Securities registered pursuant to section 12(g) of the Act:

Name of Each Exchange on

Title of Each Class

Which Registered

Common Stock, $5 par value None

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES [ ] NO [X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES [X] NO [ ]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)

YES [ ] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

[X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]

Accelerated filer [X]

Non-accelerated filer [ ]

Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [ ] No [ X ]

Based on the stockholders of record on December 31, 2010, the aggregate market value of the voting stock held by nonaffiliates of the Registrant was $53.6 million.

Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date.

Class

Outstanding at December 31, 2010

Common stock ($5.00 par value)

2,883,209 Shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference into Parts III of the Form 10-K report: Proxy Statement dated March 11, 2011.

CROSS REFERENCE INDEX

		Page
PART I
Item 1	Business	2
Item 1A	Risk Factors	14
Item 1B	Unresolved Staff Comments	18
Item 2	Properties	19
Item 3	Legal Proceedings	20
Item 4	Submission of Matters to a Vote of Security Holders	20

PART II

Item 5	Market for the Registrant's Common Equity, Related Stockholder Matters and	20
	Issuer Purchases of Equity Securities
Item 6	Selected Financial Data	21
Item 7	Management's Discussion and Analysis of Financial Condition and Results of
	Operations	22
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	43
Item 8	Financial Statements and Supplementary Data	44
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	91
Item 9A	Controls and Procedures	91
Item 9B	Other Information	92

PART III

Item 10	Directors and Executive Officers of the Registrant	92
Item 11	Executive Compensation	92
Item 12	Security Ownership of Management and Related Stockholder Matters	92
Item 13	Certain Relationships and Related Transactions	93
Item 14	Principal Accounting Fees and Services	93

Part IV

Item 15	Exhibits and Financial Statement Schedules	93
Signatures		93
Index to Exhibits		95
EX-3.(B) (EX-3.(B))
EX-21 (EX-21)
EX-23 (EX-23) EX-31.1 (EX-31.1)
EX-31.2 (EX-31.2)
EX-32.1 (EX-32.1)
EX-99.1 (EX-99.1)
EX-99.2 (EX-99.2)

* Information called for by Part III (Items 10 through 14) is incorporated by reference to the Registrant's Proxy Statement dated March 11, 2011.

PART I

ITEM 1. BUSINESS

General Development and Structure of Business

Security Capital Corporation is a one-bank holding company and has two subsidiaries, First Security Bank and Batesville Security Building Corporation.

As a bank holding company, Security Capital Corporation engages in the business of banking through its sole banking subsidiary and may engage in certain non-banking activities closely related to banking and may own certain other business corporations that are not banks, subject to applicable laws and regulations. Security Capital Corporation is not currently engaging in non-bank activities and does not own any business corporations, except for Batesville Security Building Corporation, and has no current plans to engage in non-bank activities or own any other business corporations.

Security Capital Corporation was incorporated on September 16, 1982, for the purpose of acquiring First Security Bank and serving as a one-bank holding company.

First Security Bank was originally chartered under the laws of the State of Mississippi on October 25, 1951.

Batesville Security Building Corporation, the nonbank subsidiary, was chartered under the laws of the State of Mississippi on June 23, 1971, for the purpose of acquiring real estate; to hold, improve, develop, operate, manage, mortgage, sell, exchange and lease and to generally deal and manage real estate and personal property. Batesville Security Building Corporation, a wholly owned subsidiary of Security Capital Corporation, reactivated its operations in 2004 by investing in new leasehold improvements.

First Security Insurance, Inc., a subsidiary of First Security Bank, was chartered for the purpose of selling annuities and insurance. The activities of this entity are not material and have little effect on the financial statements of Security Capital Corporation.

First Security Armored Car, Inc., a subsidiary of First Security Bank, was chartered in 2008 for the purpose of providing courier services. The activities of this entity have little effect on the financial statements of Security Capital Corporation.

Security Capital Corporation’s home or principal office is located at 295 Highway 6 West, Batesville, Mississippi 38606. The telephone number of the home or principal office is (662) 563-9311. First Security Bank's website is www.firstsecuritybk.com

Operations

Security Capital Corporation, through First Security Bank, engages in a wide range of banking activities, including accepting demand deposits, accepting savings and time deposit accounts, making secured and unsecured loans to corporations, individuals and others, issuing credit cards, issuing and processing ATM cards and debit cards, issuing commercial and standby letters of credit, originating mortgage loans, providing personal and corporate trust services, and offering Certificate of Deposits Account Registry Service (CDARS) to add protection to customers deposits that exceed current FDIC insurance limits.

Security Capital Corporation’s lending services include commercial, real estate, installment, credit card loans,, and agricultural loans. Revenues from Security Capital Corporation’s lending activities constitute the largest component of Security Capital Corporation’s operating revenues.

At December 31, 2010, the loan portfolio totaled $247.8 million constituting 59.00% of the earning assets of $420.0 million. Security Capital Corporation’s loan personnel have the authority to extend credit under guidelines established and approved by the Board of Directors. Any aggregate credit which exceeds the authority of the loan officer or a combination of several authority limits is forwarded to the Loan Committee for approval. The Loan Committee is comprised of various Bank Directors, including the Chairman.

Security Capital Corporation’s primary lending areas are the counties of Desoto, Panola, Quitman , Marshall, and Tunica in the State of Mississippi. Security Capital Corporation may extend credit to borrowers out of the primary lending area but on a limited basis in which the risk is low and/or a relationship may exist with the borrower and an industry or a development in the primary lending area. The corporation, in an outreach to the “underserved” and “not served”, targets Tate, Union and Lafayette as areas also to serve.

The following tables provide demographic information for Desoto, Panola, Quitman, Marshall, and Tunica counties, and for the State of Mississippi:

Population

	2000		1990		1980		1970

DeSoto		107,199		67,910		53,930		35,885

Panola		34,274		29,996		28,164		26,829

Marshall		34,993		30,361		29,296		24,027

Quitman		10,117		10,490		12,636		15,888

Tunica		9,277		8,164		9,652		11,854

Mississippi		2,844,658		2,573,216		2,520,698		2,216,994

SOURCE: Center for Population Studies, University of Mississippi

PER CAPITA INCOME

	2008		2007		2006		2005		2004

DeSoto		32,393		31,891		31,589		29,623		29,318

Panola		25,646		22,943		22,776		20,908		20,017

Marshall		25,326		23,739		22,754		21,683		20,249

Quitman		26,345		21,978		20,665		20,058		19,482

Tunica		30,072		23,325		21,186		19,656		19,567

Mississippi		30,383		28,541		27,028		25,051		24,518

SOURCE: United States Department of Commerce, Bureau of Economic Analysis

MEDIAN AGE

	2000		1990

DeSoto		33.7		31.5

Panola		33.0		30.1

Marshall		33.9		30.5

Quitman		31.8		30.1

Tunica		30.6		25.3

SOURCE: Center for Population Studies, University of Mississippi

Panola County and Quitman County are rural areas, in which agriculture and industry play a big part in the economy. Desoto County and Tunica County have a different economic structure. The growth and composition of Desoto County has been dictated, primarily, by the outflow from Memphis, Tennessee, seeking residential living developments as well as locations for retail businesses and other commercial developments outside the Memphis city limits. Tunica County’s economy is dependent on the gaming industry to provide employment and to provide resources for the operation of the county. The numerous casinos in the Tunica area employ residents from the surrounding counties and residents from the states of Tennessee and Arkansas. Marshall County, prior to 2008, reflected growth from being close to Memphis, Tennessee.

Security Capital Corporation has made in the past and intends to continue to make most types of real estate loans including but not limited to single and multi-family housing, farm loans, residential and commercial construction loans and loans for commercial real estate.

Major classifications of loans were as follows:



	December 31,
	2010			2009
	(In thousands)

Commercial, financial and agricultural	$	33,347		$	30,580
Real estate - construction and development		56,673			69,797
Real estate - mortgage		134,964			142,917
Installment loans to individuals		20,186			20,702
Other		2,594			2,615
		247,764			266,611
Less allowance for loan losses		(4,477	)		(4,352	)
	$	243,287		$	262,259

The success of the loan portfolio is not dependent on a single borrower or group of borrowers. The large loans of the loan portfolio are defined as those loans with a balance of $389,000 and over. As of December 31, 2010, the loan portfolio totaled $247.8 million of which the large lines total $94.4 million representing 101 borrowers.

Security Capital Corporation provides a wide range of personal and corporate trust and trust-related services, which include serving as executor of estates, as trustee under testamentary and inter vivos trusts and various pension and other employee benefit plans, as guardian of the estates of minors and incompetents, as escrow agent under various agreements, as transfer agent and paying agent of registered bond issues, and as custodian for assets invested. In addition, the Trust Department of First Security Bank offers a variety of investment tools which include a money management and financial planning program that uses the skills and abilities of a Certified Financial Planner and a Certified Retirement Services Professional among other specialists who are within the employment of First Security Bank and the Trust Department.

In 1998, Security Capital Corporation began an expansion to new market areas for the banking operation of First Security Bank. In October of 1998, First Security banking locations at Como, Mississippi, and Crenshaw, Mississippi, were purchased from First Tennessee Bank. In July of 1999, Planters Bank in Tunica was purchased from First Tennessee Bank. In December of 1995, a loan production office opened in Desoto County in the city of Olive Branch. In June of 1997, the loan production office extended to a full service bank branch but with a small facility and a small staff. In October of 2001, First Security Bank’s operation in Olive Branch moved to a newly constructed building with features of four drive-thru lanes and a total square footage of 7,000 to accommodate the projected growth in that area. In January 2001, a loan production office officially opened in Desoto County in the city of Hernando. On July 1, 2002, the operation in Hernando moved from a loan production facility to a newly constructed building, a sister to the Olive Branch building, providing full banking services. In August of 2003, a branch was opened in the town of Pope. In 2005, First Security Bank continued its expansion in the Desoto County area with the opening of a new branch in Southaven. Construction was completed in July of 2006 on a new facility for the Robinsonville banking location. The facility for a new full-service branch on the corner of Goodman Road and Pleasant Hill Road in Desoto County was occupied in September of 2006. Each of the newly constructed buildings represents state of the art facilities and will meet the needs of the staff and the level of customer activity. To better serve the customers in northern Panola County, an additional location in Sardis was opened in October of 2006. On February 19, 2009, a branch identified as the “Barton Branch” was opened in a newly constructed banking facility on the corner of Goodman Road and Highway 309 in Marshall County, Mississippi. First Security Bank provides ATM services at twenty-two locations, ten of which are not located on bank property. First Security Bank also provides the customer with 24 hours a day, 7 days a week, access to their account balances and activity through a telephone banking product called First Line. Initiated in October of 2002, First Security Bank offers internet banking, called First Net, to accommodate those customers desiring banking through technology to review their account’s activity and images of the activity, if applicable, and pay their bills from anywhere in the world.

Employees

On December 31, 2010, First Security Bank had 177 full-time equivalent employees.

Supervision and Regulation

Security Capital Corporation and First Security Bank are subject to state and federal banking laws and regulations which impose specific requirements or restrictions on and provide for general regulatory oversight with respect to virtually all aspects of operations. These laws and regulations are generally intended to protect depositors, not shareholders. To the extent that the following summary describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. Any change in applicable laws or regulations may have a material effect on the business and prospects of Security Capital Corporation. Beginning with the enactment of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and following with Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and the Gramm-Leach-Bliley Act of 1999 (the "Financial Services Modernization Act"), numerous additional regulatory requirements have been placed on the banking industry in the past several years, and additional changes have been proposed. The operations of Security Capital Corporation and First Security Bank may be affected by legislative changes and the policies of various regulatory authorities. Security Capital Corporation is unable to predict the nature or the extent of the effect on its business and earnings that fiscal or monetary policies, economic control, or new federal or state legislation may have in the future.

Security Capital Corporation is a bank holding company within the meaning of the federal Bank Holding Company Act of 1956 (the "BHCA").

The BHCA: Under the BHCA, Security Capital Corporation is subject to periodic examination by the Federal Reserve and is required to file periodic reports of its operations and such additional information as the Federal Reserve may require. Security Capital Corporation's and First Security Bank's activities are limited to banking, managing or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that the Federal Reserve determines to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (discussed in more detail below under “Recent Developments”) has removed many limitations on the Federal Reserve Board’s authority to make examinations of banks that are subsidiaries of bank holding companies. Under the Dodd-Frank Act, the Federal Reserve Board will generally be permitted to examine bank holding companies and their subsidiaries, provided that the Federal Reserve Board must rely on reports submitted directly by the institution and examination reports of the appropriate regulators (such as the FDIC and the Mississippi Department of Banking and Consumer Finance) to the fullest extent possible; must provide reasonable notice to, and consult with, the appropriate regulators before commencing an examination of a bank holding company subsidiary; and, to the fullest extent possible, must avoid duplication of examination activities, reporting requirements, and requests for information.

Investments, Control, and Activities: With certain limited exceptions, the BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before (i) acquiring substantially all the assets of any bank, (ii) acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares), or (iii) merging or consolidating with another bank holding company.

In addition, and subject to certain exceptions, the BHCA and the Change in Bank Control Act, together with regulations thereunder, require Federal Reserve approval (or, depending on the circumstances, no notice of disapproval) prior to any person or company acquiring "control" of a bank holding company, such as Security Capital Corporation. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more but less than 25% of any class of voting securities and either Security Capital Corporation has registered securities under Section 12 of the Exchange Act or no other person owns a greater percentage of that class of voting securities immediately after the transaction. The regulations provide a procedure for challenge of the rebuttable control presumption.

Under the BHCA, a bank holding company is generally prohibited from engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in nonbanking activities, unless the Federal Reserve Board, by order or regulation, has found those activities to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the activities that the Federal Reserve Board has determined by regulation to be proper incidents to the business of a bank holding company include making or servicing loans and certain types of leases, engaging in certain insurance and discount brokerage activities, performing certain data processing services, acting in certain circumstances as a fiduciary or investment or financial adviser, owning savings associations, and making investments in certain corporations or projects designed primarily to promote community welfare.

The Federal Reserve Board has imposed certain capital requirements on bank holding companies under the BHCA, including a minimum leverage ratio and a minimum ratio of "qualifying" capital to risk-weighted assets. These requirements are described below under "Capital Regulations." Subject to its capital requirements and certain other restrictions, Security Capital Corporation may borrow money to make a capital contribution to First Security Bank, and such loans may be repaid from dividends paid from First Security Bank to Security Capital Corporation (although the ability of First Security Bank to pay dividends is subject to regulatory restrictions as described below in "Dividends" under Item 5). Security Capital Corporation is also able to raise capital for contribution to First Security Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws.

Source of Strength and Cross-Guarantee: In accordance with Federal Reserve Board policy, Security Capital Corporation is expected to act as a source of financial strength to First Security Bank and to commit resources to support First Security Bank in circumstances in which Security Capital Corporation might not otherwise do so. Under the BHCA, the Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve Board's determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution's financial condition.

State and FDIC Regulation: First Security Bank is subject to regulation and periodic examinations by the FDIC and the State of Mississippi Department of Banking and Consumer Finance. These regulatory authorities examine such areas as reserves, loan and investment quality, management policies, procedures and practices and other aspects of operations. These examinations are designed for the protection of the Bank’s depositors, rather than its stockholders. In addition to these regular examinations, the Company and the Bank must furnish periodic reports to their respective regulatory authorities containing a full and accurate statement of their affairs.

FDICIA: All insured institutions must undergo regular on-site examinations by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC and the appropriate agency (and state supervisor when applicable). FDICIA also directs the FDIC to develop with other appropriate agencies a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition, or any other report of any insured depository institution. FDICIA also requires the federal banking regulatory agencies to prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to: (i) internal controls, information systems, and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset quality.

FDICIA contains a "prompt corrective action" section intended to resolve problem institutions at the least possible long-term cost to the deposit insurance funds. Pursuant to this section, the federal banking agencies are required to prescribe a leverage limit and a risk-based capital requirement indicating levels at which institutions will be deemed to be "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." In the case of a depository institution that is "critically undercapitalized" (a term defined to include institutions which still have positive net worth), the federal banking regulators are generally required to appoint a conservator or receiver.

Deposit Insurance: The FDIC establishes rates for the payment of premiums by federally insured banks and thrifts for deposit insurance. A separate Bank Insurance Fund ("BIF") and Savings Association Insurance Fund ("SAIF") are maintained for commercial banks and thrifts, respectively, with insurance premiums from the industry used to offset losses from insurance payouts when banks and thrifts fail. Since 1993, insured depository institutions like First Security Bank have paid for deposit insurance under a risk-based premium system.

Transactions with Affiliates and Insiders: First Security Bank is subject to Section 23A of the Federal Reserve Act, which places limits on the amount of loans to, and certain other transactions with, affiliates, as well as on the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited in amount, as to any one affiliate, to 10% of the Bank's capital and surplus and, as to all affiliates combined, to 20% of the Bank's capital and surplus. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements.

First Security Bank is also subject to Section 23B of the Federal Reserve Act, which prohibits an institution from engaging in certain transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution, as those prevailing at the time for comparable transactions with nonaffiliated companies. First Security Bank is subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and their related interests. Such extensions of credit (i) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features.

Community Reinvestment Act: The Community Reinvestment Act requires that, in connection with examinations of financial institutions within their respective jurisdictions, the Federal Reserve, the FDIC, the OCC, or the Office of Thrift Supervision shall evaluate the record of the financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of those institutions. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility.

Sarbanes-Oxley Act of 2002: The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), which became law on July 30, 2002, added new legal requirements for all publicly-held companies affecting corporate governance, accounting and corporate reporting. The Securities and Exchange Commission has been delegated the task of enacting rules to implement various provisions, and the Company is required to comply with such rules to the extent they are applicable to the Company. In addition, each of the national stock exchanges has developed new corporate governance rules, including rules strengthening director independence requirements for boards, the adoption of corporate governance codes, and charters for the nominating and audit committees.

Other Regulations: Interest and certain other charges collected or contracted for by First Security Bank are subject to state usury laws and certain federal laws concerning interest rates. First Security Bank's loan operations are subject to certain federal laws applicable to credit transactions, such as the federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; the Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; the Equal Credit Opportunity Act, prohibiting discrimination on the basis of creed or other prohibited factors in extending credit; the Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; the Fair Debt Collection Act, concerning the manner in which consumer debts may be collected by collection agencies; and the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. The deposit operations of First Security Bank also are subject to the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records, and the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that Act, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Enforcement Powers: FIRREA expanded and increased civil and criminal penalties available for use by the federal regulatory agencies against depository institutions and certain "institution-affiliated parties" (primarily including management, employees, and agents of a financial institution, independent contractors such as attorneys and accountants, and others who participate in the conduct of the financial institution's affairs). These practices can include the failure of an institution to timely file required reports; the filing of false or misleading information; or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations. Criminal penalties for some financial institution crimes have been increased to twenty years. In addition, regulators are provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, FIRREA expanded the appropriate banking agencies' power to issue cease and desist orders that may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications, or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the ordering agency to be appropriate.

Effect of Governmental Monetary Policies: The earnings of First Security Bank are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Board's monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments, and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.

Financial Services Modernization Act: On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act of 1999 (the "Financial Services Modernization Act"). The Financial Services Modernization Act repeals the two affiliation provisions of the Glass-Steagall Act: Section 20, which restricted the affiliation of Federal Reserve Member Banks with firms "engaged principally" in specified securities activities; and Section 32, which restricts officer, director, or employee interlocks between a member bank and any company or person "primarily engaged" in specified securities activities. In addition, the Financial Services Modernization Act also contains provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily related to insurance. The general effect of the law is to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the BHCA framework to permit a holding company system to engage in a full range of financial activities through a new entity known as a Financial Holding Company. "Financial activities" is broadly defined to include not only banking, insurance, and securities activities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

Generally, the Financial Services Modernization Act:

•

Repeals historical restrictions on, and eliminates many federal and state law barriers to, affiliations among banks, securities firms, insurance companies, and other financial service providers;

•

Provides a uniform framework for the functional regulation of the activities of banks, savings institutions, and their holding companies;

•

Broadens the activities that may be conducted by national banks, banking subsidiaries of bank holding companies, and their financial subsidiaries;

•

Provides an enhanced framework for protecting the privacy of consumer information;

•

Adopts a number of provisions related to the capitalization, membership, corporate governance, and other measures designed to modernize the Federal Home Loan Bank system;

•

Modifies the laws governing the implementation of the Community Reinvestment Act ("CRA"); and

•

Addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions.

In order for a bank holding company to take advantage of the ability to affiliate with other financial services providers, that company must become a "Financial Holding Company" as permitted under an amendment to the BHCA. To become a Financial Holding Company, Security Capital Corporation would file a declaration with the Federal Reserve, electing to engage in activities permissible for Financial Holding Companies and certifying that it is eligible to do so because all of its insured depository institution subsidiaries are well-capitalized and well-managed. In addition, the Federal Reserve must also determine that each insured depository institution subsidiary of Security Capital Corporation has at least a "satisfactory" CRA rating.

The Financial Services Modernization Act also includes a new section of the Federal Deposit Insurance Act governing subsidiaries of state banks that engage in "activities as principal that would only be permissible" for a national bank to conduct in a financial subsidiary. It expressly preserves the ability of a state bank to retain all existing subsidiaries. In order to form a financial subsidiary, a state bank must be well-capitalized, and the state bank would be subject to the same capital deduction, risk management and affiliate transaction rules as applicable to national banks.

Security Capital Corporation and First Security Bank do not believe that the Financial Services Modernization Act will have a material adverse effect on operations in the near-term. However, to the extent that it permits banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Financial Services Modernization Act is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this act may have the result of increasing the amount of competition that Security Capital Corporation and First Security Bank face from larger institutions and other types of companies offering financial products, many of which may have substantially more financial resources than Security Capital Corporation and First Security Bank.

Capital. Security Capital Corporation and First Security Bank are required to comply with the capital adequacy standards established by the Federal Reserve Board and the FDIC. There are two basic measures of capital adequacy for bank holding companies and their banking subsidiaries: a risk-based measure and a leverage measure.

The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in risk profile among depository institutions and bank holding companies, to account for off-balance sheet exposure, and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The minimum guideline for the total capital to risk-weighted assets, including certain off-balance sheet items such as standby letters of credit ("total capital ratio") is 8.0 percent. At least half of total capital must be composed of common equity, undivided profits, minority interests in the equity accounts of consolidated subsidiaries, non-cumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock, less goodwill and certain other intangible assets ("Tier 1 capital"). The remainder may consist of subordinated debt, other preferred stock, a limited amount of loan loss reserves, and unrealized gains on equity securities subject to limitations ("Tier 2 capital").

The following table represents the capital ratios for Security Capital Corporation and First Security Bank as of December 31, 2010:

	Corporation			Bank
Risk-Based Capital Ratio	Ratio			Ratio			Requirements
Total Capital		22.43	%		18.46	%		8.00	%
Tier 1 Capital		21.18	%		17.21	%		4.00	%
Leverage Capital		12.98	%		10.30	%		4.00	%

Deposit Insurance Assessments: The deposits of First Security Bank are insured by the FDIC up to the limits

set forth under applicable law. A majority of the deposits of First Security Bank are subject to the deposit insurance assessments of the Bank Insurance Fund ("BIF") of the FDIC. However, a portion of First Security Bank's deposits, relating to a savings association acquisition, are subject to assessments imposed by the Savings Association Insurance Fund ("SAIF") of the FDIC. The FDIC equalized the assessment rates for BIF-insured and SAIF-insured deposits effective January 1, 1997. The assessments imposed on all FDIC deposits for deposit insurance have an effective rate ranging from 0 to 27 basis points per $100 of insured deposits, depending on the institution's capital position and other supervisory factors. Effective March 31, 2006, the BIF and SAIF funds were merged into the newly created Deposit Insurance Fund (“DIF”). The DIF is maintained by assessing depository institutions an insurance premium effective 2007. The premium is based upon statutory factors that include the balance of the insured deposits as well as the degree of risk the institution poses to the fund. The Federal Deposit Insurance Reform Act of 2005 provided a One-time Assessment Credit of $194,604 to First Security Bank in 2007 as an eligible institution which eliminated the need to pay a DIF premium in that year. The remaining credit of $44,403 was depleted early in the next year, 2008. In 2008, the bank paid annualized basis points ranging from 5.45 basis points to 7 basis points for the DIF premium. On October 3, 2008, deposits at FDIC-insured institutions became insured up to at least $250,000 per depositor with this increase in coverage to cease at December 31, 2013. On October 14, 2008, the Temporary Liquidity Guarantee Program (TLGP) became available to participating banks. With this program, First Security Bank opted to cover any noninterest-bearing transaction accounts with a balance exceeding $250,000 at an additional fee of 10 basis points (annualized) to provide this coverage for its customers. This program, originally to expire on December 31, 2009, was extended to June 30, 2010 and then to December 31, 2010. In 2010, the Dodd-Frank Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law. Although the TLGP ceased at its sunset date of December 31, 2010, the Dodd-Frank Act has in effect extended unlimited deposit insurance coverage for noninterest-bearing transaction accounts at all FDIC-insured depository institutions for the period of December 31, 2010 through December 31, 2012. This regulation also made permanent the standard coverage of $250,000 per depositor, per insured bank, for each account ownership category. In 2009, First Security Bank paid DIF premiums ranging from annualized basis points of 7.00 to 20.89. Also in 2009, a special one-time assessment of .05% was paid on total assets less Tier 1 Capital. In 2010, First Security Bank paid DIF premiums ranging from annualized basis points of 21.04 to 21.21. Legislation was enacted in 1996 requiring both SAIF-insured and BIF-insured deposits to pay a pro rata portion of the interest due on the obligations issued by the Financing Corporation ("FICO"). Based on the assigned FICO debt service rates, the assessments paid by the Bank during 2010 was 1.04 basis points, per $100 of deposits. The projected assessments for the first quarter of 2011 will be paid based on an assigned FICO debt service rate of 1.02 basis points.

The Dodd-Frank Act also changed the method of calculation for FDIC insurance assessments. Under the current system, the assessment base is domestic deposits minus a few allowable exclusions, such as pass-through reserve balances. Under the Dodd-Frank Act, assessments are to be calculated based on the depository institution’s average consolidated total assets, less its average amount of tangible equity. On February 9, 2011, the FDIC published final regulations implementing these changes. In addition to providing for the required change in assessment base, the FDIC has modified or eliminate the assessment adjustments based on unsecured debt, secured liabilities, and brokered deposits; added a new adjustment for holding unsecured debt issued by another insured depository institution; and lowered the initial base assessment rate schedule in order to collect approximately the same amount of revenue under the new base as under the old base, among other changes. Due to the expanded assessment base the new initial base assessment rates will range from 5 to 35 basis points, and total base assessment rates will range from 2.5 to 45 basis points after adjustments. These final regulations will be effective April 1, 2011.

Legislative and Regulatory Initiatives to Address Financial and Economic Crises

The Congress, Treasury Department and the federal banking regulators, including the FDIC, have taken broad action since early September, 2008 to address volatility in the U.S. banking system, including the passage of legislation, the provision of other direct and indirect assistance to financial institutions, assistance by the banking authorities in arranging acquisitions of weakened banks and broker-dealers, implementation of programs by the Federal Reserve Board to provide liquidity to the commercial paper markets and expansion of deposit insurance coverage

In October 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted. The EESA authorizes the Treasury Department to purchase from financial institutions and their holding companies up to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief program (“TARP”). The purpose of TARP is to restore confidence and stability to the U.S. banking system and to encourage financial institutions to increase their lending to customers and to each other. The Treasury Department has allocated $250 billion towards the TARP Capital Purchase Program (“CPP”). Under the CPP, Treasury will purchase debt or equity securities from participating institutions. The TARP also includes direct purchases or guarantees of troubled assets of financial institutions. Participants in the CPP are subject to executive compensation limits and are encouraged to expand their lending and mortgage loan modifications.

The new administration and Congress have pursued a number of initiatives in an effort to stimulate the economy and stabilize the financial markets, including the enactment of the American Recovery and Reinvestment Act of 2009 and the Small Business Jobs Act of 2010, among others, and have altered the terms of some previously announced policies and programs.

The recent enactment during 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) will likely result in increased regulation of the financial services industry. Provisions likely to affect the activities of the Company and the Bank include, without limitation, the following:

·	Asset-based deposit insurance assessments. FDIC deposit insurance premium assessments will be based on bank assets rather than domestic deposits.

·	Deposit insurance limit increase. The deposit insurance coverage limit has been permanently increased from $100,000 to $250,000.

·	Extension of Transaction Account Guarantee Program. Unlimited deposit insurance coverage is extended for non-interest-bearing transaction accounts and certain other accounts for two years. This applies to all banks; there is no opt-in or opt-out requirement.

Establishment of the Bureau of Consumer Financial Protection (BCFP). The BCFP will be housed within the Federal Reserve and, in consultation with the Federal banking agencies, will make rules relating to consumer protection. The BCFP has the authority, should it wish to do so, to rewrite virtually all of the consumer protection regulations governing banks, including those implementing the Truth in Lending Act, the Real Estate Settlement Procedures Act (or RESPA), the Truth in Savings Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, the S.A.F.E. Mortgage Licensing Act, the Fair Credit Reporting Act (except Sections 615(e) and 628), the Fair Debt Collection Practices Act, and the Gramm-Leach-Bliley Act (sections 502 through 509 relating to privacy), among others.

·	Risk-retention rule. Banks originating loans for sale on the secondary market or securitization must retain 5 percent of any loan they sell or securitize, except for mortgages that meet low-risk standards to be developed by regulators.

Limitation on federal preemption. Limitations have been imposed on the ability of national bank regulators to preempt state law. Formerly, the national bank and federal thrift regulators possessed preemption powers with regard to transactions, operating subsidiaries and attorney general civil enforcement authority. These preemption requirements have been limited by the Dodd-Frank Act, which will likely impact state banks by affecting activities previously permitted through parity with national banks.

Changes to regulation of bank holding companies. Under Dodd-Frank, bank holding companies must be well-capitalized and well-managed to engage in interstate transactions. In the past, only the subsidiary banks were required to meet those standards. The Federal Reserve Board’s “source of strength doctrine” has now been codified, mandating that bank holding companies such as the Company serve as a source of strength for their subsidiary banks, meaning that the bank holding company must be able to provide financial assistance in the event the subsidiary bank experiences financial distress.

·	Executive compensation limitations. The Dodd-Frank Act codified executive compensation limitations similar to those previously imposed on TARP recipients.

This new legislation contains 16 different titles, is over 800 pages long, and calls for the completion of dozens of studies and reports and hundreds of new regulations. The information provided herein regarding the effect of the Dodd-Frank Act is intended merely for illustration and is not exhaustive, as the full impact of the legislation on banks and bank holding companies is still being studied and in any event cannot be fully known until the completion of hundreds of new federal agency rulemakings over the next few years. Interested shareholders should refer directly to the Dodd-Frank Act itself for additional information.

The Dodd-Frank Act is one of a number of legislative initiatives that have been proposed in recent months due to the ongoing national and global financial crisis. It is not possible to predict whether any other similar legislation may be adopted that would significantly affect the operations and performance of the Company and the Bank.

On June 26, 2009, as part of the TARP CPP, the Company entered into a Letter Agreement and Securities Purchase Agreement (collectively, the “Purchase Agreement”) with the Treasury Department, pursuant to which the Company sold (i) 17,388 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series UST (the “UST Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 522.00522 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series UST/W (“the “Warrant Preferred Stock”), for an aggregate purchase price of $17,388,000 in cash. The UST Preferred Stock qualifies as Tier 1 capital and is entitled to cumulative dividends at a rate of 5% per annum for the first five years, and 9% per annum thereafter. The Warrant immediately exercised upon its issuance, and the 522 net shares of Warrant Preferred Stock was (after net settlement) entitled to dividends at a rate of 9% per annum. The Company was subject to these rate requirements until September 29, 2010.

On September 29, 2010, the Company closed a transaction whereby the Treasury exchanged its 17,910 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series UST and Series UST/W for 17,910 shares of a new series of preferred stock designated Fixed Rate Cumulative Perpetual Preferred Stock, Series CD (the “CDCI Preferred Shares”). As a result of the Exchange, the Company is no longer participating in the TARP Capital Purchase Program being administered by Treasury and is now participating in Treasury’s TARP Community Development Capital Initiative (the “CDCI”). In comparison with the rates required by the TARP CPP, the CDCI Preferred Shares entitle the holder to an annual dividend of 2% of the liquidation value of the shares, payable quarterly in arrears, for a period of eight years or until repayment of the principal, whichever expires first. If the principal remains outstanding at the end of eight years, the annual dividend rate will rise to 9%. In addition, if the Company fails to maintain its compliance with the eligibility requirements for certification as a Community Development Financial Institution, the annual rate will be 5% when noncompliance exceeds 180 days and 9% for noncompliance exceeding 270 days.

These eligibility requirements include the following:

·	The Company must have a primary mission of promoting community development, based on criteria set forth in 12 C.F.R. 1805.201(b)(1);

·	The Company must provide Financial Products, Development Services, and/or other similar financing as a predominant business activity in arm’s-length transactions, as provided in 12 C.F.R. 1805.201(b)(2);

·	The Company must serve a Target Market by serving one or more Investment Areas and/or Targeted Populations, substantially in the manner set forth in 12 C.F.R. 1805.201(b)(3);

·	The Company must provide Development Services in conjunction with its Financial Products, either directly, through an Affiliate, or through a contract with a third-party provider, as provided in 12 C.F.R. 1805.201(b)(4);

·	The Company must maintain accountability to residents of the applicable Investment Area(s) and/or Targeted Population(s) through representation on its governing Board of Directors or otherwise, as provided in 12 C.F.R. 1805.201(b)(5); and

The Company must remain a non-governmental entity which is not an agency or instrumentality of the United States of America, or any State or political subdivision thereof, as described in 12 C.F.R. 1805.201(b)(6) and within the meaning of any supplemental regulations or interpretations of 12 C.F.R. 1805.201(b)(6) or such supplemental regulations published by the Fund.

As used in the discussion above, the terms “Affiliate,” “Financial Products,” “Development Services,” “Target Market,” “Investment Area(s),” and “Targeted Population(s)” have the meanings ascribed to such terms in 12 C.F.R. 1805.104.

Summary

The foregoing is a brief summary of certain statutes, rules and regulations affecting the Company and the Bank. It is not intended to be an exhaustive discussion of all the statutes and regulations having an impact on the operations of such entities.

Competition

The banking business is a highly competitive business. Security Capital Corporation’s market area consists principally of Panola, Quitman, Desoto, Marshall and Tunica Counties in Mississippi. Security Capital Corporation competes with other financial institutions, as well as insurance companies and various other entities, for deposits and in providing financial services in these counties and the surrounding counties. Security Capital Corporation, as provided by the FDIC Market Share Report of June 30, 2010 (the latest Market Share Report), held 58.41% of the deposit market in Panola County. In Quitman County, this same report reflects Security Capital Corporation holding 20.25% of the deposit market. In Desoto County, an area filled with large regional banks and national banks, Security Capital Corporation held a 4.15% share of the deposit market as of June 30, 2010. In Marshall County, Security Capital held a .78% share of the deposit base at June 30, 2010. In Tunica County, Security Capital Corporation held a 48.81% share of the deposit base as of June 30, 2010.

Available Information

The Company maintains an internet website at www.firstsecuritybk.com. The Company provides on its website, as filed with the Securities and Exchange Commission, the quarterly reports on Form 10-Q, as well as the annual report Form 10-K, current reports on Form 8-K, and amendments to those reports. These reports will be available on the Company’s website as soon as reasonably practical after the reports are filed with the Commission. Information on the Company’s website is not incorporated into this Form 10-K or the Company's other securities filings and is not a part of them. Electronic or paper copies of the reports will be provided, free of charge, upon request by mail, through our website or in person.

The 2010 annual report and the 2011 proxy material are available on the website, www.firstsecuritybk.com, for the shareholders to review prior to submitting a proxy or attending the 2011 shareholders’ meeting.

Statistical Disclosure

The statistical disclosures for the Company are contained in Tables 1 through 16.

Table 1 - Five Year Financial Summary

Table 2 - Average Balances, Interest Earned and Interest Yields

Table 3 - Net Interest Earning Assets

Table 3A - Volume/Rate Analysis

Table 4 - Non-Interest Income and Expense

Table 5 - Loans by Type

Table 6 - Loan Liquidity

Table 7 - Allowance for Loan Losses

Table 8 - Nonperforming Assets

Table 8A - Allocation of the Allowance for Loan Losses

Table 9 - Securities

Table 10 - Securities Maturity and Repricing Schedule

Table 11 - Securities Weighted Maturity and Tax Equivalent Yield by Classification

Table 12 - Deposit Information

Table 13 - Maturity Ranges of Time Deposits with Balances More Than $100,000

Table 14 - Funding Uses and Sources

Table 15 - Liquidity; Interest Rate Sensitivity

Table 15A - Changes in Net Interest Income over One Year Horizon

Table 16 - Capital Ratios

ITEM 1A. RISK FACTORS

Making or continuing an investment in securities issued by the Company, including the Company’s common stock, involves certain risks that you should carefully consider. The risks and uncertainties described below are not the only risks that may have a material adverse effect on the Company. Additional risks and uncertainties also could adversely affect the Company’s business and results of operations. If any of the following risks actually occur, the Company’s business, financial condition or results of operations could be negatively affected, the market price for your securities could decline, and you could lose all or a part of your investment. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause the Company’s actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company.

The Company may be vulnerable to certain sectors of the economy.

A portion of the Company’s loan portfolio is secured by real estate. If the economy continues to deteriorate causing depressed real estate values beyond a certain point, then the collateral value of the portfolio and the revenue stream from those loans could come under stress and possibly require additional loan loss accruals. The Company’s ability to dispose of foreclosed real estate at prices above the respective carrying values could also be impinged, causing additional losses.

General economic conditions in the areas where the Company’s operations or loans are concentrated may adversely affect our customers’ ability to meet their obligations.

A sudden or severe downturn in the economy in the geographic markets served by the Company in the state of Mississippi may affect the ability of the Company’s customers to meet loan payment obligations on a timely basis. The local economic conditions in these areas have a significant impact on the Company’s commercial, real estate, and construction loans, the ability of borrowers to repay these loans and the value of the collateral securing such loans. Changes resulting in adverse economic conditions of the Company’s market areas could negatively impact the financial results of the Company’s banking operations and its profitability. Additionally, adverse economic changes may cause customers to withdraw deposit balances, thereby causing a strain on the Company’s liquidity.

The Company is subject to a risk of rapid and significant changes in market interest rates.

The Company’s assets and liabilities are primarily monetary in nature and, as a result, the Company is subject to significant risks tied to changes in interest rates. The Company’s ability to operate profitably is largely dependent upon net interest income. Unexpected movement in interest rates markedly changing the slope of the current yield curve could

cause the Company’s net interest margins to decrease, subsequently decreasing net interest income. In addition, such changes could adversely affect the valuation of the Company’s assets and liabilities.

At present the Company’s one-year interest rate sensitivity position continues to indicate an overall neutrality, with a slight tendency to being asset sensitive. This status projects that a gradual increase in interest rates during the next twelve months should not have a significant impact on net interest income during that period. However, as with most financial institutions, the Company’s results of operations are affected by changes in interest rates and the Company’s ability to manage this risk. The difference between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities may be affected by changes in market interest rates, changes in relationships between interest rate indices, and/or changes in the relationships between long-term and short-term market interest rates. A change in this difference might result in an increase in interest expense relative to interest income, or a decrease in the Company’s interest rate spread.

Certain changes in interest rates, inflation, or the financial markets could affect demand for the Company’s products and the Company’s ability to deliver products efficiently.

Loan originations, and potentially loan revenues, could be adversely impacted by sharply rising interest rates. Conversely, sharply falling rates could increase prepayments within the Company’s securities portfolio lowering interest earnings from those investments. An underperforming stock market could reduce brokerage transactions, therefore reducing investment brokerage revenues; in addition, wealth management fees associated with managed securities portfolios could also be adversely affected. An unanticipated increase in inflation could cause the Company’s operating costs related to salaries & benefits, technology, & supplies to increase at a faster pace than revenues.

The fair market value of the Company’s securities portfolio and the investment income from these securities also fluctuate depending on general economic and market conditions. In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations.

Changes in the policies of monetary authorities and other government action could adversely affect the Company’s profitability.

The results of operations of the Company are affected by credit policies of monetary authorities, particularly the Federal Reserve Board. The instruments of monetary policy employed by the Federal Reserve Board include open market operations in U.S. government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits. In view of changing conditions in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks and the current military operations in the Middle East, we cannot predict possible future changes in interest rates, deposit levels, loan demand or the Company’s business and earnings. Furthermore, the actions of the United States government and other governments in responding to such terrorist attacks or the military operations in the Middle East may result in currency fluctuations, exchange controls, market disruption and other adverse effects.

Natural disasters could affect the Company’s ability to operate.

The Company’s market areas are susceptible to hurricanes. Natural disasters, such as hurricanes, can disrupt the Company’s operations, result in damage to properties and negatively affect the local economies in which the Company operates.

The Company cannot predict whether or to what extent damage caused by future hurricanes will affect the Company’s operations or the economies in the Company’s market areas, but such weather events could cause a decline in loan originations, a decline in the value or destruction of properties securing the loans and an increase in the risk of delinquencies, foreclosures or loan losses.

Greater loan losses than expected may adversely affect the Company’s earnings.

The Company, as a lender, is exposed to the risk that its customers will be unable to repay their loans in accordance with their terms and that any collateral securing the payment of their loans may not be sufficient to assure repayment. Credit losses are inherent in the business of making loans and could have a material adverse effect on the Company’s operating results. The Company’s credit risk, with respect to its real estate and construction loan portfolio, will relate principally to the creditworthiness of corporations and the value of the real estate serving as security for the repayment of loans. The Company’s credit risk, with respect to its commercial and consumer loan portfolio, will relate principally to the general creditworthiness of businesses and individuals within the Company’s local markets.

The Company makes various assumptions and judgments about the collectibility of its loan portfolio and provides an allowance for estimated loan losses based on a number of factors. The Company believes that its current allowance for loan losses is adequate. However, if the Company’s assumptions or judgments prove to be incorrect, the allowance for loan losses may not be sufficient to cover actual loan losses. The Company may have to increase its allowance in the future in response to the request of one of its primary banking regulators, to adjust for changing conditions and assumptions, or as a result of any deterioration in the quality of the Company’s loan portfolio. The actual amount of future provisions for loan losses cannot be determined at this time and may vary from the amounts of past provisions.

The Company’s stock is not listed or traded on the financial markets.

The Company’s stock is neither listed nor traded on any securities exchange and transfer to a non-stockholder is restricted. The Company, through handling a stock sale, provides a market for the stock.

The Company is subject to regulation by various federal and state entities.

The Company is subject to the regulations of the Securities and Exchange Commission (“SEC”), the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Mississippi Department of Banking and Consumer Finance. New regulations issued by these agencies may adversely affect the Company’s ability to carry on its business activities. The Company is subject to various federal and state laws and certain changes in these laws and regulations may adversely affect the Company’s operations.

The Company is also subject to the accounting rules and regulations of the SEC and the Financial Accounting Standards Board. Changes in accounting rules could adversely affect the reported financial statements or results of operations of the Company and may also require extraordinary efforts or additional costs to implement.

Any of these laws or regulations may be modified or changed from time to time, and the Company cannot be assured that such modifications or changes will not adversely affect the Company.

The Company engages in acquisitions of other businesses from time to time.

On occasion, the Company will engage in acquisitions of other businesses. Acquisitions may result in customer and employee turnover, thus increasing the cost of operating the new businesses. The acquired companies may also have legal contingencies, beyond those that the Company is aware of, that could result in unexpected costs.

The Company is subject to industry competition which may have an impact upon its success.

The profitability of the Company depends on its ability to compete successfully. The Company operates in a highly competitive financial services environment. Certain competitors are larger and may have more resources than the Company. The Company faces competition in its regional market areas from other commercial banks, savings and loan associations, credit unions, internet banks, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, and other financial intermediaries that offer similar services. Some of the Company’s nonbank

competitors are not subject to the same extensive regulations that govern the Company or the Bank and may have greater flexibility in competing for business.

Another competitive factor is that the financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. The Company’s future success may depend, in part, on its ability to use technology competitively to provide products and services that provide convenience to customers and create additional efficiencies in the Company’s operations.

Anti-takeover laws and certain agreements and charter provisions may adversely affect share value.

Certain provisions of state and federal law and the Company’s articles of incorporation may make it more difficult for someone to acquire control of the Company. Under federal law, subject to certain exemptions, a person, entity, or group must notify the federal banking agencies before acquiring 10% or more of the outstanding voting stock of a bank holding company, including the Company’s shares. Banking agencies review the acquisition to determine if it will result in a change of control. The banking agencies have 60 days to act on the notice, and take into account several factors, including the resources of the acquiror and the antitrust effects of the acquisition.

Securities issued by the Company, including the Company’s common stock, are not FDIC insured.

Securities issued by the Company, including the Company’s common stock, are not savings or deposit accounts or other obligations of any bank and are not insured by the FDIC, the Bank Insurance Fund, or any other governmental agency or instrumentality, or any private insurer, and are subject to investment risk, including the possible loss of principal.

Security Capital Corporation makes loans, and most of its assets are located in Panola, Quitman, Desoto, Marshall, and Tunica Counties in Mississippi. Adverse changes in economic conditions in these areas could hurt Security Capital Corporation's ability to collect loans, could reduce the demand for loans, and could negatively impact performance and financial condition.

Security Capital Corporation’s profitability depends on economic policies and factors beyond our control.

Security Capital Corporation’s earnings depend to a great extent on “rate differentials,” which are the differences between interest income that Security Capital Corporation earns on loans and investments and the interest expense paid on deposits and other borrowings. These rates are highly sensitive to many factors which are beyond Security Capital Corporation’s control, including general economic conditions and the policies of various government and regulatory authorities. Changes in interest rate policy by the Board of Governors of the Federal Reserve System affect Security Capital Corporation’s interest income, interest expense and investment portfolio. Also, governmental policies such as the creation of a tax deduction for individual retirement accounts can increase savings and affect the cost of funds. A rapid increase or decrease in interest rates could have an adverse effect on the net interest margin and results of operations of Security Capital Corporation. The nature, timing and effect of any future changes in federal monetary and fiscal policies on Security Capital Corporation and its results of operations are not predictable.

There is no assurance that Security Capital Corporation will be able to successfully compete with others for business.

The banking business is highly competitive, and the profitability of Security Capital Corporation depends principally upon its ability to compete in the market areas where its banking operations are located. Security Capital Corporation competes with other commercial banks, savings banks, savings and loan associations, credit unions, mortgage companies, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, asset-based non-bank lenders and certain other non-financial entities, including retail stores which may maintain their own credit programs and certain governmental organizations which may offer more favorable financing than Security Capital Corporation. Many of these competitors have greater financial and other resources than Security Capital Corporation, and certain larger competitors are recent entrants into Security Capital Corporation’s markets.

The capital and credit markets, including fixed income markets, have been experiencing volatility and disruption in recent months. In some cases the markets have produced downward pressure on stock prices and credit capacity for certain issuers without regard to those issuers’ financial strength. In many cases, secondary markets for certain forms of securitized credit have ceased to function.

Many lenders and institutional investors have reduced and in some cases ceased to provide funding to borrowers including to other financial institutions because of concern about the stability of financial markets and the strength of counterparties. It is difficult to predict how long these economic conditions will persist, the extent to which they will impact our business segments, or whether management’s actions will effectively mitigate these external factors. Accordingly, the resulting shortfall of available credit, lack of confidence in the financial sector, decreased consumer confidence, increased volatility in the financial markets, and reduced business activity could materially and adversely affect our business, financial condition, and results of operations.

The Company participates in the U.S. Treasury’s Troubled Asset Relief Program (TARP).

In 2009, the Company received $17,388,000 in funding under the Capital Purchase Program, which is part of the Troubled Asset Relief Program or “TARP,” in exchange for preferred stock and preferred stock warrants. On September 29, 2010, the Company closed a transaction whereby the Treasury exchanged (the “Exchange”) its 17,910 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series UST and Series UST/W for 17,910 shares of a new series of preferred stock designated Fixed Rate Cumulative Perpetual Preferred Stock, Series CD (the “CDCI Preferred Shares”). As a result of the Exchange, the Company is participating in the Community Development Capital Initiative which is also part of TARP.

Participation constrains the Company’s ability to raise dividends and repurchase equity securities and also places certain constraints on executive compensation arrangements. The increased funding provides assurance that the Company can maintain its minimum regulatory capital ratios in the face of future large real estate-related losses.

The rules that govern TARP include restrictions on certain compensation to executive officers and a number of others in the Company. Among other things, these rules include a prohibition on golden parachute payments, a prohibition on providing tax gross-ups, a bonus claw-back provision, and a prohibition on paying any bonus payment to the Company’s most highly compensated employee. It is possible that compensation restrictions imposed by TARP could impede our ability to attract and retain qualified executive officers.

·	Our participation in the Capital Purchase Program limited our annual per share dividend payments to no more than the amount paid in the immediately prior fiscal year. Beginning on September 29, 2008, our ability to repurchase our common stock would also be restricted.

Since TARP was part of legislation that has the reputation of being passed as a bailout of the financial industry, participation in the program could also create some reputational risk. This reputation of the program could impede the Company’s ability to attract business in competition with other financial institutions that did not participate. This reputational risk could also impede the Company’s ability to attract and retain qualified executive officers.

As a result of the Exchange, the Company is no longer participating in the TARP Capital Purchase Program being administered by Treasury and is now participating in Treasury’s TARP Community Development Capital Initiative (the “CDCI”). In comparison with the rates required by the TARP CPP, the CDCI Preferred Shares entitle the holder to an annual dividend of 2% of the liquidation value of the shares, payable quarterly in arrears, for a period of eight years or until repayment of the principal, whichever expires first. If the principal remains outstanding at the end of eight years, the annual dividend rate will rise to 9%. In addition, if the Company fails to maintain its compliance with the eligibility requirements for certification as a Community Development Financial Institution, the annual rate will be 5% when noncompliance exceeds 180 days and 9% for noncompliance exceeding 270 days.

These eligibility requirements include the following:

·	The Company must have a primary mission of promoting community development, based on criteria set forth in 12 C.F.R. 1805.201(b)(1);

·	The Company must provide Financial Products, Development Services, and/or other similar financing as a predominant business activity in arm’s-length transactions, as provided in 12 C.F.R. 1805.201(b)(2);

·	The Company must serve a Target Market by serving one or more Investment Areas and/or Targeted Populations, substantially in the manner set forth in 12 C.F.R. 1805.201(b)(3);

·	The Company must provide Development Services in conjunction with its Financial Products, either directly, through an Affiliate, or through a contract with a third-party provider, as provided in 12 C.F.R. 1805.201(b)(4);

·	The Company must maintain accountability to residents of the applicable Investment Area(s) and/or Targeted Population(s) through representation on its governing Board of Directors or otherwise, as provided in 12 C.F.R. 1805.201(b)(5); and

As a result of the challenges presented by current economic conditions, we face various risks in connection with these events, including the following:

•		Inability of our borrowers to make timely repayments of their loans, or decreases in value of real estate collateral securing the payment of such loans resulting in significant credit losses.

•		Increased regulation of our industry, including heightened legal standards, and regulatory requirements or future legislation. Compliance with such regulation will likely increase our costs and may limit our ability to pursue business opportunities. In addition, compensation restrictions associated with any future legislation may affect our ability to attract and retain key management personnel.

•		Possible changes to bankruptcy laws could result in the loss of all or part of our security interest in mortgage loans.

•		Further disruptions in the capital markets or other events including actions by rating agencies and deteriorating investor expectations may result in an inability to borrow at favorable terms or at all from other financial institutions.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable

ITEM 2. PROPERTIES

Security Capital Corporation, through First Security Bank, currently operates from its Main Office and its Trust and Financial Services in central Batesville and from 15 additional branches in Panola, Quitman, Desoto, Marshall, and Tunica Counties - all located in Mississippi. Information about these branches is set forth in the table below:

Name of Office	Location/Telephone Number	Banking Services Offered

Main Office	295 Highway 6 West	Loans, Deposits, Cash,
	Batesville, Mississippi 38606	Safe Deposit Boxes, ATM,
	662-563-9311	Drive-thru

Express Branch	130 Highway 51 North	Drive-thru, Cash
	Batesville, Mississippi 38606
	662-563-9311

Marks Branch	1651 Charlie Pride Highway South	Loans, Deposits, Cash,
	Marks, Mississippi 38646	Safe Deposit Boxes,
	662-326-8053	Drive-thru

Power Drive Branch	230 Power Drive	Loans, Deposits, Cash,
	Batesville, Mississippi 38606	Safe Deposit Boxes, ATM,
	662-563-9311	Drive-thru

Sardis Branch	201 South Main	Loans, Deposits, Cash,
	Sardis, Mississippi 38666	Safe Deposit Boxes
	662-487-1661

Olive Branch Branch	6659 Highway 305	Loans, Deposits, Cash,
	Olive Branch, Mississippi 38654	Safe Deposit Boxes, ATM,
	662-895-1994	Drive-thru

Como Branch	227 Main Street	Loans, Deposits, Cash,
	Como, Mississippi 38619	Safe Deposit Boxes, ATM,
	662-526-5191	Drive-thru

Crenshaw Branch	729 Broad Street	Loans, Deposits, Cash,
	Crenshaw, Mississippi 38621	Safe Deposit Boxes
	662-382-5215

Tunica Branch	1262 East Edwards Street	Loans, Deposits, Cash,
	Tunica, Mississippi 38676	Safe Deposit Boxes, ATM,
	662-363-2311	Drive-thru

Robinsonville Branch	11490 Old Highway 61 North	Loans, Deposits, Cash,
	Robinsonville, Mississippi 38664	Safe Deposit Boxes, ATM,
	662-363-5015	Drive-thru

Hernando Branch	985 East Commerce Street	Loans, Deposits, Cash,
	Hernando, Mississippi 38632	Safe Deposit Boxes, ATM,
	662-449-4115	Drive-thru

Pope Branch	7024 Highway 51 North	Deposits, Cash, ATM,
	Pope, Mississippi 38658	Drive-thru
	662-578-5650

Southaven Branch	3035 Church Road East	Loans, Deposits, Cash,
	Southaven, Mississippi 38672	Safe Deposit Boxes, ATM,
	662-893-3243	Drive-thru

Sardis Express Branch	610 East Lee Street	Deposits, Cash, ATM,
	Sardis, Mississippi 38666	Drive-thru
	662-487-1895

Goodman Road Branch	5028 Goodman Road	Loans, Deposits, Cash,
	Olive Branch, Mississippi 38654	Safe Deposit Boxes, ATM,
	662-890-1043	Drive-thru

Barton Branch	4417 Highway 302	Loans, Deposits, Cash,
	Olive Branch, Mississippi 38654	Safe Deposit Boxes, ATM,
	662-890-4670	Drive-thru

Trust and Financial Services	275 Highway 6 West	Investment Planning &
Branch	Batesville, Mississippi 38606	Management, Personal Trusts,
	662-563-9311	Corporate Trusts, Pension &
		Profit-Sharing Plans, IRA's,
		Paying Agent Accounts

First Security Bank owns its main office and all of its branch offices, except the Express Branch. The Express Branch was leased for an annual rent of $10,200 in 2010. This ground lease agreement had an option to renew which was exercised in 2007. Under the renewal, the Bank is committed to an annual rent of $10,200 for 2011 through 2012. The main office facility, originally occupied in 1973, is used solely by Security Capital Corporation and First Security Bank. This facility contains approximately 21,300 square feet and houses the executive offices and the operations department as well as providing the customer area for cash, deposit, safe deposit and loan transactions. The other branch buildings range in size from approximately 600 square feet for the Express Branch to 7,000 square feet for the Hernando, Olive Branch, and Southaven locations.

ITEM 3. LEGAL PROCEEDINGS

First Security Bank is the defendant in a case styled Amy French, individually, and Austin Lenard, a minor, by and through His Next Friend and Mother, Amy French vs. First Security Bank and Joshua Hawkins, Cause No. 2002-327-BB, filed on December 17, 2002, in the Circuit Court of the Second Judicial District of Panola County, Mississippi. The case involves an accident that occurred when a First Security Bank employee traveling in his personal vehicle to service an ATM was involved in an automobile accident. The pregnant occupant of the other vehicle gave birth later that day. The claims in the lawsuit are that the mother and child are experiencing permanent and continuing injuries, and the plaintiffs ask for compensatory damages in the amount determined to be fair by the jury. At December 31, 2010, the legal proceedings had not been resolved. However, an analysis by legal counsel anticipates possible awards to the claimants to be within the insurance coverage with no potential loss to the Bank and closure of the case is dependent on forthcoming medical documentation on status of claimants.

From time to time First Security Bank is a defendant in various other lawsuits arising out of the normal course of business. In the opinion of management, the ultimate resolution of this category of claims should not have a material adverse effect on Security Capital Corporation’s consolidated financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Reserved

PART II

ITEM 5.

MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Market Value

There is no public trading market for the common stock of Security Capital Corporation. The articles and bylaws of Security Capital Corporation give Security Capital Corporation a right of first refusal to acquire shares when a shareholder wishes to sell stock.

Dividends

Security Capital Corporation paid an annual cash dividend of $.50 per share in 2010 and 2009. The primary source of funds for dividends paid by Security Capital Corporation to its shareholders is the dividend income received from First Security Bank. There are certain restrictions on the payment of such dividends imposed by federal and state banking laws, regulations and authorities. Under Mississippi law, the payment of dividends by First Security Bank must be approved by the Mississippi Department of Banking and Consumer Finance. The FDIC also has the authority to regulate the payment of dividends and to prohibit a regulated depository institution from engaging in what, in such agency’s opinion, constitutes an unsafe or unsound practice for conducting business. Depending upon the financial condition of the depository institution, payment of dividends could be deemed to constitute such an unsafe or unsound practice. In addition, a depository institution may not pay a dividend or otherwise make a capital distribution if the payment thereof would cause such institution to fail to satisfy its capital requirements.

At December 31, 2010, there were 832 stockholders of record of the Company's common stock.

ITEM 6. SELECTED FINANCIAL DATA

Five Year Financial Summary

The following table sets forth certain financial information for Security Capital Corporation on a consolidated historical basis. Such information should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes appearing elsewhere in this report.

Security Capital Corporation
Table 1 - Five Year Financial Summary


	12/31/2010	12/31/2009	12/31/2008	12/31/2007	12/31/2006
	(In thousands except per share data and other financial data)
Income Statement Data:
Interest Income	$ 19,785	$ 21,067	$ 27,071	$ 34,133	$ 30,586
Interest Expense	4,276	5,373	8,993	13,699	11,523
Net Interest Income	15,509	15,694	18,078	20,434	19,063
Provision for Loan Losses	2,325	3,911	10,456	1,155	965
Net Interest Income After Provision	13,184	11,783	7,622	19,279	18,098
Noninterest Income	6,355	6,624	7,748	6,849	6,926
Noninterest Expenses	18,493	18,137	16,029	15,538	14,435
Income (loss) Before Income Taxes	1, 046	270	(839)	10,590	10,589
Income Tax Expense (Benefit)	(256)	(528)	(1,022)	3,155	3,349
NET INCOME	1,302	798	183	7,435	7,240
Preferred Dividends	1,014	585	-	-	-
Net income applicable to
common shareholders	288	213	183	7,435	7,240
Per Share Data:
Basic net Income – per common share*	.10	.07	.06	2.58	2.51
Cash Dividends*	.50	.50	.50	1.00	0.95
Book Value*	24.94	25.24	19.42	19.76	18.05

Other Ratios (%):
Return on Average Assets	.06	.04	.04	1.54	1.58
Return on Average Equity	.39	.32	.31	13.44	14.36
Loans to Deposits	60.62	69.52	86.82	88.28	89.08
Loans to Total Assets	48.35	54.26	67.11	72.02	71.27
Equity Capital to Total Assets	14.03	14.81	12.10	11.95	11.34
Average Equity to Average Assets	14.39	14.08	12.15	11.43	10.99
Dividend Payout Ratio	500.00	676.79	787.58	38.76	37.90

Other Financial Data:
Cash Dividends Declared	$1,441,580	$1,441,555	$1,441,280	$2,881,809	$2,743,770
Weighted Average
Outstanding Common Shares	2,883,167	2,882,959	2,882,332	2,881,934	2,880,487

*The per share information is based upon the retroactive effect of the stock dividends for the period, if applicable.
The per share data being reflected was derived using the weighted average number of outstanding shares at
December 31, 2010 as the denominator. (The weighted average number of outstanding shares at December
31, 2010 was 2,883,209.) For example, the cash dividends per share was determined by dividing the amount
of dividends by 2,883,209.
	12/31/2010	12/31/2009	12/31/2008	12/31/2007	12/31/2006
	(In thousands except other data)
Balance Sheet Data:
Total Assets	$ 512,482	$ 491,372	$ 462,485	$ 476,530	$ 458,329
Earning Assets	419,954	403,751	395,077	425,879	398,824
Investment Securities AFS	124,447	109,466	69,890	66,160	61,028
Investment Securities HTM	33,095	14,759	5,375	7,235	7,850
Other Securities	1,933	2,223	2,218	2,024	2,250
Loans - Net	243,287	262,259	306,678	338,460	322,324
Allowance for Loan Losses	4,477	4,352	3,675	4,729	4,334
Total Deposits	408,743	383,500	357,483	388,733	366,699
Savings Deposits	28,064	26,830	27,731	26,897	30,553
Time Deposits	158,987	148,746	145,899	175,805	156,692
Long-Term Borrowings	25,127	26,910	28,657	22,082	11,937
Shareholders' Equity	71,913	72,780	55,979	56,939	51,984


Average Balances:
Total Assets	518,551	477,345	482,066	472,756	450,822
Earning Assets	438,687	400,451	422,877	420,609	397,929
Securities	149,068	87,609	78,734	72,399	78,309
Total Loans	258,541	286,433	334,576	340,689	315,468
Allowance for Loan Losses	3,985	4,141	4,963	4,612	4,281
Savings Deposits	27,771	26,512	28,442	29,932	31,363
Time Deposits	156,388	144,736	162,006	168,032	144,549
Long-Term Borrowings	27,219	29,989	29,742	16,291	12,450
Shareholders’ Equity	74,608	67,539	56,228	52,990	50,414

Other Data:
Number of Employees	177	186	189	190	190

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Application of Critical Accounting Policies

Release 33-8098 requires the Company to disclose any accounting estimates based on highly uncertain data and any material impact from adopting an accounting standard or policy.

The primary area in which there is uncertainty is the potential losses in the loan portfolio. In this area, an estimate is derived from an analysis of the loan portfolio and the Allowance for Loan Losses of the loans and the loan types that pose a risk of being a future loss. To prepare for the potential loss, an increase will be made to the loan loss reserve, if needed, for the inclusion of the balances or a percentage of the balances of the identified risks in the loan portfolio. With the need to increase the Allowance for Loan Losses, an increase will occur in bad debt expense or the Provision for Loan Losses expense which ultimately lowers the net income which is reflected on the Income Statement. In addition, the building up of the Allowance for Loan Losses results in a decrease in the total assets reflected on the balance sheet by the decrease in the net loan portfolio. The amount expensed - which is a non-cash transaction - for the accounting period will be an adjustment on the Statement of Cash Flows. For future periods, the effect on the income statement and the balance sheet will be dependent on the amount of loan charge offs and the strength of the loan portfolio for the accounting period. If charge offs decrease and the analysis of the loan portfolio and the Allowance for Loan Losses determines no additional provisions are required, the decrease of the accrual estimate will boost income and net assets. See “Allowance and Provision for Loan Losses” for more details.

Management's Discussion and Analysis of Financial Condition and Results of Operations

For the Years Ended December 31, 2010, 2009, and 2008

Management's Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of Security Capital Corporation's balance sheets and statements of income. This section should be read in conjunction with Security Capital Corporation's Consolidated Financial Statements and accompanying Notes and other detailed information appearing elsewhere in this report.

This discussion includes 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. Security Capital Corporation cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, all of which may change over time. Actual results could differ materially from forward-looking statements.

In addition to factors disclosed by Security Capital Corporation elsewhere in this report, the following factors, among others, could cause actual results to differ materially from such forward-looking statements: exposure to local economic conditions, interest rate risk, credit quality, risks inherent in consumer and commercial lending, competition, and the extent and timing of legislative and regulatory actions and reforms.

Results of Operations

Overview

Security Capital Corporation earned $1.3 million of which $288 thousand or $.10 per share was available for common shareholders for 2010, $213 thousand or $.07 per share for 2009, and $ 183 thousand or $.06 per share for 2008 representing an increase of $105 thousand or $.04 per share for the period from year 2008 through year 2010 for common shareholders. The substantial change in the earnings since 2007 is primarily due to the downturn in the economy that has greatly affected the overall banking industry.

Net Interest Income

Net interest income is the most significant component of Security Capital Corporation’s earnings. Net interest income is the difference between interest and fees realized on earning assets, primarily loans and securities, and interest paid on deposits and other borrowed funds. The net interest income is determined by several factors, including the volume of earning assets and liabilities, the mix of earning assets and liabilities and interest rates heavily influenced by nonaccrual loans. Although there are a certain number of these factors which can be controlled by management policies and actions, there are certain other factors, such as the general level of credit demand, the Federal Reserve Board monetary policy, and changes in tax law that are beyond the control of management.

The decrease in net interest income in 2010 as compared to 2009 is due to a continuing decrease in loans and loan interest rates and an increase in non-accrual loans.

The following table sets forth the major components of interest earning assets and interest-bearing liabilities for three consecutive years ended December 31, 2010. In the table below, the loan interest includes loan fees and the interest on securities considers discount accretion and premium amortization.

Security Capital Corporation
Table 2 - Average Balances; Interest Earned and Interest Yields
(in thousands)
	Years ended December 31,
	2010						2009						2008
	Average				Average		Average				Average		Average				Average
	Balance		Interest		Yields		Balance		Interest		Yields		Balance		Interest		Yields
Assets:
Interest-Earning Assets:
Securities		145,905		4,512		3.09		85,672		3,515		4.10		78,188		3,712		4.75
BV to MV		3,163						1,937						546
Total Securities		149,068		4,512		3.03		87,609		3,515		4.01		78,734		3,712		4.71

Loans
Commerical/Agricultural		196,036		10,789		5.50		218,744		12,446		5.69		262,136		17,039		6.50
Consumer/Installment		57,359		4,158		7.25		62,594		4,743		7.58		66,761		5,702		8.54
Mortgage		160		8		5.00		150		12		8.00		232		19		8.19
Other Personal Loans		4,986		221		4.43		4,945		217		4.39		5,447		303		5.56
Total Loans		258,541		15,176		5.87		286,433		17,418		6.08		334,576		23,063		6.89

Other Investments
CDs with Other Banks		671		13		1.94		257		7		2.72		198		10		5.05
Federal Funds Sold		27,681		62		0.22		20,782		47		0.23		3,503		89		2.54
FHLB Account/Other		2,726		22		0.81		5,370		80		1.49		5,866		197		3.36
Total Other		31,078		97		0.31		26,409		134		0.51		9,567		296		3.09

Total Earning Assets		438,687		19,785		4.51		400,451		21,067		5.26		422,877		27,071		6.40

Noninterest Earning Assets:

Allowance for Loan Losses		-3,985						-4,141						-4,963
Fixed Assets		32,708						27,361						23,145
Other Assets		32,063						36,301						24,245
Cash and Due Froms		19,427						17,373						16,762

Total Noninterest Earning Assets		80,213						76,894						59,189

Total Assets		518,900						477,345						482,066

Liabilities & Shareholders' Equity

Interest-Bearing Liabilities
Deposits:
Interest-Bearing DDA		155,585		883		0.57		140,946		981		0.70		135,517		1,767		1.30
Savings Deposits		27,771		57		0.21		26,512		92		0.35		28,442		201		0.71
Time Deposits		156,388		2,242		1.43		144,736		3,043		2.10		162,006		5,651		3.49

Total Interest-Bearing Deposits		339,744		3,182		0.94		312,194		4,116		1.32		325,965		7,619		2.34

Borrowed Funds
Short-Term Borrowings		577		0		0.00		723		2		0.28		2,314		45		1.94
FHLB Advances- Short/Long-Term		26,642		1,094		4.11		29,989		1,255		4.18		31,614		1,329		4.20

Total Borrowed Funds		27,219		1,094		4.02		30,712		1,257		4.09		33,928		1,374		4.05

Total Interest-Bearing Liabilities		366,963		4,276		1.17		342,906		5,373		1.57		359,893		8,993		2.50

Non-Interest-Bearing Liabilities
Non-Interest-Bearing Deposits		69,422						59,201						59,544
Other Liabilities		7,907						7,699						6,401

Shareholders' Equity		74,608						67,539						56,228

Total Liabilities & Shareholders' Equity		518,900						477,345						482,066

Net Interest Income &
Interest Rate Spread				15,509		3.34				15,694		3.69				18,078		3.90

Net Interest Margin						3.54						3.92						4.28

The following table sets forth net interest earning assets and liabilities for 2010, 2009 and 2008.

Table 3 - Net Interest Earning Assets
(in thousands)

	2010		2009		2008

Average Interest
Earning Assets	$	438,687	$	400,451	$	422,877

Average Interest
Bearing Liabilities		366,963		342,906		359,893

Net	$	71,724	$	57,545	$	62,984

Table 3A - Volume/Rate Analysis depicts the dollar effect of volume and rate changes from 2008 to 2010. Variances which were not specifically attributable to volume or rate were allocated proportionately between rate and volume using the absolute values of each for a basis for the allocation. Non-accruing loans were included in the average loan balances used in determining the yields.

Table 3A - Volume/Rate Analysis
(dollars in thousands)

	2010 Change from 2009						2009 Change from 2008
	Volume		Rate		Total		Volume		Rate		Total

INTEREST INCOME (excluding fees):

Loans		-1,648		-487		-2,135		-2,935		-2,710		-5,645

Investment Securities		1,862		-867		995		347		-544		-197

Other		11		-71		-60		84		-246		-162

Total Interest Income		225		-1,425		-1,200		-2,504		-3,500		-6,004

INTEREST EXPENSE:

Interest-Bearing
Demand Deposit Accounts		51		-240		-189		34		-820		-786

Savings Deposits		3		-37		-34		-7		-102		-109

Time Deposits		167		-970		-803		-362		-2,246		-2,608

Borrowed Funds		-129		-123		-252		-131		14		-117

Total Interest Expense		92		-1,370		-1,278		-466		-3,154		-3,620

NET INTEREST INCOME		133		-55		78		-2,038		-346		-2,384

Non-Interest Income and Non-Interest Expense

Non-interest expense increased by 11.90% from 2008 to 2009 and increased by 1.96% from 2009 to 2010.

Increases in non-interest expense in 2010, as well as 2009, are attributable to the increase in FDIC assessments. In 2009, a small increase was experienced in salaries and employee benefits which, prior to 2008, an increase annually was normally in a range from 3% to 7% depending on the profits and the attainment of performance goals. In 2010, the effect of the profits of the entity and the goal to control costs can again be seen in a small increase in salaries and employee benefits. The effects of the economy can also be seen in the increase of professional fees from $440 thousand in 2008 to $939 thousand in 2009. In 2010, professional fees related to other real estate owned totaled $313 thousand which is in addition to $654 thousand for all other professional services.

The following table provides details on non-interest income and expense for the years ended December 31, 2008 through 2010.

Table 4 - Non-Interest Income and Expense
(in thousands)

	2010		2009		2008
Non-Interest Income:
Trust Department Income	$	837	$	814	$	752
Service Charges: Deposits		4,354		4,826		5,172
Other Operating Income		1,164		984		1,824

Total Non-Interest Income	$	6,355	$	6,624	$	7,748

Non-Interest Expense:
Salaries & Employee Benefits	$	9,559	$	10,456	$	10,227
Occupancy Expense		2,405		2,447		2,475
Other Operating Expense		6,529		5,234		3,507

Total Non-Interest Expense	$	18,493	$	18,137	$	16,209

Income Taxes

Security Capital Corporation records a provision for income taxes currently payable, along with a provision for those taxes in the future. Such deferred taxes arise from differences in timing of certain items for financial statement reporting rather than income tax reporting. Security Capital Corporation benefits in its computation of income taxes due to having tax-exempt securities and loans.

Financial Condition

Loans

The loan portfolio constitutes the major earning asset of Security Capital Corporation and in the opinion of management offers the best alternative for maximizing interest spread above the cost of funds. Real Estate Loans and Commercial Loans comprise the largest segment of the loan portfolio. Commercial loans which bear a higher degree of risk comprise 7.80% of the loan portfolio at December 31, 2010. Agricultural loans, another type of loan that carries a higher degree of risk, are only 1.57% of the loan portfolio at December 31, 2010.

Authorization of Loans

The Board of Directors of the Corporation has approved guidelines and policies specific for each type loan. These guidelines are followed under the direction of the President and the Senior Loan Administrators. All loans made above $25,000 will be presented by the officer originating the loan to a loan committee comprised of other officers and directors for a review of the maker(s), repayment ability, source of repayment, type and sufficiency of collateral and length of repayment. The loans reviewed are compiled into a report certifying that the loans have been made in accordance with the Board approved policies and principles. This periodic report is submitted to the Directors Loan Committee for review and then ratified at the next scheduled meeting. Each loan officer has an individual lending limit (not to exceed the legal limit of $250,000) which is awarded based on his or her lending experience and length of service. Any loan in excess of the loan officer’s limit must be approved prior to consummation by the Senior Loan Administrators, the President or the Board of Directors. All loans or lines of credit over $250,000 must be pre-approved by the Directors’ Loan Committee.

Collateral and Documentation Requirements

All loans should have an ample margin of safety between the loan advance and the current fair value of the collateral. Documentation of the collateral is properly collected before the loan transaction is completed and will meet the requirements, (to name a few), of the Mississippi Uniform Commercial Code, the Loan Policy, and all pertinent regulations. In an effort to secure and to protect the liens of First Security Bank, periodic reports, highlighting loans requiring additional documentation, are provided to management. In addition, the compliance and loan review officer along with the internal audit staff monitor the procedures on an ongoing basis with reports for management of any deficiencies.

Characteristics, Criteria and Risks of Types

The composition of the loan portfolio consists chiefly of real estate, agricultural, consumer and commercial loans. Real estate loans, in addition to the general collateral and documentation requirements, require the performance of an appraisal or evaluation before the credit decision is made. An appraisal is required for all new real estate loans where the loan amount is $250,000 or greater. All appraisals must be prepared by a certified appraiser. However, on 1-4 family residential real estate loans less than $1,000,000, the appraisal may be prepared by a licensed appraiser. For small loans (less than $250,000), the appraisals may be performed by a certified or licensed in-house appraiser. Real estate loans, which were prior to 2008 considered a low risk, now in today’s economy and market are subject to extensive review in all stages of consideration and status. Agricultural loans mandate an extensive review of the customer’s farming track record, financial statements, cash flow statements, projected income and collateral. The depth of these reviews should determine the honesty, integrity, the debt status, the repayment ability and the collateral strength of the farmer. To combat this high risk area, the bank’s policy is for production loans to be completely secured with tangible assets and not to exceed 60% of the projected cash repayment ability. Consumer loans are another area of high risk due to the type and location of the collateral and the volatility of the economy which may affect the payback ability of the customer. The consumer loans normally require the pledging of collateral. Credit card loans (a very high risk area) - in the consumer group - require a financial statement submitted in order for a credit limit of $5,000 and over to be granted. Commercial loans require a review of the purpose and the assessment of the future benefit of the operation, the financial statements, and the collateral on the onset to determine the strength of the potential loan asset. The degree of risks associated with the commercial lending is dependent on the completeness of the initial loan evaluation process.

Concentration of Credit

The bank monitors its loans in a manner that will identify any excessive risk due to concentrations of credit from a large volume of economically related assets advanced to one individual, related groups of borrowers or industry. Loans to one individual or corporation shall not exceed the limits set by state law. Mississippi state law states that the limit of lending to one individual or entity shall not exceed 20% of unimpaired capital and reserves. At least semi-annually, borrowers, related groups of borrowers, and industries who are known to be near this limit are monitored and reported to the board of directors.

The following table reflects outstanding balances by loan type for the past five years.

Table 5 - Loans by Type
(in thousands)

	2010		2009		2008		2007		2006
Commercial, Financial & Agricultural	$	33,347	$	30,580	$	44,752	$	39,135	$	38,349
Real Estate - Construction & Development		56,673		69,797		96,049		124,714		105,545
Real Estate - Mortgage		134,964		142,917		144,647		151,998		153,525
Installment Loans to Individuals		20,186		20,702		22,999		24,624		26,858
Other		2,594		2,615		1,906		2,718		2,381

Total Loans	$	247,764	$	266,611	$	310,353	$	343,189	$	326,658

The following table reflects the maturity schedule or repricing frequency of all loans that will reprice or mature within one year.

Table 6 - Loan Liquidity
(in thousands)

	Within			1 thr 5			Over
Loans That Will Reprice or Will Mature:	1 Year			Years			5 Years			Total
Allocation by Maturity Date:
Commercial, financial and agriculture loans	$	17,760		$	15,450		$	137		$	33,347
Construction and development		44,460			12,201			12			56,673
Total	$	62,220		$	27,651		$	149		$	90,020

Repricing frequency of loan types above:
Fixed Rate	$	16,162		$	14,777		$	35		$	30,974
Variable Rate		46,058			12,874			114			59,046

Total	$	62,220		$	27,651		$	149		$	90,020
Percent of Total		69.12	%		30.72	%		0.16	%		100.00	%

Allowance and Provision for Loan Losses

The provision for loan losses represent charges made to earnings to maintain an adequate allowance for loan losses. The allowance is maintained at an amount believed by management to be sufficient to absorb losses inherent in the credit portfolio. Factors considered in establishing an appropriate allowance include: a careful assessment of the financial condition of the borrower; a realistic determination for the value and adequacy of underlying collateral; the condition of the local economy and the condition of the specific industry of the borrower; a comprehensive analysis of the levels and trends of loan categories; and review of delinquent and classified loans.

Security Capital Corporation strives to attain a loan review program to evaluate loan administration, credit quality, and loan documentation. This program includes a regular review of problem loans, delinquencies, and charge-offs. The adequacy of the allowance for loan losses is evaluated on a quarterly basis. This evaluation focuses on specific loan reviews, changes in the type and volume of the loan portfolio given the current and forecasted economic conditions, and historical loss experience. Any one of the following conditions may necessitate a review of a specific loan: a question of whether the customer’s cash flow or net worth may not be sufficient to repay the loan; the loan has been criticized in a regulatory examination; the accrual of interest has been suspended; serious delinquency; or other reasons where either the ultimate collectibility of the loan is in question or the loan has other special or unusual characteristics which require special monitoring.

Activity in the allowance for loan losses is reflected in Table 7 - Analysis of Allowance for Loan Losses. The recorded values of loans and leases actually removed from the consolidated balance sheets are referred to as charge-offs and, after netting out recoveries on previously charged-off assets, become net charge-offs. Security Capital Corporation’s policy is to charge-off loans, when, in management’s opinion, the loan is deemed uncollectible, although concerted efforts are made to maximize recovery.

Security Capital Corporation
Table 7 - Allowance for Loan Losses
(in thousands)
	2010			2009			2008			2007			2006
Balance at
Beginning of Year	$	4,352		$	3,675		$	4,729		$	4,334		$	3,899

Less: Loans Charged-Off
Commercial, Financial & Agricultural		611			303			107			92			105
Real Estate - Construction & Development		1,002			1,452			8,959			202			35
Real Estate - Mortgage		379			987			683			76			44
Installment Loans to Individuals		856			1,070			2,255			2,025			1,017
Other		141			517			1,871			5			13
Total Charge-Offs		2,989			4,329			13,875			2,400			1,214

Add: Charge-Off Recovered
Commercial, Financial & Agricultural		74			69			17			10			8
Real Estate - Construction & Development		9			44			510			11			4
Real Estate - Mortgage		75			94			59			27			21
Installment Loans to Individuals		593			837			1,778			1,591			648
Other		38			51			1			1			3
Total Recoveries		789			1,095			2,365			1,640			684

Less: Net Charge-Offs		2,200			3,234			11,510			760			530

Add: Current Year Provision		2,325			3,911			10,456			1,155			965

Balance at End of Year	$	4,477		$	4,352		$	3,675		$	4,729		$	4,334

Loans at End of Year (Net of Allowance)	$	243,287		$	262,259		$	306,678		$	338,460		$	322,324

Ratio: Allowance to Loans		1.84	%		1.66	%		1.20	%		1.40	%		1.34	%

Average Loans	$	258,541		$	286,433		$	334,576		$	340,689		$	315,468

Ratio: Allowance to Average Loans		1.73	%		1.52	%		1.10	%		1.39	%		1.37	%

Ratio: Net Charge-Offs to Average Loans		0.85	%		1.13	%		3.44	%		0.22	%		0.17	%

Nonperforming assets and relative percentages to loan balances are presented in Table 8 - Nonperforming Assets. The level of nonperforming loans and leases is an important element in assessing asset quality and the relevant risk in the credit portfolio. Nonperforming loans include non-accrual loans, restructured loans, and loans delinquent 90 days or more. Loans are classified as non-accrual when management believes that collection of interest is doubtful, typically when payments are past due over 90 days, unless well secured and in the process of collection. Another element associated with asset quality is other real estate owned (OREO), which represents properties acquired by Security Capital Corporation through loan defaults by customers.

Table 8 - Nonperforming Assets
(in thousands)
	2010			2009			2008			2007			2006
Loans:
Non-accrual	$	9,584		$	15,244		$	3,271		$	1,043		$	819

90 Days+ Past-Due		63			12			3,616			1,725			1,489

Total Nonperforming Loans	$	9,647		$	15,256		$	6,887		$	2,768		$	2,308
As % of Total Loans		3.89	%		5.72	%		2.22	%		0.81	%		0.71	%

Other Real Estate	$	20,272		$	20,770		$	14,046		$	716		$	365
As % of Total Loans		8.18	%		7.79	%		4.53	%		0.21	%		0.11	%

Allowance for loan losses	$	4,477		$	4,352		$	3,675		$	4,729		$	4,334

Loan Charge-Offs	$	2,989		$	4,329		$	13,875		$	2,400		$	1,214

Total Loans	$	247,764		$	266,611		$	310,353		$	343,189		$	326,658

The consolidated allowance for loan losses reflected in Table 7 are the balances remaining after the charge-offs for the year.

The loan portfolio contained $9.6 million in non-accrual loans represented by114 loans and an aggregate of $63 thousand of 90 days past due and over as of December 31, 2010. If the non-accrual loans had been performing loans during the 2010 period, interest income would have shown an addition of $409 thousand. Loans of 90 days and over past due are automatically classified as nonaccrual loans unless collectibility is expected. The interest income recognized in 2010 for the loans classified as 90 days and over past due at December 31, 2010, was nominal.

Potential Problem Loans

As of December 31, 2010, loan management had not identified any loans requiring greater than normal supervision other than the loans in the categories of Watch, Substandard and Doubtful indicated below. Analysis of possible workout plans does not anticipate any deficiency. The actual deficiency depends on the market for the equipment and real estate at the time of disposal.

In addition to loans classified for regulatory purposes, management designates certain loans for internal monitoring purposes in a watch category. Loans may be placed on management’s watch list as a result of delinquent status, concern about the borrower’s financial condition or the value of the collateral securing the loan, substandard classification during regulatory examinations, or simply as a result of management’s desire to monitor more closely a borrower’s financial condition and performance. Watch category loans may include loans with loss potential that are still performing and accruing interest and may be current under the terms of the loan agreement; however, management may have a degree of concern about the borrowers’ ability to continue to perform according to the terms of the loan. Loss exposure on these loans is typically evaluated based primarily upon the estimated liquidation value of the collateral securing the loan. Also, watch category loans may include credits which, although adequately secured and performing, reflect a past delinquency problem or unfavorable financial trends exhibited by the borrower.

All watch list loans are subject to additional scrutiny and monitoring. Security Capital Corporation’s policies require loan officers to identify borrowers that should be monitored in this fashion and believe this process ultimately results in the identification of problem loans in a more timely fashion. At December 31, 2010, Security Capital Corporation in its allowance for loan losses analysis classified $44,093,000 with a rating of Substandard, of which $28,171,000 needed no allowance and $15,922,000 required an allowance of $2,608,000.

All other real estate is carried by Security Capital Corporation at the lower of cost or market value less costs to dispose. Any normal expense of holding the other real estate is expensed as incurred. Expenditures occurring from other real estate that are substantial or that extends the life of the asset are capitalized.

An analysis of the loan portfolio and the allowance for loan losses is conducted on a quarterly basis by loan review analyst personnel, the President and loan administrators. This analysis is approved by the Board of Directors to insure that the bank is protected against any potential and/or unexpected loan losses. To arrive at the proper grades or classifications needed in the allowance for loan losses analysis, each loan officer reviews each loan in his or her portfolio. The review process will include consideration of the payment history of the customer, bankruptcy status, and stimuli in the economy or in the area that may affect the future cash flow of the customer. The loan officer and/or the senior loan administrator will grade the loan as exceptional, satisfactory, watch, substandard or doubtful. This quarterly review and grading process is conducted on an ongoing basis to identify the loans that are non-performing as well as loans that no longer require an allocation in the loan loss reserve. The required allowance will fluctuate from quarter to quarter due to the loan portfolio performance being monitored.

The composition of the allowance for loan losses is based on the risk elements in the loan portfolio. Loans with the highest risk are graded doubtful. These would be loans that have been restructured due to poor payment performance, insufficient collateral to support the loan balance, non-accrual loans and loans that have been modified due to a change in the financial condition of the borrower to such an extent that a loss would most normally be expected. Loans with the second highest risk are graded substandard. These loans normally portray extremely weak credit with a potential for either partial or total loss which must be recognized. With these loans, legal action is anticipated with the debt not being retired through liquidation of the collateral. The next risk level is the loans that are considered to be on the “watch” list. These loan customers display inadequate financial strength or credit to provide loan management with the assurance that they will meet the scheduled repayment plan. Loan customers who have filed bankruptcy present a high risk due to likelihood that the payment plan may not be re-affirmed. Due to the type of collateral or lack of collateral, consumer loans without real estate are considered another area of risk requiring a higher allowance.

	Table 8A - Allocation of the Allowance for Loan Losses
	(Dollars in thousands)
	At December 31,
	2010					2009					2008					2007					2006
	Amount		Percent			Amount		Percent			Amount		Percent			Balance		Percent			Balance		Percent

Commercial, Financial
& Agricultural	$	310		6.92	%	$	861		19.78	%	$	367		9.99	%	$	547		11.57	%	$	590		13.61	%

Real Estate - Construction
& Development		2,178		48.65	%		1,787		41.06	%		2,029		55.21	%		1,758		37.18	%		913		21.07	%

Real Estate - Mortgage		1,773		39.60	%		1,500		34.47	%		1,037		28.22	%		1,558		32.95	%		1,922		44.35	%

Installment Loans
to Individuals		98		2.19	%		123		2.83	%		240		6.53	%		770		16.29	%		460		10.61	%

Other Loans		118		2.64	%		81		1.86	%		2		0.05	%		95		2.01	%		413		9.53	%

Unallocated		-		-			-		-			-		-			-		-			36		0.83	%

Total Loans	$	4,477		100.00	%	$	4,352		100.00	%	$	3,675		100.00	%	$	4,728		100.00	%	$	4,334		100.00	%

Note: Percent in the above table represents the amount represented by the loan type in the loan portfolio.

The allowance is based on regular, quarterly assessments of the estimated losses inherent in the loan portfolio. Our methodology for assessing the appropriateness of the allowance consists of several key elements, which include the formula allowance and specific allowances for identified problem loans. The portfolio is segregated into nine various rating codes based on a risk analysis of the portfolio prepared by management. Loss factors are based both on our loss experience as well as on significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date.

The appropriateness of the allowance is reviewed by management based upon our evaluation of then-existing economic and business conditions affecting our key lending areas and other conditions, such as credit quality trends (including trends in delinquencies, nonperforming loans and foreclosed assets expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments and recent loss experience in particular segments of the portfolio that existed as of the balance sheet date and the impact that such conditions were believed to have had on the collectibility of the loan. Management reviews these conditions quarterly. To the extent that if any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s estimate of the effect of this condition may be reflected as a specific allowance applicable to this credit or portfolio segment.

The allowance for loan losses is based on estimates of losses inherent in the loan portfolio. Actual losses can vary significantly from the estimated amounts. Our methodology as described permits adjustments to any loss factor used in the computation of the formula allowance in the event that, in management’s judgment, significant factors which affect the collectibility of the portfolio as of the evaluation date are not reflected in the loss factors. By assessing the estimated losses inherent in the loan portfolio on a quarterly basis, we are able to adjust specific and inherent loss estimates based upon any more recent information that has become available.

Assessing the adequacy of the allowance for loan losses is inherently subjective as it requires making material estimates, including the net realizable value of collateral expected to be received on impaired loans that may be susceptible to significant change. In the opinion of management, the allowance, when taken as a whole, covers all known and inherent losses in the loan portfolio that are both probable and reasonable to estimate.

The allowance for loan losses at December 31, 2007 reflects an increase of $395 thousand from December 31, 2006. The difference chiefly results from the allocation for construction and development real estate loans. This allocation increased from 2006 to 2007 by $845 thousand and is primarily due to an increase in the advances for the loan type and the increase in the allocation percentage caused by the present inherent risks in this type of lending. In the same analysis of risks and of balance levels, the allocation for the following loan types dropped during 2007: commercial, financial and agricultural loans; and mortgage loans.

At December 31, 2008, the allowance for loan losses reflects a decrease of approximately $1 million from December 31, 2007. The decrease can be attributed to the decrease in the total loan portfolio as well as a substantial decrease in the high risk loan areas – such as commercial real estate, nonfarm nonresidential properties and construction. The decrease can be supported by conservative lending in a failing real estate market as well as the realization of losses on existing loans.

At December 31, 2009 and 2010, the allowance for loan losses reflects an increase of $677 thousand and $125 thousand respectively from the previous December 31. The increase is a normal variance stemming from the analysis of the loan portfolio, which heavily concentrates on the collectibility, cash flows, meeting contract obligations and sufficiency of collateral on impaired loans.

In 2007, the loan charge offs and loan recoveries increased significantly. The significant increase in loan charge-offs can be credited to installment loans to individuals. The charge-offs for the classification of installment loans to individuals – which includes charged-off overdrafts – increased from $1.0 million to $2.0 million from 2006 to 2007.

For 2008 through 2010 activity in the allowance for loan losses reflects the state of the economy and the condition of the real estate market. In 2010, the allowance was decreased by $1 million for construction and real estate development loans that failed and, in addition, $611 thousand of non-performing commercial loans created another major decrease. The allowance was charged in 2009 with approximately $1.5 million due to declining values in collateral and poor customer performance in loans primarily for construction and development in real estate. In 2008, the allowance was charged $9 million for this type loan. The majority of the charges were due to losses from overdrafts on deposit accounts. In 2010, the allowance was charged with $856 thousand for consumer loans and $593 thousand was recovered. In 2009, approximately $1.1 million was charged to the allowance for consumer loans and $1.1 million was recovered. In 2008, $2.3 million was charged to the allowance for consumer loans and $2.4 million was recovered.

The ratio of the Allowance for Loan Losses to Loans for the years presented reflects a range from a low of 1.20% in 2008 to a high of 1.84% in 2010.

Securities

Securities are identified as either Available-for-Sale, Held-to-Maturity or Other Securities. Securities held to maturity are those securities which Security Capital Corporation has both the intent and the ability to hold to maturity and are reported at the amortized cost. Securities available-for-sale are those securities which Security Capital Corporation may decide to sell if needed for liquidity, asset/liability management or other reasons. Securities that are available-for- sale are reported at market value with the unrealized gains or losses included as a separate component of equity, net of tax. Other securities are carried at cost and are investments in FHLB, First National Banker’s Bankshares and Federal Agricultural Mortgage Corporation.

Table 9 - Securities
(in thousands)
	2010		2009		2008		2007		2006
Securities Available-for-Sale
U. S. Agencies	$	21,164	$	21,258	$	1,075	$	1,536	$	5,441
Mortgage Backed		43,308		40,223		37,534		34,452		20,915
State, Municipals & Other		59,975		47,985		31,281		30,172		34,672

Total Securities AFS		124,447		109,466		69,890		66,160		61,028

Securities Held-to-Maturity
U. S. Agencies		25,578		9,614		-		-		-
State, Municipals & Other		7,517		5,145		5,375		7,235		7,850

Total Securities HTM		33,095		14,759		5,375		7,235		7,850

Other Securities
Equities		1,933		2,223		2,218		2,024		2,250

Total Securities	$	159,475	$	126,448	$	77,483	$	75,419	$	71,128

The security portfolio is composed of U. S. Treasury securities, U. S. Agency securities, State and Municipal securities - both tax-exempt and taxable, equities, and mortgage-backed securities.

Table 10
Securities & Repricing Schedule
For 12/31/2010
(in thousands)

	1 Year		After 1 Year		5 to 10		Over
	and Less		Thru 5 Years		Years		10 Years
Agencies
Fair Value	$	1,010	$	1,539	$	10,368	$	33,217
Book Yield		5.100		1.262		1.789		1.812

Taxable Municipals
Fair Value		26		145		612		3,421
Book Yield		4.527		4.790		4.250		5.305

Municipals
Fair Value		9,556		32,425		11,118		10,230
Book Yield		3.178		3.677		4.897		6.577


Equity-FHLB		-		-		-		1,433
Book Yield		-		-		-		5.080

Other Securities		13		-		-		500

MBS
Fair Value		-		-		-		43,308
Book Yield		-		-		-		4.501

Total Fair Values	$	10,605	$	34,109	$	22,098	$	92,109
Weigh Bk Yields		3.360		3.573		3.421		3.776

Table 11
Securities Weighted Maturity and Tax Equivalent Yield by Classification
December 31, 2010

	Weighted		Weighted
	Maturity		Tax-Equivalent
	(Years)		Yield
U. S. Agencies		12.32		1.860	%
Mortgage Backed		4.11		4.501	%
Taxable Municipals		10.70		5.137	%
Tax-Exempt Municipals		5.17		4.303	%

Total Securities Portfolio		7.136		3.614	%

The weighted tax-equivalent yields reflected in the table above were calculated using amortized costs and a tax rate of 34%.

The securities portfolio carries varying degrees of risk. Investments in U. S. Treasury and U. S. Agency securities have little or no credit risk. Mortgage-backed securities are substantially issues of federal agencies. Obligations of states and political subdivisions are the areas of highest potential credit exposure in the portfolio. This risk is minimized through the purchase of high quality investments. When purchased, obligations of states and political subdivisions and corporate bonds must have a credit rating by Moody’s or Standard and Poor’s of “A” or better. The risk of non-rated municipal bonds is minimized by limiting the amounts invested in local issues. Management believes the non-rated securities are of high equality. No securities of an individual issuer exceeded 10% of Security Capital Corporation’s shareholders’ equity as of December 31, 2010. Security Capital Corporation does not use off-balance sheet derivative financial instruments as defined in FASB Accounting Standards Codification (ASC) Topic 815, “Derivatives and Hedging.”

The securities investment was increased as investment decisions favored securities investments when adequate loan funding was maintained. In 2010, the investment in securities increased by $33.1 million due to a decrease in loans.

Deposits

Security Capital Corporation offers a wide variety of deposit services to individual and commercial customers, such as non-interest-bearing and interest-bearing checking accounts, savings accounts, money market deposit accounts, and time deposit. The deposit base provides the major funding source for earning assets. Total average deposits have shown steady growth over the past few years. Time deposits continue to be the largest single source of Security Capital Corporation’s deposit base.

A five year schedule of average balances of deposits by type is presented in Table 12. Also, the maturities of time deposits greater than $100,000 are presented in Table 13.

Table 12 - Deposit Information
(in thousands)
	2010				2009				2008				2007				2006
	Average		Avg		Average		Avg		Average		Avg		Average		Avg		Average		Avg
	Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate
Noninterest- Bearing
Demand	$	69,143			$	58,940			$	59,286			$	56,816			$	58,635
Savings		279				261				258				251				242
Interest-bearing
Demand		155,585		0.70		140,946		0.70		135,517		1.30		135,369		2.76		132,447		2.65
Savings		27,771		0.35		26,512		0.35		28,442		0.71		29,932		1.52		31,363		1.50
Time Deposits		156,388		2.10		144,736		2.10		162,006		3.49		168,032		4.86		144,549		4.27
	$	409,166			$	371,395			$	385,509			$	390,400			$	367,236

Table 13 - Maturity Ranges of Time Deposits
With Balances More Than $100,000
As of December 31, 2010
(in thousands)

3 Months or Less	$	32,412
Over 3 Months thru 6 Months		19,245
Over 6 Months thru 12 Months		23,037
Over 12 Months		6,191
	$	80,885

Security Capital Corporation in its normal course of business will acquire large certificates of deposit (time deposits), generally from public entities that exhibit a variety of maturities. These funds are acquired on a bid basis and are considered to be part of the deposit base of Security Capital Corporation.

Borrowings

Aside from the core deposit base and large denomination certificates of deposit mentioned above, the remaining funding sources include short-term and long-term borrowings. As of December 31, 2009, Security Capital Corporation’s short-term borrowings consisted of approximately $1.0 million of the Treasury Tax and Loan open-end note and $1,000,000 of the $27,909,000 borrowed from the Federal Home Loan Bank. As of December 31, 2010, short-term borrowings were composed of $843 thousand of the Treasury Tax and Loan open-end note and $1,000,000 of the $26,127,000 borrowed from the Federal Home Loan Bank. Security Capital Corporation foresees short-term borrowings to be a continuing source of liquidity and will continue to use these borrowings as a method to fund short-term needs.

At the end of 2009 and 2010, Security Capital Corporation had long-term debt in the amount of $26,909,000 and $25,127,000, respectively. Scheduled principal payments of $1,819,000 are due to the Federal Home Loan Bank in 2011. The rates on the debt with Federal Home Loan Bank as of December 31, 2010

, ranged from 2.568% to 5.810% with the maturities ranging to 2032. The maximum month-end balance during 2010 with Federal Home Loan Bank occurred at the beginning of 2010 with the balance of $27,846,000. For 2010, the average outstanding long-term balance was $26,642,000 for debt with Federal Home Loan Bank.

Liquidity and Rate Sensitivity

Liquidity management is the process by which Security Capital Corporation ensures that adequate liquid funds are available to meet financial commitments on a timely basis. These commitments include honoring withdrawals by depositors, funding credit obligations to borrowers, servicing long-term obligations, making shareholder dividend payments, paying operating expenses, funding capital expenditures and maintaining reserve requirements. Interest rate risk is the exposure to Corporation earnings and capital from changes in future interest rates. All financial institutions assume interest rate risk as an integral part of normal operations. Managing and measuring the interest rate risk is the process that ranges from reducing the exposure of Security Capital Corporation’s interest margin regarding swings in interest rates assuring that there are sufficient capital and liquidity to support future balance sheet growth.

Liquidity risk is the risk to a bank’s earnings and capital arising from its inability to meet obligations when they come due without incurring losses. Bank management must ensure that sufficient funds are available at a reasonable cost to meet potential demands from both funds providers and borrowers.

Security Capital Corporation addresses short–term liquidity from both an asset liquidity and a liability liquidity viewpoint. Short-term asset liquidity is provided by money market assets, the investment portfolio, and readily saleable bank assets. Short-term liability liquidity is measured by the liabilities considered to be more volatile in nature and more likely to be sensitive to changes in interest rates. Short-term liquidity is monitored through the asset/liability reports in a measure of a coverage ratio and a crisis coverage ratio. These ratios measure the ability of the bank to raise cash quickly and how many times this cash will cover volatile liabilities. For December 31, 2010, the coverage ratio was 6.14. Of this ratio, the calculated reserves or the source for cash was $185.3 million which would be needed to meet the demand of the identified volatile liabilities and unused loan commitments of $22.9 million and $5.2 million, respectively. The crisis ratio looks at the coverage of volatile liabilities under a scenario where cash is needed immediately. The crisis ratio for December 31, 2010, was 2.63. The identified reserves for a crisis ratio totaled $147.3 million and the volatile liabilities and unused loan commitments totaled $56.0 million. Additionally, the bank monitors liquidity by looking at the ratio of cash and short-term investments versus non-core funding. The liquidity ratio for December 31, 2010, was in compliance with the policy limit of 15% with a ratio of 45.20%. This ratio measures the net cash and short-term marketable assets of $112.4 million to the net deposits and short-term liabilities of $248.7 million. The Corporation’s dependency ratio of -21.67% was in compliance with the policy ratio of 20.0% at December 31, 2010. This ratio measures the net volatile liabilities to the earning assets less short-term investments.

Long-term liquidity is the ability of the bank to maintain its reputation in the market and to produce an acceptable return to its shareholders. Adverse effects of reputation deterioration could cause depositors and other funds providers as well as investors, to seek higher compensation and negatively impact the bank’s earnings and capital. If negative public opinion occurred, withdrawals of funding could become debilitating. The bank will take steps to minimize its reputation risk and the potential impact on liquidity. One step is to monitor its reliance on credit-sensitive funding. Another issue that is monitored is asset growth. Strategic consideration will be given to the development of new business. A significant component of reputation risk is the underlying credit underwriting process of the financial institution. Continued stringent underwriting standards for both existing and for new business will be employed. Additionally, concentrations of credit will be closely monitored.

At December 31, 2010, the Company had outstanding loan origination commitments and unused commercial and commercial and retail lines of credit of $17.5 million. Letters of credit commitments totaling $10.5 million consisted of financial standby letters of credit of $6.4 million, performance standby letters of credit of $1.1 million and commercial letters of credit of $3.0 million. We anticipate that we will have sufficient funds available to meet current origination and other lending commitments. As a contingency plan for significant funding needs, the Asset/Liability Management Committee may also consider the sale of securities, sale of loans and/or the temporary curtailment of lending activities. Certificates of deposit that are scheduled to mature within one year totaled approximately $136 million at December 31, 2010. We expect to retain a substantial majority of these certificates of deposit.

The asset/liability committee is responsible for managing liquidity issues and interest rate risk, among other matters. Various interest rate movements are factored into a simulation model to assist the asset/liability committee in assessing interest rate risk. The committee analyzes the results of the simulation model to formulate strategies to effectively manage the interest rate risk that may exist.

The liquidity of Security Capital Corporation is dependent on the receipt of dividends from First Security Bank. Management expects that in the aggregate, First Security Bank will continue to have the ability to provide adequate funds to Security Capital Corporation.

The Interest Rate Risk Management System is comprised of six different steps. They are: Board Oversight; Senior Management Oversight; Risk Limits and Controls; Risk Identification and Measurement; Risk Monitoring andReporting; and Independent Review. A strategic plan highlighting risk tolerance levels is established and monitored by the Board. Senior management implements the strategic plan of goals, objectives and risk limits. Risk limits are set for Earnings at Risk, Gap Analysis, Economic Value and Value at Risk. The status of liquidity and rate sensitivity is forecasted in a quarterly report, Asset/Liability Performance Analysis which is provided by an independent outside organization. The resulting analysis report notifies Security Capital Corporation of compliance with the limitations/goals established by Security Capital Corporation and regulatory agencies as well as projecting a flat rate scenario where rates do not change from the starting point of the analysis, the scenario of rates increasing by 200 and 300 basis points and the scenario of rates decreasing by 200 or 300 basis points.

The areas of interest rate risk which Security Capital Corporation is susceptible are Repricing Risk, Option Riskand Yield Curve/Basis Risk. Repricing Risk is the difference in the timing of the assets and the liabilities due to eithermaturities or repricing within a certain time frame. Option Risk is the interest rate related options embedded in the bank’s assets and liabilities which change the cash flow characteristics of the assets and liabilities. Yield Curve/Basis Risk are the changes in the relationship between different interest rates with the same maturity or interest rates across a maturity spectrum which create compression or expansion of net interest margins.

Gap Analysis is the analytical tool that places maturing and repricing assets and liabilities into time buckets tomeasure the short- and long-term pricing imbalances for a given period. The broad guidelines set by Security CapitalCorporation for this measure are set in time frames of three months, six months, and twelve months with a +/- cumulative gap position limit of 30%. Earnings at Risk (EAR), another analysis tool, is considered management’s best source of managing short-term interest rate risk (in a one-year time frame.) The EAR variance is the percentage change in net interest income over 12 months relative to the base case scenario (with rates being flat) for a +/- instantaneous parallel movement. The first limit or level is set at 10% of net interest income which will serve as a warning to management. The second level of 15% represents a risk earnings and is not acceptable to management. When this occurs, an explanation of the variance is reported to Asset/Liability Committee and to the Board of Directors with an action plan to decrease the variance. Among the possible actions are loan sales, use of FHLB borrowings and investment portfolio restructuring. Economic Value of Equity is the tool for measuring long-term interest rate risk. This tool measures the long-term safety and soundness of the institution being compromised for the sake of short-term results. The two limits of Economic Value of Equity are level I designated having a variance of 30-39% and level II designated having a variance of 40% or higher and uses the same concern or action level as for Earnings at Risk.

The analysis performed using December 31, 2010, data projecting for the period ending December 31, 2011,

reflected the net interest income at $15.6 million and the Return on Assets (ROA) and Return on Equity (ROE) were projected for 2011 at .44% and 3.82%, respectively. To compare, the actuals at December 31, 2010, were .06% and .39%, respectively. In the current model, the net interest margin 3.58 drops to 3.11 in the 200 ramp down and a drop to 3.34 in the down 100 ramp. For the 200 ramp up and the 100 ramp up, the model reflects an increase to 4.78 and 4.23, respectively. The Economic Value of Equity increased 10.0% in the up 200 ramp. The down 200 ramp results in a decrease to net interest income of 16.3% which is well within the policy limit of 30%. As rates move up or down 100 or 200 basis points, we see a small change in net interest income. The model shows if rates continue to tighten, the risk to earnings will be minimal.

First Security Bank’s source of funding is predominantly core deposits consisting of both commercial and individual deposits, maturities of securities, repayments of loan principal and interest, federal funds purchased, and long-term borrowings from the FHLB. With the deposit base being diversified between individual and commercial accounts, First Security Bank avoids dependence on large concentrations of funds. Security Capital Corporation does not solicit certificates of deposit from brokers. The primary sources of liquidity on the asset side of the balance sheet are federal funds sold and securities classified as available for sale. Most of the investment securities portfolio are classified in the available-for-sale category and are subject to be sold should liquidity needs arise.

The cash available for use in 2008 was provided by operating activities in the amount of $12.2 million. Other transactions or activities affecting cash were: purchases of available-for-sale securities of $19.2 million; maturities, calls and sales of securities of $17.8 million; repayment of debt of $14.1 million; proceeds from borrowings of $23.3 million; and payment of cash dividends of $1.4 million.

Along with the funds provided by operations in 2009, the cash available for use was provided by maturities and paydowns on securities of $23.1 million, a decrease in loans of $30.4 million, an increase of deposits of $26.0 million and the proceeds from the issuance of preferred stock of $17.4 million. These funds were used to provide for the decrease in federal funds purchased of $8 million, an increase in federal funds sold of $20.6 million, the paying of a cash dividend of $1.4 million, and the purchase of securities of $62.4 million.

In addition to the funds provided by operations of $9.6 million in 2010, the increase of deposits by $25.2 million and the decrease of loans by $15.5 million provided the source of funding for an increase in securities and federal funds sold of $35.8 million and $10.7 million, respectively.

Table 14 - Funding Uses and Sources details the main components of cash flows for 2008 thru 2010.

Table 14 - Funding Uses and Sources
(in thousands)
	2010								2009								2008
			Increase								Increase								Increase
	Average		(Decrease)			%			Average		(Decrease)			%			Average		(Decrease)			%
	Balance		Amount			Change			Balance		Amount			Change			Balance		Amount			Change
Funding Uses
Loans	$	258,541	$	(27,892	)		(9.74	)	$	286,433	$	(48,143	)		(14.39	)	$	334,576	$	(6,113	)		(1.79	)
Securities*		145,905		60,233			70.31			85,672		7,484			9.57			78,188		5,534			7.62
Federal Funds Sold		27,681		6,899			33.20			20,782		17,279			493.26			3,503		600			20.67
		432,127		39,240			9.99			392,887		(23,380	)		(5.62	)		416,267		21			0.01

Funding Sources
Noninterest Bearing Deposits
Demand Deposits		69,143		10,203			17.31			58,940		(346	)		(0.58	)		59,286		2,470			4.35
Savings Deposits		279		18			6.90			261		3			1.16			258		7			2.79
Interest Bearing Deposits
Demand Deposits		155,585		14,639			10.39			140,946		5,429			4.01			135,517		148			0.11
Savings Deposits		27,771		1,259			4.75			26,512		(1,930	)		(6.79	)		28,442		(1,490	)		(4.98	)
Time Deposits		156,388		11,652			8.05			144,736		(17,270	)		(10.66	)		162,006		(6,027	)		(3.59	)
Borrowings		27,219		(3,493	)		(11.37	)		30,712		(3,216	)		(9.48	)		33,928		10,218			43.10
	$	436,385	$	34,278			8.52		$	402,107	$	(17,330	)		(4.13	)	$	419,437	$	5,326			1.29

*Cost basis is used for securities instead of market values.

Table 15 - Liquidity and Interest Rate Sensitivity reflects interest earning assets and interest-bearing liabilities by maturity distribution. Product lines repricing in time periods predetermined by contractual agreements are included in the respective maturity categories.

Table 15 - Liquidity; Interest Rate Sensitivity
(in thousands)
As of December 31, 2010

	Less			Over 3 Mos			Over 1 yr			Over
	3 Mos			thru 1 Yr			thru 3 Yrs			3 Yrs			Total
Interest Earning Assets
Loans	$	115,287		$	59,559		$	52,214		$	20,704		$	247,764
Short-Term Investments		31,270			-			-			-			31,270
Investment Securities		9,635			29,649			57,634			62,557			159,475
Other		-			-			-			6,650			6,650
Total Interest Earning Assets		156,192			89,208			109,848			89,911			445,159

Interest Bearing Liabilities
NOW		32,499			-			9,526			57,956			99,981
Money Market		12,520			-			2,200			13,409			28,129
Savings Deposits		33,976			-			2,140			11,510			47,626
Time Deposits		42,646			75,596			16,220			24,525			158,987
Short-Term Borrowings		-			1,000			-			-			1,000
Long-Term Borrowings		-			-			11,309			13,818			25,127
Total Interest Bearing Liabilities	$	121,641		$	76,596		$	41,395		$	121,218		$	360,850

Rate Sensitive Assets (RSA)		156,192			245,400			355,248			445,159			445,159
Rate Sensitive Liabilities (RSL)		121,641			198,237			239,632			360,850			360,850
Rate Sensitive Gap		34,551			12,612			68,453			(31,307	)		84,309
Rate Sensitive Cumulative Gap		34,551			47,163			115,616			84,309			84,309
Cumulative % of Earning Assets		7.76	%		10.59	%		25.97	%		18.94	%		18.94	%
Cumulative % of Total Assets		6.74	%		9.20	%		22.56	%		16.45	%		16.45	%

Interest rate risk can also be measured by analyzing the extent to which the repricing of assets and liabilities are mismatched to create an interest sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period. The interest rate sensitivity gap is defined as the difference between the amount of interest earning assets maturing or repricing within a specific time period and the amount of interest bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, therefore, a negative gap would tend to adversely affect the net interest income. Conversely, during a period of falling interest rates, a negative gap position would tend to result in an increase in net interest income.

Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types of assets may lag behind changes in market rates. Additionally, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Therefore, we do not rely solely on a gap analysis to manage our interest rate risk, but rather we use what we believe to be the more reliable simulation model - relating to changes in net interest income.

Income Sensitivity :

Based on simulation modeling at December 31, 2010 and December 31, 2009, our net interest income would change over a one-year time period due to changes in interest rates as follows:

Table 15A - Change in Net Interest Income Over One Year Horizon

	(Dollars in Thousands)
	at December 31, 2010						at December 31, 2009
	Dollar			%			Dollar			%
Changes in Levels of Interest Rates	Change			Change			Change			Change

Increase 2.00%	$	841			5.40	%	$	479			2.90	%
Increase 1.00%		356			2.30	%		446			2.70	%
Decrease 1.00%		(424	)		-2.70	%		(73	)		-0.40	%
Decrease 2.00%		(622	)		-4.00	%		(228	)		-1.40	%

As of December 31, 2009 and 2010, the neutral status is evident as reflected in the nominal, projected percentage changes, in the ramps, as shown above.

Capital Adequacy

Security Capital Corporation and First Security Bank are subject to various regulatory capital guidelines as required by federal and state banking agencies, as discussed in greater detail under Item 1 hereof. These guidelines define the various components of core capital and assign risk weights to various categories of assets.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires federal regulatory agencies to define capital tiers. These are: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under these regulations, a “well-capitalized” institution must achieve a Tier I risk-based capital ratio of at least 6.00%, and a total capital ratio of at least 10.00%, and a leverage ratio of at least 5.00% and not be under a capital directive order. Failure to meet capital requirements can initiate regulatory action that could have a direct material effect on Security Capital Corporation’s financial statements. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions, asset growth and expansion is limited, in addition to the institution being required to submit a capital restoration plan.

Management believes Security Capital Corporation and First Security Bank meet all the capital requirements as of December 31, 2010, as noted below in Table 16 - Capital Ratios, and is well-capitalized under the guidelines established by the banking regulators. To be well-capitalized, Security Capital Corporation and First Security Bank must maintain the prompt corrective action capital guidelines described above.

Security Capital Corporation paid dividends of $.50 per share for 2009 and 2010. The dividends totaled $1,441,580 in 2010 and $1,441,555 in 2009. The small increase in 2010 is due to the small decrease in the number of treasury shares.

Table 16 - Capital Ratios
(Dollars in thousands)

	As of December 31,
	2010		2009		2008
Tier 1 Capital

Total Tier 1 Capital	$	66,803	$	67,717	$	51,597

Total Capital
Tier 1 Capital		66,803		67,717		51,597
Allowable Allowance for Loan Losses		3,942		4,117		3,675

Total Capital	$	70,745	$	71,834	$	55,272

Risk Weighted Assets

Net Average Assets	$	514,677	$	473,289	$	463,804

Total Risk Weighted Assets	$	314,858	$	329,554	$	357,261

Risk Based Ratios (%)
Tier 1 Leverage Ratio		12.98		14.31		11.12
Tier 1 Risk Based Capital Ratio		21.22		20.55		14.44
Total Risk Based Capital Ratio		22.47		21.80		15.47

Off-Balance Sheet Arrangements

The Company’s primary off-balance sheet arrangements are in the form of loan commitments. At December 31, 2010, the Company had $17.5 million in unused loan commitments outstanding. Of these commitments, $2.6 million mature in one year or less. Lines of credit are established using the credit policy of the Company concerning the lending of money.

Letters of credit are used to facilitate the borrowers’ business and are usually related to the acquisition of inventory or of assets to be used in the customers’ business. Letters of credit are generally secured and are underwritten using the same standards as traditional commercial loans. Most standby letters of credit expire without being presented for payment. However, the presentment of a standby letter of credit would create a loan receivable from the Bank’s loan customer. The Bank’s asset-based lending subsidiary uses commercial letters of credit to facilitate the purchase of inventory items by its customers. At December 31, 2010, the Company had, issued and outstanding, $3.0 million in commercial letters of credit, $6.4 million in financial standby letters of credit, and $1.1 million in performance standby letters of credit.

At December 31, 2010, there was no standby letter of credit issued on the Company’s behalf by a Federal Home Loan Bank. At December 31, 2009, there was $20 million in standby letters of credit issued on the Company’s behalf by a Federal Home Loan Bank. At December 31, 2008, there was $25 million in standby letters of credit issued on the Company’s behalf by a Federal Home Loan Bank. The Company used these letters of credit as additional collateral on loan participations sold and is obligated to the Federal Home Loan Bank if the letters of credit must be drawn upon.

Tabular Disclosure of Contractual Obligations

Tabular Disclosure of Contractual Obligations
(in thousands)

	Payment due by period
			Less than		1 to 3		3 to 5		More Than
Contractual Obligations	Total		1 Year		Years		Years		5 Years

Long-Term Debt Obligations	$	26,127	$	1,819	$	12,304	$	2,860	$	9,144

Capital Lease Obligations		-		-		-		-		-

Operating Lease Obligations		20		10		10		-		-

Purchase Obligations		-		-		-		-		-

Other Long-Term Liabilities
Reflected on the Registrant's
Balance Sheet under GAAP		-		-		-		-		-

Total	$	26,147	$	1,829	$	12,314	$	2,860	$	9,144

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential of loss arising from adverse changes in interest rates and prices. The Company is exposed to market risk as a consequence of the normal course of conducting its business activities. Financial products that expose the Company to market risk include investment securities, loans, deposits and debt. The Company's market risk management process involves measuring, monitoring, controlling and managing risks that can significantly impact the Company's financial position and operating results. In this management process, market risks are balanced with expected returns in an effort to enhance earnings performance and shareholder value, while limiting the volatility of each. Normal business transactions expose the Company's balance sheet profile to varying degrees of market risk. The Company's primary market risk exposure is interest rate risk. A key element in the process of managing market risk involves oversight by senior management and the Board of Directors as to the level of such risk assumed by the Company in its balance sheet. The Board of Directors reviews and approves risk management policies, including risk limits and guidelines and delegates oversight functions to the Asset Liability Management Committee ("ALCO"). The ALCO, consisting of senior business and finance officers, monitors the Company's market risk exposure and, as market conditions dictate, modifies balance sheet positions.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee of the

Board of Directors and Shareholders

Security Capital Corporation

We have audited the accompanying consolidated balance sheets of Security Capital Corporation and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2010. We also have audited Security Capital Corporation’s internal control over financial reporting as of December 31, 2010, based on criteria established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Security Capital Corporation’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Report of Management on Internal Control Over Financial Reporting.” Our responsibility is to express an opinion on these financial statements and an opinion on the Corporation’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

To the Audit Committee of the

Board of Directors and Shareholders

Page 2

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Security Capital Corporation and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Security Capital Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/S/ T. E. Lott & Company

Columbus, Mississippi

March 15, 2011

SECURITY CAPITAL CORPORATION
SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31,

	2010			2009			2008			2007		2006
	(In thousands, except per share data)
INCOME DATA
Interest and fees on loans	$	15,176		$	17,418		$	23,063		$	30,283	$	27,013
Interest and dividends on securities		4,512			3,515			3,712			3,403		3,294
Other interest income		97			134			296			447		279
Total interest income		19,785			21,067			27,071			34,133		30,586
Interest expense		4,276			5,373			8,993			13,699		11,523
Net interest income		15,509			15,694			18,078			20,434		19,063
Provision for loan losses		2,325			3,911			10,456			1,155		965
Net interest income after provision for
loan losses		13,184			11,783			7,622			19,279		18,098
Service charges on deposit accounts		4,354			4,826			5,172			5,152		4,592
Other income		2,001			1,798			2,576			1,697		2,334
Total noninterest income		6,355			6,624			7,748			6,849		6,926
Salaries and employee benefits		9,559			10,456			10,227			10,141		9,276
Occupancy and equipment expense		2,405			2,447			2,475			2,302		1,888
Other expenses		6,529			5,234			3,507			3,095		3,271
Total noninterest expenses		18,493			18,137			16,209			15,538		14,435

Income (loss) before income taxes		1,046			270			(839	)		10,590		10,589
Income taxes (benefit)		(256	)		(528	)		(1,022	)		3,155		3,349

Net income	$	1,302		$	798		$	183		$	7,435	$	7,240
Preferred dividends		1,014			585			-			-		-
Net income applicable to
common shareholders	$	288		$	213		$	183		$	7,435	$	7,240

PER COMMON SHARE DATA (1)
Basic net income - per common share	$	0.10		$	0.07		$	0.06		$	2.58	$	2.51
Dividends		0.50			0.50			0.50			1.00		0.95
Book value		24.94			25.24			19.42			19.76		18.05

OTHER RATIOS (%)
Return on Average Assets		0.06			0.04			0.04			1.54		1.58
Return on Average Equity		0.39			0.32			0.31			13.44		14.36
Loans to Deposits		60.62			69.52			86.82			88.28		89.08
Loans to Total Assets		48.35			54.26			67.11			72.02		71.27
Equity Capital to Total Assets		14.03			14.81			12.10			11.95		11.34
Average Equity to Average Assets		14.39			14.08			12.15			11.43		10.99
Dividend Payout Ratio		500.00			676.79			787.58			38.76		37.90

FINANCIAL DATA
Total assets	$	512,482		$	491,372		$	462,485		$	476,530	$	458,329
Net loans		243,287			262,259			306,678			338,460		322,324
Total deposits		408,743			383,500			357,483			388,733		366,669
Total shareholders' equity		71,913			72,780			55,979			56,939		51,984

(1) Restated for stock dividends, if applicable

SECURITY CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2010 AND 2009

ASSETS	2010			2009
	(In thousands)

Cash and due from banks	$	14,822		$	16,722
Interest-bearing deposits with banks		442			323
Total cash and cash equivalents		15,264			17,045

Federal funds sold		31,270			20,550
Certificates of deposit with other banks		1,778			296

Securities available-for-sale		124,447			109,466
Securities held-to-maturity (estimated fair value of $32,541 in 2010 and $14,781 in 2009)		33,095			14,759
Securities, other		1,933			2,223
Total securities		159,475			126,448

Loans, less allowance for loan losses of $4,477 in 2010 and $4,352 in 2009		243,287			262,259
Interest receivable		2,902			3,235
Premises and equipment		22,922			23,908
Other real estate		20,272			20,770
Goodwill		3,874			3,874
Cash surrender value of life insurance		6,650			6,444
Customers' liability on acceptances		1,142			1,429
Other assets		3,646			5,114

Total Assets	$	512,482		$	491,372

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
Noninterest-bearing deposits	$	74,022		$	61,673
Interest-bearing deposits		334,721			321,827
Total deposits		408,743			383,500

Interest payable		419			556
Acceptances outstanding		1,142			1,429
Borrowed funds		26,970			28,912
Other liabilities		3,295			4,195
Total liabilities		440,569			418,592

Shareholders' equity:
Preferred stock, $1,000 par value, 25,000 shares authorized, 17,910 shares issued		17,742			17,504
Common stock - $5 par value, 10,000,000 shares authorized, 2,890,811 shares issued		14,454			14,454
Surplus		40,733			40,732
Retained earnings (deficit)		(2,214	)		(1,061	)
Accumulated other comprehensive income		1,236			1,189
Treasury stock, at par, 7,602 shares and 7,652 shares issued in 2010 and 2009, respectively		(38	)		(38	)
Total shareholders' equity		71,913			72,780

Total Liabilities and Shareholders' Equity	$	512,482		$	491,372

The accompanying notes are an integral part of these statements.

SECURITY CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

	2010			2009			2008
	(In thousands, except per share data)
INTEREST INCOME
Interest and fees on loans	$	15,176		$	17,418		$	23,063
Interest and dividends on securities:
Taxable		2,877			2,101			2,111
Tax-exempt		1,635			1,414			1,601
Other		97			134			296
Total interest income		19,785			21,067			27,071

INTEREST EXPENSE
Interest on time deposits of $100,000 or more		1,118			1,323			2,752
Interest on other deposits		2,064			2,793			4,867
Interest on borrowed funds		1,094			1,257			1,374
Total interest expense		4,276			5,373			8,993

Net interest income		15,509			15,694			18,078

Provision for loan losses		2,325			3,911			10,456
Net interest income after provision for loan losses		13,184			11,783			7,622

OTHER INCOME
Service charges on deposit accounts		4,354			4,826			5,172
Other service charges and fees		635			649			797
Trust Department income		837			814			752
Securities gains		11			20			13
Gains (losses) on sale of other assets, net		81			(97	)		552
Income from other real estate		103			141			-
Other		334			271			462
Total other income		6,355			6,624			7,748

OTHER EXPENSE
Salaries and employee benefits		9,559			10,456			10,227
Net occupancy expense		1,246			1,242			1,196
Furniture and equipment expense		1,159			1,205			1,279
Printing, stationery and supplies		242			248			235
Data processing		276			283			203
FDIC assessments		988			1,021			329
Professional fees		654			939			440
Expenses from other real estate		743			539			-
Other		3,626			2,204			2,300
Total other expense		18,493			18,137			16,209

Income (loss) before income taxes		1,046			270			(839	)
Income tax benefit		(256	)		(528	)		(1,022	)

Net income		1,302			798			183

Preferred dividends and accretion		1,014			585			-

Net income applicable to common shareholders	$	288		$	213		$	183

Basic net income per common share	$	0.10		$	0.07		$	0.06

The accompanying notes are an integral part of these statements.

SECURITY CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
													Accumulated
							Retained						Other
	Preferred		Common				Earnings			Treasury			Comprehensive
	Stock		Stock		Surplus		(Deficit)			Stock			Income		Total

Balance, January 1, 2008	$	-	$	14,454	$	40,701	$	1,502		$	(44	)	$	326	$	56,939

Cumulative effect of adoption of ASC Subtopic 715-60		-		-		-		(77	)		-			-		(77	)

Comprehensive income:
Net income for 2008		-		-		-		183			-			-		183
Net change in unrealized gain (loss) on
securities available-for-sale, net of tax		-		-		-		-			-			350		350
Total comprehensive income																533

Cash dividends paid		-		-		-		(1,441	)		-			-		(1,441	)
Reissuance of treasury stock		-		-		22		-			3			-		25

Balance, December 31, 2008		-		14,454		40,723		167			(41	)		676		55,979

Comprehensive income:
Net income for 2009		-		-		-		798			-			-		798
Net change in unrealized gain (loss) on
securities available-for-sale, net of tax		-		-		-		-			-			513		513
Total comprehensive income																1,311

Issuance of preferred stock and warrants		17,388		-		-		-			-			-		17,388
Accretion on preferred stock		116		-		-		(116	)		-			-		-
Cash and accrued dividends paid on preferred stock		-		-		-		(469	)		-			-		(469	)
Cash dividends paid on common stock		-		-		-		(1,441	)		-			-		(1,441	)
Reissuance of treasury stock		-		-		9		-			3			-		12

Balance, December 31, 2009	$	17,504	$	14,454	$	40,732	$	(1,061	)	$	(38	)	$	1,189	$	72,780

The accompanying notes are an integral part of these statements.

SECURITY CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
													Accumulated
							Retained						Other
	Preferred		Common				Earnings			Treasury			Comprehensive
	Stock		Stock		Surplus		(Deficit)			Stock			Income		Total

Balance, December 31, 2009 (brought forward)	$	17,504	$	14,454	$	40,732	$	(1,061	)	$	(38	)	$	1,189	$	72,780

Comprehensive income:
Net income for 2010		-		-		-		1,302			-			-		1,302
Net change in unrealized gain (loss) on
securities available-for-sale, net of tax		-		-		-		-			-			47		47
Total comprehensive income																1,349

Accretion on preferred stock		238		-		-		(238	)		-			-		-
Cash and accrued dividends paid on preferred stock		-		-		-		(775	)		-			-		(775	)
Cash dividends paid on common stock		-		-		-		(1,442	)		-			-		(1,442	)
Reissuance of treasury stock		-		-		1		-			-			-		1

Balance, December 31, 2010	$	17,742	$	14,454	$	40,733	$	(2,214	)	$	(38	)	$	1,236	$	71,913

The accompanying notes are an integral part of these statements.

SECURITY CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

	2010			2009			2008
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES

Net income	$	1,302		$	798		$	183
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses		2,325			3,911			10,456
Amortization of premiums and discounts on securities, net		1,567			449			69
Depreciation and amortization		1,201			1,241			1,212
Deferred income taxes		(548	)		716			2,284
FHLB stock dividend		(6	)		(4	)		(45	)
(Gain) loss on sale of securities, net		(11	)		(20	)		(13	)
(Gain) loss on sale of other assets, net		157			97			(552	)
Changes in:
Interest receivable		333			498			2,425
Cash value of life insurance, net		(221	)		(218	)		(211	)
Other assets		2,771			2,472			(2,667	)
Interest payable		(137	)		(461	)		(936	)
Other liabilities		(639	)		(1,169	)		20

Net cash provided by operating activities		8,094			8,310			12,225

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available-for-sale		(86,530	)		(62,345	)		(19,160	)
Proceeds of maturities and calls of securities available-for-sale		70,346			23,139			13,016
Proceeds from sales of securities available-for-sale		-			-			2,903
Proceeds of maturities and calls of held-to-maturity		18,570			230			1,860
Purchase of securities held-to-maturity		(37,185	)		(9,614	)		-
Purchase of other securities		-			-			(572	)
Sale of other securities		296			-			422
Additions to premises and equipment		(124	)		(730	)		(2,546	)
Proceeds of sale of other assets		3,063			2,251			578
Purchase of bank-owned life insurance		(21	)		-			-
Redemption of bank-owned life insurance		36			60			-
Changes in:
Loans		12,861			30,438			7,025
Federal funds sold		(10,720	)		(20,550	)		-
Certificates of deposits with other banks		(1,482	)		(98	)		-

Net cash provided by (used in) investing activities		(30,890	)		(37,219	)		3,526

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of preferred stock	$	-		$	17,388		$	-
Dividends paid on common stock		(1,442	)		(1,441	)		(1,441	)
Dividends paid on preferred stock		(845	)		(354	)		-
Reissuance of treasury stock		1			12			25
Repayment of debt		(1,942	)		(5,016	)		(12,799	)
Proceeds from issuance of debt		-			-			23,256
Changes in:
Deposits		25,243			26,017			(31,250	)
Federal funds purchased		-			(8,000	)		4,000

Net cash provided by (used in) financing activities		21,015			28,606			(18,209	)

Net increase (decrease) in cash and cash equivalents		(1,781	)		(303	)		(2,458	)

Cash and cash equivalents at beginning of year		17,045			17,348			19,806

Cash and cash equivalents at end of year	$	15,264		$	17,045		$	17,348



Supplemental Disclosures of Cash Flow Information

Cash paid during the year for:
Interest	$	4,413		$	5,834		$	9,929
Income taxes		256			56			610

Noncash activities:
Transfers of loans to other real estate and
repossessed inventory		5,569			10,993			15,550

The accompanying notes are an integral part of these statements.

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Security Capital Corporation (Corporation), and its subsidiaries, follow accounting principles generally accepted in the United States of America, including, where applicable, general practices within the banking industry.

1. Basis of Presentation

The consolidated financial statements include the accounts of Security Capital Corporation, a one-bank holding company, and its wholly-owned subsidiaries, First Security Bank (Bank), Batesville Security Building Corporation (Building Corporation), and Bank’s wholly-owned subsidiaries, First Security Insurance, Inc. (Insurance) and First Security Armored Car, Inc. (Courier). Significant intercompany accounts and transactions have been eliminated. Certain amounts reported in prior years have been reclassified to conform to the 2010 presentation. These reclassifications did not significantly impact the Corporation’s consolidated financial condition or results of operations.

2. Nature of Operations

The Corporation is a financial holding company. Its primary asset is its investment in its subsidiary bank. The Bank operates under a state bank charter and provides full banking services, including trust services. The Bank is subject to regulation by the Mississippi Department of Banking and Consumer Finance, and the Federal Deposit Insurance Corporation (FDIC). The area served by the Bank is primarily the northern half of Mississippi, and services are provided in branch locations at Batesville, Marks, Sardis, Como, Crenshaw, Olive Branch, Hernando, Robinsonville, Tunica, Pope, Southaven, and Barton. The operations of the Building Corporation, Insurance, and Courier are not material in relation to the Corporation as a whole.

3. Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions in the agricultural and real estate development industries.

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

3. Estimates (Continued)

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

4. Securities

Investments in securities are accounted for as follows:

Securities Available-for-Sale

Securities classified as available-for-sale are those securities that are intended to be held for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available-for-sale would be based on various factors, including movements in interest rates, liquidity needs, security risk assessments, changes in the mix of assets and liabilities and other similar factors. These securities are carried at their estimated fair values and the net unrealized gain or loss is reported as accumulated other comprehensive income, net of tax, until realized. Premiums and discounts are recognized in interest income using the interest method.

Gains and losses on the sale of securities available-for-sale are determined using the adjusted cost of the specific security sold.

Securities Held-to-Maturity

Securities classified as held-to-maturity are those securities for which there is a positive intent and ability to hold to maturity. These securities are carried at cost adjusted for amortization of premium and accretion of discount, computed by the interest method.

Trading Account Securities

Trading account securities are those securities which are held for the purpose of selling them at a profit. There were no trading account securities on hand at December 31, 2010 and 2009.

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

4. Securities (Continued)

Other Securities

Other securities are carried at cost and consist of investments in stock of the Federal Home Loan Bank (FHLB) and First National Banker’s Bankshares. The transferability of these stock holdings is restricted.

5. Loans

Loans are carried at the principal amount outstanding, adjusted for the allowance for loan losses and net deferred origination fees. Interest income on loans is recognized based on the principal balance outstanding and the stated rate of the loan.

A loan is considered to be impaired when it appears probable that the entire amount contractually due will not be collected. Factors considered in determining impairment include payment status, collateral values, and the probability of collecting scheduled payments of principal and interest when due. Generally, impairment is measured on a loan by loan basis using the fair value of the supporting collateral.

Loans are generally placed on a nonaccrual status when principal or interest is past due ninety days, or when specifically determined to be impaired. When a loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income. If collectability is in doubt, cash receipts on nonaccrual loans are used to reduce principal rather than recorded as interest income. Past due status is based on contractual terms.

Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan.

6. Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed adequate by management to absorb probable losses inherent in the loan portfolio and is based on the size and current risk characteristics of the loan portfolio, an assessment of individual problem loans, actual and anticipated loss experience, current economic events, including unemployment levels, and other pertinent factors, including regulatory guidance and general economic conditions. Determination of the allowance is inherently subjective as it requires significant estimates, including the evaluation of collateral supporting impaired loans, estimated losses on pools of homogeneous loans based on historical loss

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

6. Allowance for Loan Losses (Continued)

experience, and consideration of current economic trends, all of which may be susceptible to significant change. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for loan losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

The allowance for loan losses consists of an allocated component and an unallocated component. The components of the allowance for loan losses represent an estimation done pursuant to either Accounting Standards Codification (ASC) Topic 450 – Contingencies, or ASC Topic 310 – Receivables. The allocated component of the allowance for loan losses reflects expected losses resulting from an analysis developed through specific credit allocations for individual or pools of loans and historical loss experience for each loan category. The specific allocations are based on a regular review of all loans where the internal credit rating is at or below a predetermined classification. The historical loan loss element is determined statistically using loss experience and the related internal gradings of loans charged off. The analysis is performed quarterly, and loss factors are updated regularly based on actual experience. The allocated component of the allowance for loan losses also includes consideration of the amounts necessary for any concentrations and changes in portfolio mix and volume.

The unallocated portion of the allowance reflects management’s estimate of probable inherent but undetected losses within the portfolio due to uncertainties in economic conditions, changes in collateral values, unfavorable information about a borrower’s financial condition, and other risk factors that have not yet manifested themselves. In addition, the unallocated allowance includes a component that explicitly accounts for the inherent imprecision in the loan loss analysis.

7. Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are determined using the straight-line method at rates calculated to depreciate or amortize the cost of assets over their estimated useful lives.

Maintenance and repairs of property and equipment are charged to operations, and major improvements are capitalized. Upon retirement, sale, or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts, and any gains or losses are included in operations.

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

8. Bank Owned Life Insurance

The Corporation invests in bank owned life insurance (BOLI). BOLI involves the purchasing of life insurance by the Corporation on a chosen number of employees. The Corporation is the owner of the policies and, accordingly, the cash surrender value of the policies is an asset, and increases in cash surrender values are reported as income. The co-beneficiaries of the policies are the Bank and the insured employee.

9. Other Real Estate

Other real estate consists of properties acquired through foreclosure and is recorded at the lower of cost or current appraised value less estimated expense to sell. Any write-down from the cost to estimated fair market value required at the time of foreclosure is charged to the allowance for loan losses. Subsequent gains or losses, including write-downs, on other real estate are reported in other income or expenses. At December 31, 2010 and 2009, other real estate was $20,272,000 and $20,770,000, respectively.

10. Income Taxes

Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently payable plus deferred taxes related primarily to differences between the bases of assets and liabilities as measured by income tax laws and their bases as reported in the financial statements. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

The Corporation and its subsidiaries file consolidated income tax returns. The subsidiaries provide for income taxes on a separate return basis and remit to the Corporation amounts determined to be payable.

11. Net Income per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of common shares outstanding adjusted to include the number of additional common shares that would have been outstanding if any dilutive potential common shares had been issued. For the three years ended December 31, 2010, there were no potential dilutive common shares. All weighted average, actual shares or per share

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

11. Net Income per Share (Continued)

information in the financial statements have been adjusted retroactively for the effect of stock dividends, if applicable.

Presented below is a summary of the components used to calculate basic net income per share for the years ended December 31, 2010, 2009, and 2008 (as restated for stock dividends):

	2010		2009		2008
	(In thousands, except per share data)
Basic Net Income Per Share

Weighted average common shares outstanding		2,883		2,883		2,882
Net income	$	1,302	$	798	$	183
Basic net income per share	$	0.45	$	0.28	$	0.06
Net income applicable to common shareholders	$	288	$	213	$	183
Basic net income per share	$	0.10	$	0.07	$	0.06

12. Statement of Cash Flow

For purposes of reporting cash flow, cash and cash equivalents include cash on hand and noninterest-bearing and readily available interest-bearing deposits due from other banks.

13. Advertising

Advertising costs are expensed as incurred. Advertising expense for 2010, 2009, and 2008 was approximately $174,000, $268,000, and $242,000, respectively.

14. Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net assets of the acquired entities. The Corporation and its subsidiaries account for goodwill in accordance with ASC Topic 350 – Intangibles, Goodwill and Other. Goodwill is subject to an assessment for impairment using a fair value based test at least annually. If impaired, the asset is written down to its estimated fair value.

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

15. Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Bank enters into off-balance sheet financial instruments consisting of commitments to extend credit, credit card agreements, commercial and similar letters of credit, and commitments to purchase securities. Such financial instruments are recorded in the financial statements when they are exercised.

16. Trust Assets

Except for amounts included in deposits, assets of the Trust Department are not included in the accompanying balance sheets.

17. Business Segments

FASB Accounting Standards Codification (ASC) Topic 280–Segment Reporting, requires public companies to report (i) certain financial and descriptive information about their reportable operating segments (as defined) and (ii) certain enterprise-wide financial information about products and services, geographic areas, and major customers. Management believes the Corporation’s principal activity is community banking and that any other activities are not considered significant segments.

18. Accounting Pronouncements

ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures About Fair Value Measurements.” ASU 2010-06 requires expanded disclosures related to fair value measurements including (i) the amounts of significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy and the reasons for the transfers, (ii) the reasons for transfers of assets or liabilities in or out of Level 3 of the fair value hierarchy, with significant transfers disclosed separately, (iii) the policy for determining when transfers between levels of the fair value hierarchy are recognized and (iv) for recurring fair value measurements of assets and liabilities in Level 3 of the fair value hierarchy, a gross presentation of information about purchases, sales, issuances and settlements. ASU 2010-06 further clarifies that (i) fair value measurement disclosures should be provided for each class of assets and liabilities (rather than major category), which would generally be a subset of assets or liabilities within a line item in the consolidated balance sheets and (ii) company’s should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for each class of assets and liabilities included in Levels 2 and 3 of the fair value hierarchy. The disclosures related to the gross presentation of purchases, sales, issuances and settlements of assets and liabilities included in Level 3 of the fair value hierarchy will be required for the Corporation beginning January 1, 2011. The

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

18. Accounting Pronouncements (Continued)

remaining disclosure requirements and clarifications made by ASU 2010-06 became effective for the Corporation on January 1, 2010. (See Note N – Disclosure About Fair Values of Financial Instruments.)

ASU No. 2010-20, “Receivables (Topic 310)—Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” ASU 2010-20 requires entities to provide disclosures designed to facilitate financial statement users’ evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (iii) the changes and reasons for those changes in the allowance for credit losses. Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systematic method for determining its allowance for credit losses, and class of financing receivable, which is generally a disaggregation of portfolio segment. The required disclosures include, among other things, a roll forward of the allowance for credit losses as well as information about modified, impaired, non-accrual and past due loans and credit quality indicators. ASU 2010-20 became effective for the Corporation’s financial statements as of December 31, 2010, as it relates to disclosures required as of the end of a reporting period. (See Note D – Loans.) Disclosures that relate to activity during a reporting period will be required for the Corporation’s financial statements that include periods beginning on or after January 1, 2011. ASU 2011-01, “Receivables (Topic 310)—Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20,” temporarily deferred the effective date for disclosures related to troubled debt restructurings to coincide with the effective date of a proposed accounting standards update related to troubled debt restructurings, which is currently expected to be effective for periods ending after June 15, 2011.

ASU No. 2010-28, “Intangibles—Goodwill and Other (Topic 350)—When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist such as if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASU 2010-28 will be effective for the Corporation on January 1, 2011 and is not expected have a significant impact on the Corporation’s financial statements.

ASU No. 2010-29, “Business Combinations (Topic 805)—Disclosure of Supplementary Pro Forma Information for Business Combinations.” ASU 2010-29 provides clarification regarding the

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

18. Accounting Pronouncements (Continued)

acquisition date that should be used for reporting the pro forma financial information disclosures required by Topic 805 when comparative financial statements are presented. ASU 2010-29 also requires entities to provide a description of the nature and amount of material, nonrecurring pro forma adjustments that are directly attributable to the business combination. ASU 2010-29 is effective for the Corporation prospectively for business combinations occurring after December 31, 2010.

NOTE B – RESERVE REQUIREMENTS

The Bank is required to maintain reserve funds in cash or on deposit with the Federal Reserve Bank. The required reserve at December 31, 2010 and 2009 was $433,000 and $293,000, respectively.

NOTE C – SECURITIES

A summary of amortized cost and estimated fair value of securities available-for-sale and securities held-to-maturity at December 31, 2010 and 2009, follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(In thousands)
December 31, 2010:
Securities available-for-sale:
U. S. Government agencies	$	21,242	$	51	$	143	$	21,150
Mortgage-backed securities		41,733		1,688		112		43,309
State and local political
subdivisions		59,497		929		451		59,975
Other equity securities		4		9		-		13

	$	122,476	$	2,677	$	706	$	124,447

Securities held-to maturity:
U. S. Government agencies	$	25,578	$	5	$	600	$	24,983
State and local political
subdivisions		7,517		84		43		7,558

	$	33,095	$	89	$	643	$	32,541

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C – SECURITIES (Continued)

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(In thousands)
December 31,2009:
Securities available-for-sale:
U. S. Government agencies	$	21,541	$	69	$	358	$	21,252
Mortgage-backed securities		38,641		1,608		26		40,223
State and local political
subdivisions		47,384		901		300		47,985
Other equity securities		4		2		-		6

	$	107,570	$	2,580	$	684	$	109,466

Securities held-to maturity:
U. S. Government agencies	$	9,614	$	-	$	371	$	9,243
State and local political
subdivisions		5,145		393		-		5,538

	$	14,759	$	393	$	371	$	14,781

The scheduled maturities of securities at December 31, 2010, are as follows:

Securities
Scheduled Maturities


	Available-For-Sale				Held-to-Maturity
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
	(In thousands)

Within one year	$	10,213	$	10,272	$	320	$	320
Over one year through five years		32,196		32,847		1,245		1,262
After five years through ten years		15,931		15,945		6,137		6,154
After 10 years		22,399		22,062		25,393		24,805
Mortgage-backed securities		41,733		43,308		-		-
Other equity securities		4		13		-		-

	$	122,476	$	124,447	$	33,095	$	32,541

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C – SECURITIES (Continued)

Investment securities with a carrying value of $97,176,000 and $52,087,000 at December 31, 2010 and 2009, respectively, were pledged to secure public and trust deposits and for other purposes as required or permitted by law.

Gross gains of $11,000 in 2010, $20,000 in 2009 and $16,000 in 2008, and gross losses of $0 in 2010, $0 in 2009 and $3,000 in 2008, were realized on securities available-for-sale.

The details concerning securities classified as available-for-sale with unrealized losses as of December 31, 2010 and 2009 were as follows:

	Losses < 12 Months		Losses 12 Months or >		Total
		Gross		Gross		Gross
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
	Value	Losses	Value	Losses	Value	Losses
2010
U. S. Government
agencies	$ 8,924	$ 143	$ -	$ -	$ 8,924	$ 143
Mortgage-backed
securities	11,524	112	-	-	11,524	112
State and local political
subdivisions	17,202	369	1,236	82	18,438	451
Other equity securities	-	-	-	-	-	-

	$ 37,650	$ 624	$ 1,236	$ 82	$ 38,886	$ 706

2009
U. S. Government
agencies	$ 17,186	$ 358	$ -	$ -	$ 17,186	$ 358
Mortgage-backed
securities	3,760	26	-	-	3,760	26
State and local political
subdivisions	11,734	235	436	65	12,170	300
Other equity securities	-	-	-	-	-	-

	$ 32,680	$ 619	$ 436	$ 65	$ 33,116	$ 684

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C – SECURITIES (Continued)

The details concerning securities classified as held-to-maturity with unrealized losses as of December 31, 2010 and 2009 were as follows:

	Losses < 12 Months		Losses 12 Months or >		Total
		Gross		Gross		Gross
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
	Value	Losses	Value	Losses	Value	Losses
2010
U. S. Government
agencies	$ 19,675	$ 600	$ -	$ -	$ 19,675	$ 600
State and local political
subdivisions	2,144	43	-	-	2,144	43
	$ 21,819	$ 643	$ -	$ -	$ 21,819	$ 643

2009
U. S. Government
agencies	$ 9,243	$ 371	$ -	$ -	$ 9,243	$ 371
State and local political
subdivisions	-	-	-	-	-	-
	$ 9,243	$ 371	$ -	$ -	$ 9,243	$ 371

As of December 31, 2010, approximately 29% of the number of securities in the portfolio reflected an unrealized loss. Management is of the opinion the Corporation has the ability and intent to hold these securities until such time as the value recovers or the securities mature. Management also believes the deterioration in value is attributable to changes in market interest rates and not to the credit quality of the issuer.

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D – LOANS

Major classifications of loans were as follows:

	December 31,
	2010			2009
	(In thousands)

Commercial, financial and agricultural	$	33,347		$	30,580
Real estate - construction and development		56,673			69,797
Real estate - mortgage		134,964			142,917
Installment loans to individuals		20,186			20,702
Other		2,594			2,615
		247,764			266,611
Less allowance for loan losses		(4,477	)		(4,352	)
	$	243,287		$	262,259

Included in the above are customer demand deposits in overdraft status of approximately $587,000 at December 31, 2010, and $229,000 at December 31, 2009.

Transactions in the allowance for loan losses were as follows:

	Years Ended December 31,
	2010			2009			2008
				(In thousands)

Balance at beginning of year	$	4,352		$	3,675		$	4,729
Charge-offs during year		(2,989	)		(4,329	)		(13,875	)
Recoveries on loans previously
charged off		789			1,095			2,365
Provision charged to operating expense		2,325			3,911			10,456

Balance at end of year	$	4,477		$	4,352		$	3,675

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D – LOANS (Continued)

The following table provides the ending balances in the Company's loans and allowance for loan losses, broken down by portfolio segment as of December 31, 2010. The table also provides additional detail as to the amount of our loans and allowance that correspond to individual versus collective impairment evaluation. The impairment evaluation corresponds to the Company's systematic methodology for estimating its Allowance for Loan Losses.

			Installment		Commercial,
			and		Financial
	Real Estate		Other		and Agriculture		Total
	(In thousands)
Loans
Individually evaluated	$	44,284	$	28	$	950	$	45,262
Collectively evaluated		147,359		22,752		32,391		202,502
Total	$	191,643	$	22,780	$	33,341	$	247,764

Allowance for Loan Losses
Individually evaluated	$	2,870	$	1	$	8	$	2,879
Collectively evaluated		1,136		215		247		1,598
Total	$	4,006	$	216	$	255	$	4,477

At December 31, 2010, and December 31, 2009, loans lines of $250,000 and greater, rated substandard or lower, were analyzed for impairment. The following is a summary comparison of the analysis for impairment:

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D – LOANS (Continued)

	December 31,
	2010		2009
	(In thousands)
Loans analyzed for impairment
without a valuation allowance	$	28,171,248	$	14,486,555
Loans analyzed for impairment
with a valuation allowance		17,090,793		17,807,559
Total loans analyzed for impairment	$	45,262,041	$	32,294,114
Valuation allowance related analysis
of loans for impairment	$	2,879,000	$	1,961,835

Nonaccrual loans at December 31, 2010 totaled $9,584,000, and the loans past-due ninety days or more and still accruing totaled $63,000. Nonaccrual loans at December 31, 2009 totaled $15,244,000, and the loans past-due ninety days or more and still accruing totaled $12,000.

The average recorded investment in nonaccrual loans and loans past-due ninety days or more and still accruing during the years ended December 31, 2010, 2009, and 2008 was approximately $10,067,000, $11,068,000 and $9,402,000, respectively. For the years ended December 31, 2010, 2009, and 2008, the amount of interest income recognized on impaired loans was immaterial. The amount of interest income that would have been recognized on impaired loans using the cash-basis would have been $435 thousand, $444 thousand, and $105 thousand for the period ended December 31, 2010, 2009 and 2008, respectively. The Corporation had no loan commitments to borrowers in non-accrual status at December 31, 2010 and 2009.

The following table provides additional detail of loans lines of $250,000 and greater, rated substandard or lower which were analyzed for impairment and reflects the breakdown according to class as of December 31, 2010. The recorded investment included in the following table represents customer balances net of any partial charge-offs recognized on the loans, net of any deferred fees and costs. As a majority of these loans at December 31, 2010 are on nonaccrual status, recorded investment excludes any insignificant amount of accrued interest receivable on loans 90-days or more past due and still accruing. The unpaid balance represents the recorded balance prior to any partial charge-offs.

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D – LOANS (Continued)

							Average		Interest
							Recorded		Income
	Recorded		Unpaid		Related		Investment		Recognized
	Investment		Balance		Allowance		YTD		YTD
	(In thousands)
Loans analyzed for
impairment with
no related allowance:
Commercial, financial, and agricultural	$	623	$	623	$	-	$	580	$	29
Real estate-construction and development		19,055		19,055		-		20,360		762
Real estate-mortgage		9,662		9,662		-		9,759		377
Installment loans and other		-		-		-		-		-
Total	$	29,340	$	29,340	$	-	$	30,699	$	1,168
Loans analyzed for
impairment with
a related allowance:
Commercial, financial, and agricultural	$	327	$	347	$	8	$	338	$	12
Real estate-construction and development		10,861		10,861		1,667		10,788		364
Real estate-mortgage		4,706		4,982		1,203		4,784		192
Installment loans and other		28		28		1		31		1
Total	$	15,922	$	16,218	$	2,879	$	15,941	$	569
Total loans analyzed for
impairment:
Commercial, financial, and agricultural	$	950	$	970	$	8	$	918	$	41
Real estate-construction and development		29,916		29,916		1,667		31,148		1,126
Real estate-mortgage		14,368		14,644		1,203		14,543		569
Installment loans and other		28		28		1		31		1
Total Impaired Loans	$	45,262	$	45,558	$	2,879	$	46,640	$	1,737

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D – LOANS (Continued)

The gross interest income that would have been recorded in the period that ended if the nonaccrual loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination was $453 thousand and $459 thousand for December 31, 2010 and 2009, respectively.

The following table summarizes by class our loans classified as past due in excess of 30 days or more in addition to those loans classified as non-accrual:

			90 Days +
		30-89	Past Due
	Days Past		and Still		Non-Accrual		Total		Total
	Due		Accruing		Loans		Past Due		Loans
	(In thousands)

Commercial, financial	$	238	$	29	$	326	$	593	$	33,347
and agricultural
Real estate - construction
and development		1,016		-		3,856		4,872		56,673
Real estate - mortgage		2,070		-		5,237		7,307		134,964
Installment loans to individuals		842		-		165		1,007		20,186
Other		67		34		-		101		2,594
Total	$	4,233	$	63	$	9,584	$	13,880	$	247,764

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company uses the following definitions for risk ratings, which are consistent with the definitions used in supervisory guidance:

Special Mention: Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D – LOANS (Continued)

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of December 31, 2010, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Real Estate				Installment		Commercial,
	Commercial &		Real Estate		and		Financial
	Development		Mortgage		Other		and Agriculture		Total
	(In thousands)
Pass	$	15,545	$	107,179	$	21,514	$	24,098	$	168,336
Special Mention		10,261		10,329		643		7,811		29,044
Substandard		30,867		17,456		623		1,443		50,389
Doubtful		-		-		-		-		-
Subtotal		56,673		134,964		22,780		33,352		247,769
Less:
Unearned Discount		-		-		-		5		5
Loans, net of unearned discount	$	56,673	$	134,964	$	22,780	$	33,347	$	247,764

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE E – PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation and amortization as follows:

	Estimated Useful	December 31,
	Life in Years	2010	2009

Land	-	$ 7,439	$ 7,439
Buildings and improvements	10 - 40	18,186	18,144
Furniture and equipment	3 - 10	7,267	7,245
		32,892	32,828
Less accumulated depreciation and amortization		(9,970)	(8,920)

		$ 22,922	$ 23,908

The amount charged to operating expense for depreciation was $1,105,000 for 2010, $1,134,000 for 2009, and $1,108,000 for 2008.

NOTE F – TIMES DEPOSITS

The aggregate amount of time deposits in denominations of $100,000 or more at December 31, 2010 and 2009 was $80,885,000 and $67,578,000, respectively.

Projected maturities of time deposits included in interest-bearing deposits at December 31, 2010, are as follows (in thousands):

			Year		Amount
			2011		$135,949
			2012		5,487
			2013		902
			2014		1,454
			2015		1,798
			Thereafter		13,397

					$158,987

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G – BORROWED FUNDS

Borrowed funds consisted of the following:

	December 31,
	2010	2009
	(In thousands)

FHLB Advances	$ 26,127	$ 27,909
Treasury tax and loan note	843	1,003

	$ 26,970	$ 28,912

The Bank has outstanding advances from the FHLB under a blanket agreement for advances and a security agreement (Agreements). The Agreements entitle the Bank to borrow funds from FHLB to fund mortgage loan programs and to satisfy certain other funding needs. Advances from the FHLB have maturity dates ranging from February 2011, through September 2032. Interest is payable monthly at rates ranging from 2.5675% to 5.810%. The advances are collateralized by FHLB capital stock, amounts on deposit with the FHLB, and a blanket lien on first mortgage, small business, and agriculture loans equal to the advances outstanding. FHLB advances available and unused at December 31, 2010, totaled $5.4 million.

The treasury tax and loan note generally matures within one to sixty days from the transaction date. Interest is paid at an adjustable rate as set by the U.S. Government.

Federal funds purchased represent unsecured borrowings from other banks, generally on an overnight basis.

Annual principal repayment requirements on FHLB borrowings at December 31, 2010, are as follows:

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G – BORROWED FUNDS (Continued)

			Year		Amount
					(In thousands)
			2011		$ 1,819
			2012		9,857
			2013		2,447
			2014		681
			2015		2,179
			Thereafter		9,144

					$ 26,127

NOTE H – EMPLOYEE RETIREMENT PLANS

The Bank has two defined contribution plans (a [401(k)] and an employee stock ownership plan [ESOP]) which covers all employees who satisfy the initial eligibility requirements of one year of service and being age twenty-one or older.

In the 401(k) plan, employees may contribute up to the maximum amount of their salary allowable by law which is matched by the Bank at the rate of 60% up to the first 5% deferred into the plan. Employer profit-sharing contributions are subject to Board discretion. The Bank’s contribution was approximately $171,000 for 2010, $297,000 for 2009, and $318,000 for 2008.

The ESOP is funded solely by employer profit-sharing contributions at the discretion of the Board. The ESOP invests primarily in the stock of the Corporation. Dividends on ESOP shares are recorded as a reduction of retained earnings and the shares are considered outstanding for earnings per share computation. Bank contributions were approximately $430,000 for 2010, $301,000 for 2009, and $287,000 for 2008. The ESOP held 205,887 and 194,887 shares of Corporation common stock, of which 205,887 and 194,887 were allocated shares, at December 31, 2010 and 2009, respectively.

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE I – COMPREHENSIVE INCOME

In the calculation of comprehensive income, certain reclassification adjustments are made to avoid double counting amounts that are displayed as part of other comprehensive income. The disclosures of the reclassification amounts are as follows:

	Years Ended December 31,
	2010			2009			2008
	(In thousands)
Net change in unrealized gains on
available-for-sale securities	$	86		$	839		$	571
Reclassification adjustment for net
(gains) realized in income		(11	)		(20	)		(13	)
Net unrealized gains		75			819			558
Tax effect		(28	)		(306	)		(208	)

Net change in unrealized gains on
securities available-for-sale, net of tax	$	47		$	513		$	350

NOTE J – INCOME TAXES

The provision (benefit) for income taxes including the tax effects of securities transactions is as follows:

	Years Ended December 31,
	2010			2009			2008
	(In thousands)

Current:
Federal	$	241		$	(1,040	)	$	(2,896	)
State		51			(203	)		(410	)
Deferred		(548	)		715			2,284

	$	(256	)	$	(528	)	$	(1,022	)

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J – INCOME TAXES (Continued)

The difference between the total expected tax expense at the federal tax rate and the reported income tax expense is as follows:

	Years Ended December 31,
	2010			2009			2008
	(In thousands)
Tax (benefit)on income before income taxes	$	356		$	92		$	(285	)

Increase (decrease) resulting from:
Tax-exempt income		(630	)		(548	)		(599	)
Disallowed interest expense		30			30			47
State income taxes, net of federal benefit		34			(134	)		(271	)
Other, net		(46	)		32			86
	$	(256	)	$	(528	)	$	(1,022	)

The components of the net deferred tax included in the consolidated balance sheets are as follows:

	December 31,
	2010			2009
	(In thousands)
Deferred tax assets:
Other real estate expenses
and writedowns	$	651		$	-
Other		105			91
		756			91
Deferred tax liabilities:
Allowance for loan losses		(175	)		(222	)
Premises and equipment		(1,367	)		(1,304	)
Unrealized gain on securities
available for sale		(735	)		(707	)
Intangible asset		(949	)		(849	)
Other		(314	)		(314	)
		(3,540	)		(3,396	)
Net deferred tax asset (liability)	$	(2,784	)	$	(3,305	)

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J – INCOME TAXES (Continued)

ASC Topic 740 – Income Taxes provides guidance on financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. The ASC requires an evaluation of tax positions to determine if the tax positions will more likely than not be sustainable upon examination by the appropriate taxing authority. The Corporation at December 31, 2010 and 2009 had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Corporation’s consolidated income tax returns are not subject to federal and state examinations for the years prior to 2006.

NOTE K – COMMITMENTS AND CONTINGENT LIABILITIES

The consolidated financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of the Bank’s business and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities are commitments to extend credit, commercial letters of credit, credit card agreements, and standby letters of credit. A summary of the Bank’s approximate commitments and contingent liabilities arising from the normal course of business at December 31 is as follows:

	Contractual Amount
	2010		2009
	(In thousands)

Commitments to extend credit	$	14,890	$	18,146
Credit card arrangements		2,571		2,555
Letters of credit		10,533		10,469

Commitments to extend credit, credit card agreements, commercial letters of credit, and standby letters of credit include some exposure to credit loss in the event of nonperformance of the customer. The Bank’s credit policies and procedures for such commitments and financial guarantees are the same as those used for lending activities. Because these instruments have fixed maturity dates, and because many of them expire without being drawn upon, they do not generally present any significant liquidity risk. No significant losses on commitments were incurred during the three years ended December 31, 2010, nor are any significant losses as a result of these transactions anticipated.

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

The Bank leases property for branch offices under a non-cancellable lease agreement that expires in 2012. The lease is for a five-year period with an option to renew. The total minimum rental commitment at December 31, 2010, under the lease is approximately $20,400 which is due as follows:


		Year		Amount

		2011		$ 10,200
		2012		10,200
				$ 20,400

The annual rental expense was $10,200 for 2010, 2009 and 2008.

The Bank is a defendant in various pending and threatened legal actions arising in the normal course of business. In the opinion of management, based upon the advice of legal counsel, the ultimate disposition of these matters will not have a material effect on the consolidated financial statements.

NOTE L – RELATED PARTY TRANSACTIONS

In the normal course of business, loans are made to directors and executive officers and to companies in which they have a significant ownership interest. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other parties, are consistent with sound banking practices and are within applicable regulatory and lending limitations. Such loans amounted to approximately $4,134,000 and $4,282,000 at December 31, 2010 and 2009, respectively.

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M – REGULATORY MATTERS

Banking regulations require the Bank to maintain certain capital levels and limit the dividends paid by the Bank to the holding company. Dividends paid by the Bank to the Corporation are the primary source of funds for dividends by the Corporation to its shareholders. Payments of dividends require preapproval of the Bank’s regulators.

The Corporation and its subsidiary bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and its subsidiary bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and its subsidiary bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to adjusted average total assets (leverage). Management’s contention is that as of December 31, 2010, the Corporation and its subsidiary bank exceeded all capital adequacy requirements.

At December 31, 2010 the Bank was categorized by regulators as well-capitalized under the regulatory framework for prompt corrective action. A financial institution is considered to be well-capitalized if it has a total risk-based capital ratio of 10% or more, a Tier 1 risk-based capital ratio of 6% or more, and a Tier 1 leverage capital ratio of 5% or more. There are no conditions or anticipated events that, in the opinion of management, would change the categorization.

The actual capital amounts and ratios at December 31, 2010 and 2009, are presented in the following table. No amount was deducted from capital for interest-rate risk exposure.

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M – REGULATORY MATTERS (Continued)

	Security Capital
	Corporation
	(Consolidated)					Bank
	Amount		Ratio			Amount		Ratio
	(In thousands)
December 31, 2010
Total risk-based	$	70,745		22.5	%	$	55,487		18.5	%
Tier 1 risk-based		66,803		21.2	%		51,724		17.2	%
Tier 1 leverage		66,803		13.0	%		51,724		10.3	%

December 31, 2009
Total risk-based	$	71,834		21.8	%	$	54,378		17.4	%
Tier 1 risk-based		67,717		20.6	%		50,454		16.1	%
Tier 1 leverage		67,717		14.3	%		50,454		10.8	%

The minimum amounts of capital and ratios as established by banking regulators at December 31, 2010 and 2009 were as follows:

	Security Capital
	Corporation
	(Consolidated)					Bank
	Amount		Ratio			Amount		Ratio
	(In thousands)
December 31, 2010
Total risk-based	$	25,189		8.0	%	$	24,049		8.0	%
Tier 1 risk-based		12,594		4.0	%		12,025		4.0	%
Tier 1 leverage		20,587		4.0	%		20,082		4.0	%

December 31, 2009
Total risk-based	$	26,365		8.0	%	$	25,077		8.0	%
Tier 1 risk-based		13,182		4.0	%		12,539		4.0	%
Tier 1 leverage		18,932		4.0	%		18,663		4.0	%

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N – DISCLOSURE ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments is made in accordance with ASC Topic 825 – Financial Instruments. The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents – For such short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities – For securities held as investments, fair value equals market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. Fair value of other securities, which consist of FHLB and First National Banker’s Bankshares is estimated to be the carrying value which is par.

Loans – The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits – The fair values of demand deposits are, as required by ASC Topic 825, equal to the carrying value of such deposits. Demand deposits include noninterest-bearing demand deposits, saving accounts, NOW accounts, and money market demand accounts. The fair value of variable rate term deposits, those repricing within six months or less, approximates the carrying value of these deposits. Discounted cash flows have been used to value fixed rate term deposits and variable rate term deposits repricing after six months. The discount rate used is based on interest rates currently being offered on comparable deposits as to amount and term.

FHLB and Other Borrowings – The fair value of the fixed rate borrowings are estimated using discounted cash flows, based on current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount of any variable rate borrowings approximates their fair values.

Off-Balance Sheet Instruments – Fair values of off-balance sheet financial instruments are based on fees charged to enter into similar agreements. However, commitments to extend credit do not

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N – DISCLOSURE ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

represent a significant value until such commitments are funded or closed. Management has determined that these instruments do not have a distinguishable far value and no fair value has been assigned.

The estimated fair values of the financial instruments, none of which are held for trading purposes, were as follows:

	December 31, 2010				December 31, 2009
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
	(In thousands)				(In thousands)
Financial assets:
Cash and cash equivalents	$	15,264	$	15,264	$	17,045	$	17,045
Federal funds sold		31,270		31,269		20,550		20,549
Certificates of deposit with
other banks		1,778		1,778		296		296
Securities available-for-sale		124,447		124,447		109,466		109,466
Securities held-to-maturity		33,095		32,541		14,759		14,781
Securities, other		1,933		1,933		2,223		2,223
Loans		247,764		249,898		266,611		269,134
Financial liabilities:
Noninterest-bearing deposits		74,022		58,013		61,673		61,673
Interest-bearing deposits		334,721		318,760		321,827		295,271
FHLB and other borrowings		26,970		28,671		28,912		31,206

ASC Topic 820 – “Fair Value Measurements and Disclosures” establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

·	Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N – DISCLOSURE ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

·	Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

·	Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table summarizes the valuation of the assets and liabilities that the Corporation measures at fair value on a recurring basis, by the ASC Topic 820 pricing observability levels as of December 31, 2010 and December 31, 2009, (in thousands):

Quoted

Models with

Carrying

market

significant

value

prices in

observable

unobservable

in the

active

market

Balance

markets

parameters

Sheet

Level 1

Level 2

Level 3

Total

December 31, 2010:

Available-for-sale securities

124,447

Quoted

Models with

Carrying

market

significant

value

prices in

observable

unobservable

in the

active

market

Balance

markets

parameters

Sheet

Level 1

Level 2

Level 3

Total

December 31, 2009:

Available-for-sale securities

109,466

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N – DISCLOSURE ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

The fair value of available-for-sale securities is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. The Corporation has no securities classified within Level 1. If quoted market prices are not available, then fair values are estimated by using pricing models or quoted prices of securities with similar characteristics. Level 2 securities include U.S. Treasury securities, Obligations of U.S. government corporations and agencies, Obligations of state and political subdivisions, mortgage-backed securities, and collateralized mortgage obligations. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. The Corporation has no securities classified within Level 3.

Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Impaired Loans

Loans for which it is probable that the Corporation will not collect all principal and interest due according to contractual terms are measured for impairment in accordance with the provisions of ASC Topic 310-Receivables. Allowable methods for estimation fair value include using the fair value of the collateral for collateral dependent loans, or, where a loan is determined not to be collateral dependent, using the discounted cash flow method.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. If the impaired loan is determined not to be collateral dependent, then the discounted cash flow method is used. This method requires the impaired loan to be recorded at the present value of expected future cash flows discounted at the loan’s effective interest rate. The effective interest rate of a loan is the contractual interest rate adjusted for any net deferred loan fees or costs, premium or discount existing at origination or acquisition of the loan. Impaired loans are classified within Level 3 of the fair value hierarchy.

Other Real Estate Owned

Other real estate owned acquired through loan foreclosure is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for loan losses. Due to the subjective nature of establishing the fair value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N – DISCLOSURE ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

asset could differ from the original estimate. If it is determined the fair value declines subsequent to foreclosure, a valuation allowance is recorded through non-interest expense. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other non-interest expense. Other real estate owned measured at fair value on a non-recurring basis at December 31, 2010 and 2009 amounted to $8.2 million and $11.7 million, respectively. The remainder of other real estate was carried at cost at December 31, 2010 and 2009, at $4.1 million and $9.1 million, respectively. Net losses on other real estate disposed of during the year ended December 31, 2010 totaled $171 thousand.

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fell at December 31, 2010 and December 31, 2009.

December 31, 2010

Carrying

Quoted

Models with

value

market

significant

in the

prices in

observable

unobservable

Balance

active

market

Sheet

markets

parameters

Fair Value

Level 1

Level 2

Level 3

Impaired Loans

17,091

Other real estate owned

8,233

December 31, 2009

Carrying

Quoted

Models with

value

market

significant

in the

prices in

observable

unobservable

Balance

active

market

Sheet

markets

parameters

Fair Value

Level 1

Level 2

Level 3

Impaired Loans

17,808

Other real estate owned

11,664

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE O – CONCENTRATIONS OF CREDIT

Most of the loans, commitments, commercial letters of credit and standby letters of credit have been granted to customers in the Bank’s market area. Generally such customers are also depositors. Investments in state and municipal securities also include governmental entities within the Bank’s market area. The concentrations of credit by type of loan are set forth in Note D. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Letters of credit were granted primarily to commercial borrowers.

NOTE P – CONDENSED PARENT COMPANY STATEMENTS

Balance sheets as of December 31, 2010 and 2009, and statements of income and cash flows for the years ended December 31, 2010, 2009, and 2008 of Security Capital Corporation (parent company only) are presented below:

BALANCE SHEET

	December 31,
	2010		2009
	(In thousands)
Assets
Cash and cash equivalents	$	1,352	$	2,571
Investment in subsidiaries		57,602		56,227
Loans		2,988		6,539
Other real estate		10,386		8,276
Other assets		327		13
	$	72,655	$	73,626
Liabilities and Shareholders' Equity
Accrued payables	$	78	$	182
Other liabilities		664		664
Shareholders' equity		71,913		72,780
	$	72,655	$	73,626

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE P – CONDENSED PARENT COMPANY STATEMENTS (Continued)

INCOME STATEMENT

	Years Ended December 31,
	2010			2009		2008
	(In thousands)

Income
Dividends (including from subsidiary)	$	777		$	780	$	788
Other		127			74		97

		904			854		885

Expenses (total)		1,332			349		279

Income (loss) before income taxes and equity in
undistributed earnings of subsidiaries		(428	)		505		606
Income tax benefit		447			99		61
Income before equity in undistributed earnings
of subsidiaries		19			604		667
Equity in undistributed earnings of subsidiaries
in excess of (less than) dividends		1,283			194		(484	)

Net income	$	1,302		$	798	$	183

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE P – CONDENSED PARENT COMPANY STATEMENTS (Continued)

STATEMENT OF CASH FLOWS

	Years Ended December 31,
	2010			2009			2008
				(In thousands)
Cash Flows from Operating Activities
Net income	$	1,302		$	798		$	183
Equity in subsidiaries' undistributed (earnings) losses		(1,283	)		(194	)		484
Provision for loan losses		271			-			-
Other real estate writedown		602			-			-
Deferred income tax benefit		(303	)		-			-
Loss on sale of other real estate		53			-			-
Other, net		(90	)		219			(80	)

Net cash provided by operating activities		552			823			587

Cash Flows From Investing Activities
Purchases of assets		(281	)		(14,861	)		-
Proceeds from sale of other assets		167			-			1,924
Other, net		629			81			184

Net cash provided by (used in) investing activities		515			(14,780	)		2,108

Cash Flows From Financing Activities
Dividends paid on common stock		(1,442	)		(1,441	)		(1,441	)
Dividends paid on preferred stock		(845	)		(354	)		-
Proceeds from issuance of preferred stock		-			17,388			-
Repayment of debit obligations		-			-			(750	)
Other, net		1			(123	)		23

Net cash used in financing activities		(2,286	)		15,470			(2,168	)

Net increase (decrease) in cash and cash equivalents		(1,219	)		1,513			527

Cash and cash equivalents at beginning of year		2,571			1,058			531

Cash and cash equivalents at end of year	$	1,352		$	2,571		$	1,058

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE Q – SUMMARY OF QUARTERLY RESULTS OF OPERATIONS AND PER SHARE AMOUNTS (UNAUDITED)

	Three Months Ended
	Mar. 31		Jun. 30		Sept. 30			Dec. 31
	(In thousands, except per share data)

2010
Total interest income	$	4,873	$	5,050	$	5,010		$	4,852
Total interest expense		1,051		1,100		1,060			1,065
Net interest income		3,822		3,950		3,950			3,787
Provision for loan losses		276		576		376			1,097
Net interest income after provision for loan losses		3,546		3,374		3,574			2,690
Total noninterest income, excluding securities gains		1,494		1,566		1,753			1,531
Securities gains		-		5		5			1
Total noninterest expenses		4,414		4,004		5,176			4,899
Income taxes (benefit)		11		197		(136	)		(328	)

Net income (loss)		615		744		292			(349	)

Preferred dividends		289		280		293			152

Net income (loss) applicable to common
shareholders	$	326	$	464	$	(1	)	$	(501	)

Per share: (1)
Net income (loss) per common shareholders	$	0.11	$	0.16	$	(0.00	)	$	(0.17	)
Cash dividends declared		-		-		-			0.50

(1) Restated for stock dividends, if applicable

Weighted Average Shares		2,883,159		2,883,159		2,883,159			2,883,190

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE Q – SUMMARY OF QUARTERLY RESULTS OF OPERATIONS AND PER SHARE AMOUNTS (UNAUDITED) (Continued)

	Three Months Ended
	Mar. 31		Jun. 30			Sept. 30		Dec. 31
	(In thousands, except per share data)

2009
Total interest income	$	5,468	$	5,434		$	5,058	$	5,107
Total interest expense		1,354		1,379			1,313		1,327
Net interest income		4,114		4,055			3,745		3,780
Provision for loan losses		778		1,490			478		1,165
Net interest income after provision for loan losses		3,336		2,565			3,267		2,615
Total noninterest income, excluding securities gains		1,672		1,990			1,719		1,223
Securities gains		-		11			9		-
Total noninterest expenses		4,398		4,846			4,380		4,513
Income taxes (benefit)		56		(80	)		14		(518	)

Net income (loss)		554		(200	)		601		(157	)

Preferred dividends		-		10			289		286

Net income (loss) applicable to common
shareholders	$	554	$	(210	)	$	312	$	(443	)

Per share: (1)
Net income (loss) per common shareholders	$	0.19	$	(0.07	)	$	0.11	$	(0.16	)
Cash dividends declared		-		-			-		0.50

(1) Restated for stock dividends, if applicable

Weighted Average Shares		2,882,697		2,882,945			2,883,050		2,883,137

NOTE R – DISCLOSURE ABOUT CAPITAL PURCHASE PROGRAM

On October 3, 2008, the Emergency Economic Stabilization Act of 2008 (initially introduced as the Troubled Asset Relief Program or “TARP”) was enacted. On October 14, 2008, the U.S. Treasury announced its intention to inject capital into financial institutions under the TARP Capital Purchase Program (the “CPP”). The CPP is a voluntary program designed to provide capital to healthy, well

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE R – DISCLOSURE ABOUT CAPITAL PURCHASE PROGRAM (Continued)

managed financial institutions in order to increase the availability of credit to businesses and individuals and help stabilize the U.S. financial system.

On June 26, 2009, the Company issued to the U. S. Treasury 17,388 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series UST (the “Preferred Stock”), having a liquidation preference of $1,000 per share. The Preferred Stock has a dividend rate of 5% for the first five years and 9% thereafter. The Preferred Stock has a call feature after three years.

In connection with the sale of the Preferred Stock, the Company also issued the U.S. Treasury ten-year warrants to purchase up to 522 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series UST/W (the “Warrants”), par value $1,000 per share at an initial exercise price of $.01 per share. The Warrants were immediately exercised and had a dividend rate of 9%.

As required under the TARP Capital Purchase Program, dividend payments on and repurchase of the Company’s common stock are subject to certain restrictions. For as long as the Preferred Stock is outstanding, no dividends may be declared or paid on the Company’s common stock until all accrued and unpaid dividends on the Preferred Stock are fully paid. In addition, the U.S. Treasury’s consent is required for any increase in dividends on common stock before the third anniversary of issuance of the Preferred Stock and for any repurchase of any common stock except for repurchases of common shares in connection with benefit plans.

The Preferred Stock and Warrants were sold to the U.S. Treasury for an aggregate purchase price of $17,338,000 in cash. The purchase price was allocated between the Preferred Stock and the Warrants based upon the relative fair values of each to arrive at the amounts recorded by the Company. This resulted in the Preferred Stock being issued at a discount which is being amortized on a level yield basis as a charge to retained earnings over an assumed life of five years.

NOTE S – DISCLOSURE ABOUT COMMUNITY DEVELOPMENT CAPITAL INITIATIVE PROGRAM

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE S – DISCLOSURE ABOUT COMMUNITY DEVELOPMENT CAPITAL INITIATIVE PROGRAM (Continued)

Treasury and is now participating in Treasury’s TARP Community Development Capital Initiative (the “CDCI”). In comparison with the rates required by the TARP CPP, the CDCI Preferred Shares entitle the holder to an annual dividend of 2% of the liquidation value of the shares, payable quarterly in arrears, for a period of eight years or until repayment of the principal, whichever transpires first. If the principal remains outstanding at the end of eight years, the annual dividend rate will rise to 9%. In addition, if the Company fails to retain its certification as a Community Development Financial Institution, the annual rate will be 5% when noncompliance exceeds 180 days and 9% for noncompliance exceeding 270 days. Certification requires the Company to have a primary mission of promoting community development in targeted areas with a goal to serve the “unserved” markets.

NOTE T – SUBSEQUENT EVENTS

Management has evaluated the effect of subsequent events on these financial statements through the date the financial statements were issued.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) of the Securities Exchange Act, our management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of December 31, 2010, of the effectiveness of our “disclosure controls and procedures” as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2010, our controls and procedures were effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported in accordance with the rules and forms of the SEC and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for the preparation, integrity and reliability of the consolidated financial statements and related financial information contained in this annual report. The financial statements were prepared in accordance with generally accepted accounting principles and prevailing practices of the banking industry. Where amounts must be based on estimates and judgments, they represent the best estimates and judgments of management.

Management has established and is responsible for maintaining an adequate internal control structure designed to provide reasonable, but not absolute, assurance as to the integrity and reliability of the financial statements, safeguarding of assets against loss from unauthorized use or disposition and the prevention and detection of fraudulent financial reporting. The internal control structure includes: a financial accounting environment; a comprehensive internal audit function; an independent audit committee of the board of directors; and extensive financial and operating policies and procedures. Management also recognizes its responsibility for fostering a strong ethical climate which is supported by a code of conduct, appropriate levels of management authority and responsibility, an effective corporate organizational structure and appropriate selection and training of personnel.

The board of directors, primarily through its audit committee, oversees the adequacy of the Company’s internal control structure. The audit committee, whose members are neither officers nor employees of the Company, meets periodically with management, internal auditors and internal credit examiners, if required, to review the functioning of each and to ensure that each is properly discharging its responsibilities. In addition, T. E. Lott and Company, an independent registered public accounting firm, was engaged to audit the Company’s financial statements and express an opinion as to the fairness of presentation of such financial statements. T. E. Lott and Company was also engaged to audit the Company’s internal control over financial reporting. The report of T. E. Lott and Company follows this report.

Management recognizes that there are inherent limitations in the effectiveness of any internal control structure. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010, based upon the criteria for effective internal control over financial reporting described in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based upon this assessment, management believes that, as of December 31, 2010, the Company maintained effective control over financial reporting.

Remediation of Material Weaknesses in Internal Control

Not Applicable

Changes in Internal Controls

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls over financial reporting in the fourth quarter of 2010 or thereafter.

ITEM 9B. OTHER INFORMATION

Not Applicable

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Included under the heading "Information Concerning Nominees and Directors" in the Company's Proxy Statement dated March 11, 2011, and incorporated by reference herein.

The Company's Board of Directors has adopted a Code of Ethics that applies to the Company's principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions. A copy of this Code of Ethics can be found at the Company's internet website at www.firstsecuritybk.com. The Company intends to disclose any amendments to its Code of Ethics, and any waiver from a provision of the Code of Ethics granted to the Company's principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, on the Company's internet website within five business days following such amendment or waiver. The information contained on or connected to the Company's internet website is not incorporated by reference into this Form 10-K and should not be considered part of this or any other report that we file with or furnish to the SEC.

Under the Capital Purchase Plan and the CDCI program of the Troubled Asset Relief Program, the Company, as a recipient, is required to have an Excessive Expenditure Policy. Such a policy was adopted by the Company’s Board of Directors on August 20, 2009, and is posted on the Bank’s website at www.firstsecuritybk.com.

ITEM 11. EXECUTIVE COMPENSATION

Included under the heading "Executive Compensation" in the Company's Proxy Statement dated March 11, 2011, and incorporated by reference herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT, AND RELATED STOCKHOLDER MATTERS

Included under the heading "Security Ownership of Certain Beneficial Owners and Management" in the Company's Proxy Statement dated March 11, 2011, and incorporated by reference herein.

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Included under the heading "Certain Relationship and Related Transactions” in the Company's Proxy Statement dated March 11, 2011, and incorporated by reference herein.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Included under the heading "Independent Public Accountants and Fees" in the Company's Proxy Statement dated March 11, 2011, and incorporated by reference herein.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements and Exhibits

Documents Filed as Part of This Annual Report on Form 10-K

(a)	Independent Registered Public Accountants’ Report

(b)	Consolidated Financial Statements – See the Financial Statements included in Item 8.

(c)	Financial Statement Schedules – Financial statement schedules are omitted for the reason that they are not required or are not applicable, or the required information is included in the financial statements.

(d)

Exhibits – The exhibits filed as part of this Annual Report on Form 10-K are identified in the Exhibit Index, which Exhibit Index specifically identifies those exhibits that describe or evidence all management contracts and compensation plans or arrangements required to be filed as exhibits to this report. Such Exhibit Index is incorporated herein by reference.

Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Security Capital Corporation

Date: March 15, 2011

By /s/ Frank West

Frank West, Chief Executive Officer

Date: March 15, 2011 By /s/ Connie Hawkins

Connie Hawkins, Chief Financial Officer

952131.1/13193.16317

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

DATE:

March 15, 2011

/s/ Larry Pratt, Director

DATE:

March 15, 2011

/s/ Frank West, Director

DATE:

March 15, 2011

/s/ Laney Funderburk, Director

DATE:

March 15, 2011

/s/ Joe Brown, Director

DATE:

March 15, 2011

/s/ Ben Smith, Director

DATE:

March 15, 2011

/s/ Ken Murphree, Director

DATE:

March 15, 2011

/s/ Will Hays, Director

DATE:

March 15, 2011

/s/ Tony Jones, Director

DATE:

March 15, 2011

/s/ John Mothershed, Director

952131.1/13193.16317

Exhibit Index

		Reference to
		Prior Filing or
Exhibit		Exhibit Number
Number	Document	Attached Hereto
3.1	Registrant's Articles of Incorporation	*

3.2	Registrant's Bylaws	*

21	Subsidiaries of the registrant	21

31.1	Rule 13a-14(a) Certification of the Company's President	31.1
	and Chief Executive Officer

31.2	Rule 13a-14(a) Certification of the Company's Chief	31.2
	Financial Officer

32.1	Section 1350 Certification of the Company’s President	32.1
	and Chief Executive Officer

32.2	Section 1350 Certification of the Company’s Chief	32.2
	Financial Officer
99.1	Annual Certification Pursuant to 31 C.F.R. §30.15	99.1
	of the Company’s President and Chief Executive Officer

99.2	Annual Certification Pursuant to 31 C.F.R. §30.15	99.2
	of the Company’s President and Chief Financial Officer

952131.1/13193.16317

SECURITY CAPITAL CORP/MS - FORM 10-K - March 15, 2011

Attached files

SECURITY CAPITAL CORP/MS Reports