body_10k.htm

10-K 1 body_10k.htm SECURITY CAPITAL CORPORATION 12-31-07 FORM 10K body_10k.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, 2007

[ ]	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

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(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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Indicated 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 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 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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” 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, 2007, the aggregate market value of the voting stock held by nonaffiliates of the Registrant was $110.5 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, 2007

Common stock ($5.00 par value)

2,881,959 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 April 4, 2008.

952131.1/13193.16317

CROSS REFERENCE INDEX

		Page
PART I
Item 1	Business	2
Item 1A	Risk Factors	10
Item 1B	Unresolved Staff Comments	15
Item 2	Properties	15
Item 3	Legal Proceedings	16
Item 4	Submission of Matters to a Vote of Security Holders	16

PART II

Item 5	Market for the Registrant's Common Equity, Related Stockholder Matters and
	Issuer Purchases of Equity Securities	16
Item 6	Selected Financial Data	17
Item 7	Management's Discussion and Analysis of Financial Condition and Results of
	Operations	18
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	40
Item 8	Financial Statements and Supplementary Data	40
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	71
Item 9A	Controls and Procedures	71
Item 9B	Other Information	72

PART III

Item 10	Directors, Executive Officers, and Corporate Governance	72
Item 11	Executive Compensation	72
Item 12	Security Ownership of Certain Beneficial Owners, Management and Related Stockholder Matters	72
Item 13	Certain Relationships, Related Transactions, and Director Independence	73
Item 14	Principal Accounting Fees and Services	73

Part IV

Item 15	Exhibits and Financial Statement Schedules	73
Signatures		74
Index to Exhibits		75
EX-3.(B) (EX-3.(B))
EX-21 (EX-21)
EX-31.1 (EX-31.1)
EX-31.2 (EX-31.2)
EX-32.1 (EX-32.1)

____________

* Information called for by Part III (Items 10 through 14) is incorporated by reference to the Registrant's Proxy Statement dated April 4, 2008.

952131.1/13193.16317

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 is a wholly owned subsidiary of Security Capital Corporation which has been inactive in the past years but in 2004 reactivated its operations by investing in new leasehold improvements.

First Security Insurance, Inc., the subsidiary of First Security Bank, was chartered for the purpose of sale of annuities and insurance. The activities of this entity are not material and 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, and providing personal and corporate trust services.

Security Capital Corporation’s lending services include commercial, real estate, installment, credit card loans, merchant accounts receivable loans, student 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, 2007, the loan portfolio totaled $343.2 million constituting 80.58% of the earning assets of $425.9 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 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 following tables provide demographic information for Desoto, Panola, Quitman 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
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
	2005	2004	2003	2002	2001
DeSoto	$29,623	$29,318	$28,713	$28,251	$27,679
Panola	20,908	20,017	19,173	18,331	18,238
Quitman	20,058	19,482	17,933	15,256	16,820
Tunica	19,656	19,567	19,325	16,823	18,444
Mississippi	25,051	24,518	23,466	22,511	21,950
SOURCE: United States Department of Commerce, Bureau of Economic Analysis

	MEDIAN AGE
	2000	1990
DeSoto	33.7	31.5
Panola	33.0	30.1
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.

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:

Loans
Major Classifications


	December 31,
	2007			2006
	(In thousands)

Commercial, financial and agricultural	$	39,135		$	38,349
Real estate - construction and development		124,714			105,545
Real estate - mortgage		151,998			153,525
Installment loans to individuals		24,624			26,858
Other		2,718			2,381
		343,189			326,658
Less allowance for loan losses		(4,729	)		(4,334	)
	$	338,460		$	322,324

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 $397,000 and over. As of December 31, 2007, the loan portfolio totaled $343.2 million of which the large lines total $149 million representing 132 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 the northern Panola County, an additional location in Sardis was opened in October of 2006. In August of 2007, land was purchased for a future banking facility on the corner of Goodman Road and Highway 309 in Marshall County, Mississippi. Security Capital Corporation has offered ATM services for numerous years and began in 1995 “running” its own ATMs. Today, First Security Bank provides ATM services at twenty-seven locations, sixteen 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 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, 2007, First Security Bank had 190 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.

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, 2007:

	Corporation	Bank
Risk-Based Capital Ratio	Ratio	Ratio	Requirements
Total Capital	15.30%	14.67%	8.00%
Tier 1 Capital	14.05%	13.42%	4.00%
Leverage Capital	11.06%	10.55%	3.00%

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 (“FDIRA”) provides for a One-time Assessment Credit (“OTAC”) for eligible institutions. First Security Bank was provided an OTAC of $194,604 which eliminated the need for payment of the assessed insurance premiums. The DIF premium paid by the Bank from the OTAC during 2007 totaled $150,201 leaving a credit of $44,403 for use in 2008. The Bank during 2007 was assessed a DIF premium at an approximate 5 basis points. 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 2007 ranged from 1.14 basis points to 1.22 basis points, per $100 of deposits. The assessments for the first quarter of 2008 will be paid based on an assigned FICO debt service rate of 1.14 basis points.

Competition

The banking business is a highly competitive business. Security Capital Corporation’s market area consists principally of Panola, Quitman, Desoto 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, 2007 (the latest Market Share Report), held 54.74% of the deposit market in Panola County. In Quitman County, this same report reflects Security Capital Corporation holding 18.53% of the deposit market. In Desoto County, an area filled with large regional banks and national banks, Security Capital Corporation held a 5.66% share of the deposit market as of June 30, 2007. Management measures the success of the locations in this area, not only by the growth of the deposits, but by its ability to continue to be competitive and to grow in the loan production area. In Tunica County, Security Capital Corporation held a 49.04% share of the deposit base as of June 30, 2007.

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.

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 deteriorated and depressed real estate values beyond a certain point, that 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 payments 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, such 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 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, 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable

ITEM 2. PROPERTIES

Security Capital Corporation, through First Security Bank, currently operates from its main office in central Batesville and from 15 additional branches in Panola, Quitman, Desoto, 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, ATM
	Batesville, Mississippi 38606;	Safe Deposit Boxes,
	662-563-9311	Cash, Drive-thru

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

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,
	662-526-5191	Drive-thru, ATM

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

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


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

Hernando Branch	985 East Commerce Street	Loans, Deposits, Cash,
	Hernando, Mississippi 38632;	Safe Deposit Boxes,
	662-449-4115	ATM, 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, MS 38672;	Safe Deposit Boxes,
	662-893-3243	ATM, 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,
	662-890-1043	ATM, 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, IRAs,
		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 $9,600 in 2007. 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 2008 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, 2007, 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

No matters were submitted to a shareholder vote during the fourth quarter of 2007.

PART II

ITEM 5.

MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER 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 $1.00 per share in 2007 and $.95 per share (split adjusted) in 2006. 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, 2007, there were 816 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


	12/31/2007		12/31/2006		12/31/2005		12/31/2004		12/31/2003
	(in thousands except per share data and Other Financial Data)
Income Statement Data:
Interest Income		34,133		30,586		24,458		19,092		17,009
Interest Expense		13,699		11,523		6,907		4,139		3,955
Net Interest Income		20,434		19,063		17,551		14,953		13,054
Provision for Loan Losses		1,155		965		1,440		637		546
Net Interest Income After Provision		19,279		18,098		16,111		14,316		12,508
Noninterest Income		6,849		6,926		6,151		5,657		5,666
Noninterest Expenses		15,538		14,435		12,948		11,410		10,618
Income Before Income Taxes		10,590		10,589		9,314		8,563		7,556
Income Tax Expense		3,155		3,349		2,707		2,431		2,039
NET INCOME		7,435		7,240		6,607		6,132		5,517

Per Share Data:
Net Income*		2.58		2.51		2.29		2.13		1.92
Cash Dividends*		1.00		0.95		0.91		0.86		0.78
Book Value*		19.76		18.05		16.39		15.25		14.22

Other Ratios:
Return on Average Assets		1.54		1.58		1.57		1.65		1.66
Return on Equity		13.44		14.36		14.16		14.22		13.73
Loans to Deposits		88.28		89.08		83.98		70.29		70.87
Loans to Total Assets		72.02		71.27		68.36		60.06		60.08
Equity Capital to Total Assets		11.95		11.34		10.83		11.24		12.01
Average Equity to Average Assets		11.43		10.99		11.12		11.61		12.12
Dividend Payout Ratio		38.76		37.90		39.52		40.52		40.66

Other Financial Data:
Cash Dividends Declared		2,811,809		2,743,770		2,611,400		2,484,937		2,243,187
Weighted Average
Outstanding Common Shares		2,881,934		2,880,487		2,879,059		2,876,613		2,871,747

* The per share information is based upon the retroactive effect of the stock dividends for the period.

The per share data being reflected was derived using the weighted average number of outstanding shares at
December 31, 2007 as the denominator. (The weighted average number of outstanding shares at December
31, 2007 was 2,881,934.) For example, the cash dividends per share was determined by dividing the amount
of dividends by 2,881,934.

Balance Sheet Data:
Total Assets		476,530		458,329		435,876		390,274		340,253
Earning Assets		425,879		398,824		381,794		349,276		304,056
Investment Securities AFS		66,156		61,028		78,949		96,669		76,320
Investment Securities HTM		7,235		7,850		2,047		2,050		2,053
Other Securities		2,028		2,250		1,456		1,259		991
Loans - Net		338,460		322,324		294,046		230,805		200,759
Allowance for Loan Losses		4,729		4,334		3,899		3,598		3,665
Total Deposits		388,733		366,699		354,766		333,458		288,442
Savings Deposits		26,897		30,553		30,349		28,416		25,869
Time Deposits		175,805		156,692		129,057		116,064		110,914
Long Term Borrowings		22,082		11,937		12,991		8,634		4,738
Shareholders' Equity		56,939		51,984		47,187		43,870		40,848


Average Balances:
Total Assets		472,756		450,822		419,569		371,424		331,612
Earning Assets		420,609		397,929		371,856		333,561		296,651
Securities		72,399		78,309		93,077		97,514		87,954
Total Loans		340,689		315,468		271,323		221,309		197,814
Allowance for Loan Losses		4,612		4,281		3,727		3,850		3,667
Savings Deposits		29,932		31,363		29,420		26,663		23,006
Time Deposits		168,032		144,549		117,127		114,125		114,998
Long-Term Borrowings		16,291		12,450		11,766		7,695		3,197
Shareholder's Equity		52,990		50,414		46,665		43,110		40,183

Other Data:
Number of Employees		190		190		182		162		157

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 statement 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. In 2007, the allocation to Allowance for Loan Losses increased expenses and lowered net income and net assets by $1,155 thousand. For future periods, the affect 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 the 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, 2007, 2006, and 2005

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 $7,435,372 or $2.58 per share for 2007, $7,239,882 or $2.51 per share for 2006, and $6,606,141 or $2.29 per share for 2005 representing an increase of $829,231 or $.29 per share for the period from year 2005 through year 2007. These changes are due to the general growth of the banking operation and the effective management of the assets and liabilities.

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. 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 increase in net interest income in 2007 as compared to 2006 is due to the increase in loans and loan interest rates.

The following table sets forth the major components of interest earning assets and interest-bearing liabilities for three consecutive years ending December 31, 2007. 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,
	2007						2006						2005
	Average				Average		Average				Average		Average				Average
	Balance		Interest		Yields		Balance		Interest		Yields		Balance		Interest		Yields
Assets:
Interest-Earning Assets:
Securities		72,654		3,487		4.80		78,986		3,386		4.29		92,679		3,687		3.98
BV to MV		-255						-677						398
Total Securities		72,399		3,487		4.82		78,309		3,386		4.32		93,077		3,687		3.96

Loans
Commerical/Agricultural		265,654		22,496		8.47		240,725		19,759		8.21		197,627		13,888		7.03
Consumer/Installment		69,374		6,218		8.96		69,092		5,826		8.43		68,682		5,275		7.68
Mortgage		338		34		10.06		529		44		8.32		859		70		8.15
Other Personal Loans		5,323		394		7.40		5,122		278		5.43		4,155		278		6.69
Total Loans		340,689		29,142		8.55		315,468		25,907		8.21		271,323		19,511		7.19

Other Investments
CDs with Other Banks		198		8		4.04		374		15		4.01		564		19		3.37
Federal Funds Sold		2,903		139		4.79		1,836		88		4.79		3,567		106		2.97
FHLB Account/Bank Accounts		4,420		205		4.64		1,942		84		4.33		3,325		76		2.29
Total Other		7,521		352		4.68		4,152		187		4.50		7,456		201		2.70

Total Earning Assets		420,609		32,981		7.84		397,929		29,480		7.41		371,856		23,399		6.29

Noninterest Earning Assets:

Allowance for Loan Losses		-4,612						-4,281						-3,727
Fixed Assets		20,834						18,848						16,570
Other Assets		18,912						23,404						19,250
Cash and Due Froms		17,013						14,922						15,620

Total Noninterest Earning Assets		52,147						52,893						47,713

Total Assets		472,756						450,822						419,569

Liabilities & Shareholder Equity

Interest-Bearing Liabilities
Deposits:
Interest-Bearing DDA		135,369		3,732		2.76		132,447		3,511		2.65		145,036		2,461		1.70
Savings Deposits		29,932		456		1.52		31,363		470		1.50		29,420		348		1.18
Time Deposits		168,032		8,171		4.86		144,549		6,169		4.27		117,127		3,355		2.86

Total Interest-Bearing Deposits		333,333		12,359		3.71		308,359		10,150		3.29		291,583		6,164		2.11

Borrowed Funds
Short-Term Borrowings		3,252		181		5.57		3,899		216		5.54		6,272		230		3.67
FHLB Advances- Short/Long-Term		20,458		1,159		5.67		23,334		1,133		4.86		11,766		506		4.30

Total Borrowed Funds		23,710		1,340		5.65		27,233		1,349		4.95		18,038		736		4.08

Total Interest-Bearing Liabilities		357,043		13,699		3.84		335,592		11,499		3.43		309,621		6,900		2.23

Non-Interest-Bearing Liabilities
Non-Interest-Bearing Deposits		57,067						58,877						58,199
Other Liabilities		5,656						5,939						5,084

Shareholders' Equity		52,990						50,414						46,665

Total Liabilities & Shareholder Equity		472,756						450,822						419,569

Net Interest Income &
Interest Rate Spread				19,282		4.00				17,981		3.98				16,499		4.06

Net Interest Margin						4.58						4.52						4.44

The following table sets forth net interest earning assets and liabilities for 2007, 2006 and 2005.

Table 3 - Net Interest Earning Assets
(in thousands)

	2007		2006		2005

Average Interest
Earning Assets		420,609		397,929		371,856

Average Interest
Bearing Liabilities		357,043		335,592		309,621

Net		63,566		62,337		62,235

Table 3A - Volume/Rate Analysis depicts the dollar effect of volume and rate changes from 2005 to 2007. 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
(in thousands)

	2007 Change from 2006						2006 Change from 2005
	Volume		Rate		Total		Volume		Rate		Total

INTEREST INCOME:

Loans		2,202		1,073		3,275		3,679		2,767		6,446

Investment Securities		-285		392		107		-638		335		-303

Other		158		7		165		-149		134		-15

Total Interest Income		2,075		1,472		3,547		2,892		3,236		6,128

INTEREST EXPENSE:

Interest Bearing
Demand Deposit Accounts		81		146		227		-334		1,378		1,044

Savings Deposits		-22		6		-16		29		94		123

Time Deposits		1,141		832		1,973		1,186		1,651		2,837

Borrowed Funds		-199		191		-8		455		157		612

Total Interest Expense		1,001		1,175		2,176		1,336		3,280		4,616

NET INTEREST INCOME		1,074		297		1,371		1,556		-44		1,512

Non-Interest Income and Non-Interest Expense Non-interest expense increased by 11.48% from 2005 to 2006 and increased by 7.64% from 2006 to 2007, primarily because of increases in salaries and employee benefits. Increases in non-interest expense is supported by the decision to provide a new state of the art facility for the Robinsonville Branch. The increase also signifies the move by Security Capital Corporation into an additional location in Desoto County that required expenditures for banking facilities as well as training employees to perform the operational procedures. Security Capital Corporation, in providing state of the art buildings in its Desoto County locations, has addressed the needs of its staff and of the increase in business as well as presented an attractive banking establishment for its customers. With the establishment of a new facility, other costs are involved such as the purchase of new equipment and the increase in the maintenance costs of the equipment. In addition to the increase in employees, salaries and employee benefits normally increase in a range from 3% to 7% dependent on the profits and the attainment of performance goals.

For 2005, non-interest income increased by $494,000 from 2004 to 2005, primarily in the area of service charges. Reflected in the 2006 non-interest income is the gain from the sale of property. In 2006, a gain of $406,000 was due to the sale of a building that previously housed the trust services and a vacant lot that was identified as other real estate. The other components of non-interest income in 2006 reflect a steady increase attributable to the growth of the business. For 2007, non-interest income included the recognition of an other-than-temporary loss of $448,000 in the available-for sale securities.

The following table provides details on non-interest income and expense for the Years ended December 31, 2005 through 2007.

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

	2007		2006		2005
Non-Interest Income:
Trust Department Income		1,068		1,038		978
Service Charges: Deposits		5,152		4,592		4,333
Other Operating Income		629		1,296		840

Total Non-Interest Income		6,849		6,926		6,151

Non-Interest Expense:
Salaries & Employee Benefits		10,141		9,276		8,588
Occupancy Expense		2,302		1,888		1,553
Other Operating Expense		3,095		3,271		2,807

Total Non-Interest Expense		15,538		14,435		12,948

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. The continuing loan growth is primarily due to Security Capital Corporation’s move to a market area that is experiencing rapid growth in the building of residential and commercial structures. Real Estate Loans and Commercial Loans comprise the largest segment of the loan portfolio. Commercial loans which bear a higher degree of risk comprise 5.89% of the loan portfolio at December 31, 2007. Agricultural loans, another type of loan that carries a higher degree of risk, are only 1.89% of the loan portfolio at December 31, 2007.

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 Officer. All loans made above $25,000 will be presented by the officer originating the loan to a committee of loan officers for a review of the maker(s), the repayment ability, source of repayment, type and sufficiency of collateral and length of repayment. The loans reviewed will be 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 Officer or the President or the Board of Directors or by a combined lending authority with another loan officer. All loans or lines of credit over $250,000 must be pre-approved by the Directors Loan Committee.

Collateral and Documentation Requirements

All loans must have an ample margin of safety between the loan advance and the current fair value of the collateral. The benchmark, under normal circumstances, is loan advances for all types of loans and should not exceed 80% of the current fair value of the collateral. However, decisions of judgment are needed in special circumstances and this percentage may be reduced by the abnormality/unusual nature 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 the First Security Bank, a staff provides loan management with periodic reports highlighting loan accounts requiring additional documentation. 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 are normally considered a low risk due to the required strength in collateral. Agricultural loans mandate an extensive review of the customer’s farming tract 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 is 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. However, up to $10,000 may be extended without the pledging of the collateral but must be based on the creditworthiness of the loan applicant. 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 the loan portfolio will not represent an 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. To keep abreast of the loan concentrations, a tracking of individual borrowers, related groups of borrowers and industry groups as well as geographical locations is compiled in a quarterly report that is presented to the Directors Loan Committee.

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

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

Table 5 - Loans by Type
(in thousands)

	2007		2006		2005		2004		2003
Commercial, Financial & Agricultural		39,135		38,349		30,826		28,077		32,878
Real Estate - Construction & Development		124,714		105,545		86,404		49,189		37,116
Real Estate - Mortgage		151,998		153,525		149,602		124,911		103,348
Installment Loans to Individuals		24,624		26,858		28,833		29,898		28,529
Other		2,718		2,381		2,280		2,328		2,553

Total Loans		343,189		326,658		297,945		234,403		204,424

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		28,343			10,247			545			39,135
Construction and development		112,462			12,112			140			124,714
		140,805			22,359			685			163,849

Repricing frequency of loan types above:
Fixed Rate		42,915			15,546			348			58,809
Variable Rate		97,890			6,813			337			105,040

Total		140,805			22,359			685			163,849
Percent of Total		85.94	%		13.65	%		0.41	%		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 maintains a comprehensive 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)
	2007			2006			2005			2004			2003
Balance at
Beginning of Year		4,334			3,899			3,598			3,665			3,455

Loans Charged-Off
Commercial, Financial & Agricultural		92			105			250			242			146
Real Estate - Construction & Development		202			35			20			6			4
Real Estate - Mortgage		76			44			313			225			69
Installment Loans to Individuals		2,025			1,017			971			655			167
Other		5			13			63			-			324
Total Charge-Offs		2,400			1,214			1,617			1,128			710

Charge-Off Recovered
Commercial, Financial & Agricultural		10			8			23			2			36
Real Estate - Construction & Development		11			4			-			-			26
Real Estate - Mortgage		27			21			49			24			-
Installment Loans to Individuals		1,591			648			383			398			104
Other		1			3			23			-			208
Total Recoveries		1,640			684			478			424			374

Net Charge-Offs		760			530			1,139			704			336

Current Year Provision		1,155			965			1,440			637			546

Balance at End of Year		4,729			4,334			3,899			3,598			3,665

Loans at End of Year (Net of Allowance)		338,460			322,324			294,046			230,805			200,759

Ratio: Allowance to Loans		1.40	%		1.34	%		1.33	%		1.56	%		1.83	%

Average Loans		340,689			315,468			271,323			221,309			197,814

Ratio: Allowance to Average Loans		1.39	%		1.37	%		1.44	%		1.63	%		1.85	%

Ratio: Net Charge Offs to Average Loans		0.22	%		0.17	%		0.42	%		0.32	%		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)
	2007			2006			2005			2004			2003
Loans:
Non-accrual		1,043			819			15			172			78

90 Days+ Past-Due		1,725			1,489			786			724			629

Total Nonperforming Loans		2,768			2,308			801			896			707
As % of Total Loans		0.81	%		0.71	%		0.27	%		0.38	%		0.35	%

Other Real Estate		716			365			558			165			129
As % of Total Loans		0.21	%		0.11	%		0.19	%		0.07	%		0.06	%

Loan Loss Reserve		4,729			4,334			3,899			3,598			3,665

Loan Charge-Offs		2,400			1,214			1,617			1,128			710

Total Loans		343,189			326,658			297,945			234,403			204,424

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

The loan portfolio contained $1,043 thousand in non-accrual loans represented by ten loans and an aggregate of $1,726 thousand of 90 days past due and over as of December 31, 2007. If the non-accrual loans had been performing loans during the 2007 period, interest income would have shown an addition of $39 thousand. The 90 days and over past due loans, classified as being well-secured and capable of being collected, were not subject to a non-accrual status and interest is accrued and recognized daily as income. The interest income recognized in 2007 for the loans classified as 90 days and over past due at December 31, 2007, totaled $131 thousand.

Potential Problem Loans

As of December 31, 2007, 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.

Management believes loans classified for regulatory purposes as loss, doubtful, or substandard that are not included in nonperforming or impaired loans do not represent or result from trends or uncertainties which will have a material impact on future operating results, liquidity, or capital resources.

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 significant 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, 2007, Security Capital Corporation in its Loan Loss Reserve Analysis classified $20,910,719 with a rating of Watch, $1,519,362 with a rating of Substandard, and $1,091,665 with a rating of Doubtful.

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 is substantial or that extends the life of the asset are capitalized.

An analysis of the loan portfolio and the loan loss reserve or allowance is conducted on a quarterly basis by the President and loan administrators and approved by the Board of Directors to insure that the bank is well protected against any potential and/or unexpected loan losses. To arrive at the proper grades or classifications needed in the loan loss reserve 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 reserve will fluctuate from quarter to quarter due to the loan portfolio performance being monitored.

The composition of the allowance or reserve 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 of 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 more reserves. Agricultural loans, by the nature of the purpose and the unforeseen elements in the farming process, complete the loans identified as having more than the normal risks.

Table 8A - Allocation of the Allowance for Loan Losses
(Dollars in thousands)
	At December 31,
	2007					2006					2005					2004					2003
	Amount		Percent			Amount		Percent			Amount		Percent			Balance		Percent			Balance		Percent

Commercial, Financial
& Agricultural	$	547		11.57	%	$	590		13.61	%	$	401		10.28	%	$	538		14.95	%	$	856		23.36	%

Real Estate - Construction
& Development		1,758		37.17	%		913		21.07	%		865		22.19	%		522		14.51	%		461		12.58	%

Real Estate - Mortgage		1,558		32.95	%		1,922		44.35	%		1,906		48.88	%		1,735		48.22	%		1,533		41.83	%

Installment Loans
to Individuals		770		16.29	%		460		10.61	%		575		14.75	%		780		21.68	%		732		19.97	%

Other Loans		95		2.01	%		413		9.53	%		152		3.90	%		23		0.64	%		26		0.71	%

Unallocated		-		0.00	%		36		0.83	%		-		0.00	%		-		0.00	%		57		1.56	%

Total Loans	$	4,729		100.00	%	$	4,334		100.00	%	$	3,899		100.00	%	$	3,598		100.00	%	$	3,665		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 collect-ability 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 collect-ability 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 collect-ability 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.

Due to the growth in the loan portfolio from $187.5 million to $204.4 million during 2003, the loan portfolio analysis required an increase in the loan loss reserve. The allocation for doubtful loans reflected an increase of $17 thousand primarily due to using a specific allocation for a projected loss. A specific allocation is a deficiency when the balance of the loans exceeds the market value of the collateral. The loan loss reserve at December 31, 2003, was allocated as follows: substandard loans, $166 thousand; doubtful loans, $25 thousand; bankruptcy loans, $439 thousand; credit card loans, $38 thousand; agricultural loans, $575 thousand; consumer loans without real estate collateral, $540 thousand; watch loans, $260 thousand; and the remainder of the adjusted loan portfolio, $1,622 thousand.

At December 31, 2004, the loan loss reserve reflected a small decrease of $67 thousand from the previous year. The loan loss reserve at December 31, 2004, was composed of the following: substandard loans, $160 thousand; an allocation for deemed uncollectible doubtful loans, $113 thousand; bankruptcy loans, $448 thousand; credit card loans, $49 thousand; agricultural loans, $288 thousand; consumer loans without real estate collateral, $558 thousand; watch loans, $202 thousand; and the remainder of the adjusted loan portfolio, $780 thousand.

The loan loss reserve at December 31, 2005, showed an increase of $291 thousand from the previous year, which can be justified by the increase in the loan portfolio. The loan loss reserve at December 31, 2005, was represented by substandard loans ($195 thousand), doubtful loans ($5 thousand), bankruptcy loans ($577 thousand), credit card loans ($42 thousand), agricultural loans ($145 thousand), consumer loans without real estate collateral ($543 thousand), watch loans ($301 thousand) and the remainder of the adjusted loan portfolio ($1,992 thousand). In the third and fourth quarter of 2005, management looked intently at the adequacy of the loan loss reserve with the loan losses of $1.4 million being recognized for the year. Analysis at the close of 2005 of the loan loss reserve considered loan growth in specific market areas, and potential problem accounts forecasted changes in the allocation and methodology in the loan loss reserve calculations.

At December 31, 2006, the loan loss reserve reflected a growth of approximately $435 thousand from December 31, 2005. The allocation for substandard loans, which increased from 2005 by $341 thousand, remained basically unchanged at approximately $180 thousand due to the change in the historic percentage. Bankruptcy loans decreased by approximately $1,064 thousand and caused a decrease in its loan loss reserve allocation of $235 thousand. The loans classified as watch loans increased by approximately $2.9 million. This increase created an increase in the watch loans allocation by $447 thousand. The allocation for doubtful loans increased by $372 thousand in 2006, attributable to an increase in the level of doubtful loans and the estimated loss. The doubtful loans grew from $14 thousand in 2005 at an estimated loss of $5 thousand to $822 thousand in 2006 at an estimated loss of $377 thousand. The loan loss reserve for December 31, 2006, also includes consideration and allocation as follows: construction loans of $31.6 million, $316 thousand, commercial real estate loans of $74.7 million, $374 thousand; nonfarm/nonresidential loans of $91.1 million, $228 thousand and economic factors based on loans of $327 million, $819 thousand.

The loan loss reserve 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.

Loan charge offs in 2005 and 2006 were $1,617 and $1,214 thousand, respectively, reflecting an increase over the average loan charge offs of $1,152 thousand for the period of 2003 through 2005. This continuing level in loan charge offs mandates the need to maintain the status in the provisions for the Allowance for Loan Losses for 2005 and 2006, of $1,440 thousand and $965 thousand respectively. The significant increase in 2005 from 2004 of $803 in the provision is the resulting action of a continuing analysis of problem loans, a readiness to recognize losses, and a dedication to maintain a sufficient level of a reserve. The provisions in 2006 continued that dedication of maintaining the allowance based on historic experience and current trends. The latest regulatory exam as of September 30, 2005, however, classified $1.9 million of loans as substandard, up from $1.6 million as reflected in the regulatory exam as of December 31, 2003. This increase will be a gauge in the analysis of needed loan provisions. Recoveries reflected an increase in 2006 from $478 thousand to $684 thousand as a result of the diligent efforts by loan and deposit personnel to regain principal from the classified loan activity. 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 increase in recoveries indicates the readiness of the bank staff in follow-up procedures to recover losses. 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. The recoveries for the same classification increased from $648 thousand to $1.6 million from 2006 to 2007.

The ratio of the Allowance for Loan Losses to Loans for the years presented reflects a range from a low of 1.33% in 2005 to a high of 1.83% in 2003.

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)
	2007		2006		2005		2004		2003
Securities Available for Sale
U. S. Treasuries				-		-		-		702
U. S. Agencies		1,536		5,441		11,175		23,316		28,560
Mortgage Backed		34,452		20,915		20,872		22,419		9,611
State, Municipals & Other		30,168		34,672		46,902		50,934		37,447
Total Securities AFS		66,156		61,028		78,949		96,669		76,320

Securities Held to Maturity
U. S. Treasuries				-		-		-		-
U. S. Agencies				-		-		-		-
Mortgage Backed				-		-		-		-
State, Municipals & Other		7,235		7,850		2,047		2,050		2,053
Total Securities HTM		7,235		7,850		2,047		2,050		2,053

Other Securities
Equities		2,028		2,250		1,456		1,259		991

Total Securities		75,419		71,128		82,452		99,978		79,364

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 Maturity & Repricing Schedule
For 12/31/2007
(in thousands)
	1 Year		After 1 Year		5 to 10		Over
	and Less		Thru 5 Years		Years		10 Years
Agencies
Fair Value		-		1,536		-		-
Book Yield		-		5.150		-		-

Taxable Municipals
Fair Value		149		118		115		-
Book Yield		6.926		4.840		4.831		-

Municipals
Fair Value		3,083		13,071		9,474		11,599
Book Yield		5.956		5.796		6.408		7.225


Equity-FHLB		-		-		-		1,524
Book Yield								5.080

Other Securities		-		-		-		504

MBS
Fair Value		-		-		-		34,453
Book Yield								5.518

Total Fair Values		3,232		14,725		9,589		48,080
Weigh Bk Yields		5.730		5.790		6.390		5.840

Table 11 - Securities Weighted Maturity and Tax Equivalent Yield by Classification
December 31, 2007
				Weighted
	Weighted			Tax-Equivalent
	Maturity			Yield
U. S. Agencies		2.82			5.150	%
Mortgage Backed		5.73			5.520	%
Taxable Municipals		3.28			5.710	%
Tax-Exempt Municipals		7.02			6.410	%

Total Securities Portfolio		6.310	%		5.950	%

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, 2007. Security Capital Corporation does not use off-balance sheet derivative financial instruments as defined in Statement of Financial Accounting Standards No. 119, “Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments.”

The securities investment was increased as investment decisions favored securities investments when adequate loan funding was maintained. In 2005 and 2006, the securities portfolio decreased as the loan demand increased without an echo of the same increase in the deposits. In 2007, the investment in securities increased by $4.3 million. The securities portfolio in 2007 reflected a significant activity due to the adoption of the fair value accounting pronouncements with sales and purchases resulting.

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)
	2007				2006				2005				2004				2003
	Average		Avg		Average		Avg		Average		Avg		Average		Avg		Average		Avg
	Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate		Balance		Rate
Noninterest- Bearing
Demand		56,816				58,635				57,954				51,557				47,034
Savings		251				242				245				241				226
Interest-bearing
Demand		135,369		2.76		132,447		2.65		145,036		1.70		123,215		1.04		93,409		1.00
Savings		29,932		1.52		31,363		1.50		29,420		1.18		26,663		1.05		22,780		1.13
Time Deposits		168,032		4.86		144,549		4.27		117,127		2.86		114,125		1.95		114,998		2.11
		390,400				367,236				349,782				315,801				278,447

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.

Table 13 - Maturity Ranges of Time Deposits
With Balances More Than $100,000
As of December 31, 2007
(in thousands)

3 Months or Less	$	41,210
Over 3 Months thru 6 Months		21,829
Over 6 Months thru 12 Months		24,012
Over 12 Months		3,248
		90,299

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, 2007, Security Capital Corporation’s short-term borrowings consisted of $389,885 of the Treasury Tax and Loan open-end note and $1,000,000 of the $23,082,000 borrowed from the Federal Home Loan Bank. As of December 31, 2006, the short-term borrowings were composed of $1,443,000 in the Treasury, Tax and Loan open-end note and $14,000,000 of the $25,937,000 borrowed from the Federal Home Loan Bank. Security Capital Corporation foresees short-term borrowings to be a continued source of liquidity and will continue to use these borrowings as a method to fund short-term needs.

At the end of 2006 and 2007, Security Capital Corporation had long-term debt in the amount of $11,937,000 and $22,082,000, respectively. Scheduled principal payments of $1,655 thousand are due to the Federal Home Loan Bank in 2008. The rates on the debt with Federal Home Loan Bank as of December 31, 2007, ranged from 2.790% to 5.810% with the maturities ranging to 2032. The maximum month-end balance during 2007 with Federal Home Loan Bank occurred at the end of January with the balance of $31,095,844. For 2007, the average outstanding long-term balance was $16,291,211 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 thru 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, 2007, the coverage ratio was 4.58. Of this ratio, the calculated reserves or the source for cash was $180.0 million which would be needed to meet the demand of the identified volatile liabilities and unused loan commitments of $23.9 million and $15.4 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, 2007, was 1.74. The identified reserves for a crisis ratio totaled $128.5 million and the volatile liabilities and unused loan commitments totaled $74.0 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, 2007, was in compliance with the policy limit of 15% with a ratio of 16.0%. This ratio measures the net cash and short-term marketable assets of $56.9 million to the net deposits and short-term liabilities of $356.2 million. The corporation’s dependency ratio of 18.91% was in compliance with the policy ratio of 20.0% at December 31, 2007. 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, 2007, we had outstanding loan origination commitments and unused commercial and commercial and retail lines of credit of $51.3 million. Letters of credit commitments totaling $18.9 million consisted of financial standby letters of credit of $11.9 million, performance standby letters of credit of $2.1 million and commercial letters of credit of $4.9 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 $158 million at December 31, 2007. 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 formulatestrategies 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 and Reporting; 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 Risk and Yield Curve/Basis Risk. Repricing Risk is the difference in the timing of the assets and the liabilities due to either maturities 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 to measure the short and long term pricing imbalances for a given period. The broad guidelines set by Security Capital Corporation 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, 2007, data projecting for the period ending December 31, 2008,

reflected the net interest income at $22.2 million. Return on Assets and Return on Equity at 1.81% and 15.45%, respectively, compare to December 31, 2007, actuals at 1.54% and 13.44%, respectively. The model for December 31, 2007 remains consistently neutral to changes in rates. In the current model, the net interest margin remains basically the same in the 200 ramp up and in the up 100 ramp. For the 200 ramp down and the 100 ramp down, the model reflects a small change with the largest drop of .08% occurring in the down 200. The Economic Value of Equity increased 13.1% in the up 200 ramp. The down 200 ramp results in a decrease to net interest income of 14.8% which is well within the policy limit of 30%. As rates move down 100 basis points we see a small decrease in net interest income of $21 thousand. The model shows if rates continue to tighten, the risk to earnings to 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.

In 2005, the funds provided by operations totaled $5.8 million. The increase in loans of $63.6 million demanded funding from the redemption of federal funds sold of $14 million, an increase in borrowings of approximately $19 million (which includes federal funds purchased), and an increase in deposits of $21.3 million. Other uses of fundings were a $2 million purchase of bank owned life insurance, $2.6 million in dividends paid, and a $4.5 million capitalization for premises. A net decrease of $9.4 million between purchases and maturities in investment in securities assisted in providing for the expenditures in 2005.

Along with the funds provided by operations of $8.2 million in 2006, the cash available for use was provided by an increase of deposits of $11.9 million and a net increase of borrowings of $13.2 million. These funds were used to provide for an increase in loan demand of $28.7 million, the paying of a cash dividend of $2.7 million, and the addition of buildings and equipment of $4.6 million.

In addition to the funds provided by operations of $10.5 million in 2007, the increase of deposits by $22.0 million provided for the source of funding for the loan advances of $16.6 million and the repayment of federal funds purchased of $4.0 million. Funds from the sales and maturities of securities of $29.6 million assisted providing the funding for the investments of premises and equipment of $2.3 million and the purchase of securities of $35.0 million in 2007.

Table 14 - Funding Uses and Sources details the main components of cash flows for 2005 thru 2007.

Table 14 - Funding Uses and Sources
(in thousands)
	2007			2006			2005
		Increase			Increase			Increase
	Average	(Decrease)	%	Average	(Decrease)	%	Average	(Decrease)	%
	Balance	Amount	Change	Balance	Amount	Change	Balance	Amount	Change
Funding Uses
Loans	340,689	25,221	7.99	315,468	44,145	16.27	271,323	50,014	22.60
Securities*	72,654	-6,332	-8.02	78,986	-13,693	-14.77	92,679	-3,540	-3.68
Federal Funds Sold	2,903	1,067	58.12	1,836	-1,731	-48.53	3,567	-921	-20.52
	416,246	19,956	5.04	396,290	28,721	7.81	367,569	45,553	14.15

Funding Sources
Noninterest Bearing Deposits
Demand Deposits	56,816	-1,819	-3.10	58,635	681	1.18	57,954	6,397	12.41
Savings Deposits	251	9	3.72	242	-3	-1.22	245	4	1.66
Interest Bearing Deposits
Demand Deposits	135,369	2,922	2.21	132,447	-12,589	-8.68	145,036	21,821	17.71
Savings Deposits	29,932	-1,431	-4.56	31,363	1,943	6.60	29,420	2,757	10.34
Time Deposits	168,033	23,484	16.25	144,549	27,422	23.41	117,127	3,002	2.63
Borrowings	23,710	-3,523	-12.94	27,233	9,195	50.98	18,038	9,311	106.69
	414,111	19,642	4.98	394,469	26,649	7.25	367,820	43,292	13.34

*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, 2007
	Less			Over 3 Mos			Over 1 yr			Over
	3 Mos			thru 1 Yr			thru 3 Yrs			3 Yrs			Total
Interest Earning Assets
Loans		166,954			103,957			49,241			23,038			343,190
Short-Term Investments		198			-			-			-			198
Investment Securities		5,208			11,587			18,435			40,189			75,419
Other		-			-			-			5,970			5,970
Total Interest Earning Assets		172,360			115,544			67,676			69,197			424,777

Interest Bearing Liabilities
NOW		21,727			-			6,368			38,747			66,842
Money Market		42,761			-			2,706			15,800			61,267
Savings Deposits		11,995			-			2,108			12,794			26,897
Time Deposits		61,328			96,433			5,581			12,463			175,805
Short-Term Borrowings					1,000			-			-			1,000
Long-Term Borrowings		164			491			4,404			17,023			22,082
Total Interest Bearing Liabilities		137,975			97,924			21,167			96,827			353,893

Rate Sensitive Assets (RSA)		172,360			287,904			355,580			424,777			424,777
Rate Sensitive Liabilities (RSL)		137,975			235,899			257,066			353,893			353,893
Rate Sensitive Gap		34,385			17,620			46,509			-27,630			70,884
Rate Sensitive Cumulative Gap		34,385			52,005			98,514			70,884			70,884
Cumulative % of Earning Assets		8.09	%		12.24	%		23.19	%		16.69	%		16.69	%
Cumulative % of Total Assets		10.11	%		15.28	%		28.95	%		20.83	%		20.83	%

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, 2007, and December 31, 2006, 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, 2007		at December 31, 2006
	Dollar	%	Dollar	%
Changes in Levels of Interest Rates	Change	Change	Change	Change

Increase 2.00%	($57)	-0.30%	$3	0.00%
Increase 1.00%	(7)	0.00%	(21)	-0.01%
Decrease 1.00%	(27)	-0.10%	210	1.10%
Decrease 2.00%	(332)	-1.50%	269	1.40%

As of December 31, 2006, the neutral status is evident as reflected in the projected .00% decrease in the up 200 ramp. The down 200 ramp as of December 31, 2006, results in an increase to net interest income of 1.40%, well within the policy limit of (10%). Analysis of the simulation presented indicates as of December 31, 2007, there is some short term interest rate risk due to the projected decrease in net interest income of 1.50% in a down 200 basis point rate ramp. At December 31, 2007, the model reflected compliance with the policy limit.

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, 2007, 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 increased the amount of dividends paid to $2,881,809 in 2007, compared to $2,743,770 in 2006, an increase of $138,039 or 5.03%.

Table 16 - Capital Ratios
(Dollars in thousands)

	As of December 31,
	2007		2006		2005
Tier 1 Capital

Total Tier 1 Capital		53,106		48,151		43,568

Total Capital
Tier 1 Capital		53,106		48,151		43,568
Allowable Allowance for Loan Losses		4,699		4,334		3,899

Total Capital		57,805		52,485		47,467

Risk Weighted Assets

Net Average Assets		480,244		454,841		426,707

Total Risk Weighted Assets		377,859		356,670		330,071

Risk Based Ratios
Tier 1 Leverage Ratio		11.06		10.59		10.21
Tier 1 Risk Based Capital Ratio		14.05		13.50		13.20
Total Risk Based Capital Ratio		15.30		14.72		14.38

Off-Balance Sheet Arrangements

The Company's primary off-balance sheet arrangements are in the form of loan commitments. At December 31, 2007 the Company had $38.0 million in unused loan commitments outstanding. Of these commitments, $24.0 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 borrower's business and are usually related to the acquistion 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 stanby 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, 2007 the Company had, issued and outstanding, $5 million in commercial letters of credit, $12 million in financial standby letters of credit, and $2 million in performance standby letters of credit.

At December 31, 2007, there was $40 million in standby letters of credit issued on the Company's behalf by a Federal Home Loan Bank. At December 31, 2006, there was $25 million in standby letters of credit issued on the Company's behalf by a Federal Home Loan Bank. The Company uses 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	$	23,082	$	1,655	$	4,404	$	9,538	$	7,485

Capital Lease Obligations		-		-		-		-		-

Operating Lease Obligations		51		10		20		21		-

Purchase Obligations		-		-		-		-		-

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

Total	$	23,133	$	1,665	$	4,424	$	9,559	$	7,485

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

SECURITY CAPITAL CORPORATION

SELECTED FINANCIAL DATA

YEARS ENDED DECEMBER 31,

	2007		2006		2005		2004		2003
	(In thousands, except per share data)
INCOME DATA
Interest and fees on loans	$	30,283	$	27,013	$	20,570	$	15,042	$	13,584
Interest and dividends on securities		3,403		3,294		3,643		3,826		3,256
Other interest income		447		279		245		224		169
Total interest income		34,133		30,586		24,458		19,092		17,009
Interest expense		13,699		11,523		6,907		4,139		3,955
Net interest income		20,434		19,063		17,551		14,953		13,054
Provision for loan losses		1,155		965		1,440		637		546
Net interest income after provision for
loan losses		19,279		18,098		16,111		14,316		12,508
Service charges on deposit accounts		5,152		4,592		4,333		3,876		3,758
Other income		1,697		2,334		1,818		1,781		1,908
Total noninterest income		6,849		6,926		6,151		5,657		5,666
Salaries and employee benefits		10,141		9,276		8,588		7,607		6,649
Occupancy and equipment expense		2,302		1,888		1,553		1,236		1,311
Other expenses		3,095		3,271		2,807		2,567		2,658
Total noninterest expenses		15,538		14,435		12,948		11,410		10,618

Income before income taxes		10,590		10,589		9,314		8,563		7,556
Income taxes		3,155		3,349		2,707		2,431		2,039

Net income	$	7,435	$	7,240	$	6,607	$	6,132	$	5,517

PER SHARE DATA (1)
Net income - basic	$	2.58	$	2.51	$	2.29	$	2.13	$	1.92
Dividends

Other Ratios:
Return on Average Assets		1.54		1.58		1.57		1.65		1.66
Return on Equity		13.44		14.36		14.16		14.22		13.73
Loans to Deposits		88.28		89.08		83.98		70.29		70.87
Loans to Total Assets		72.02		71.27		68.36		60.06		60.08
Equity Capital to Total Assets		11.95		11.34		10.83		11.24		12.01
Average Equity to Average Assets		11.43		10.99		11.12		11.61		12.12
Dividend Payout Ratio		38.76		37.90		39.52		40.52		40.66

FINANCIAL DATA
Total assets	$	476,530	$	458,329	$	435,876	$	390,274	$	340,253
Net loans		338,460		322,324		294,046		230,805		200,759
Total deposits		388,733		366,669		354,766		333,458		288,442
Total shareholders' equity		56,939		51,984		47,187		43,870		40,848

(1)	Restated for stock dividends

952131.1/13193.16317

SECURITY CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006

ASSETS	2007		2006
	(In thousands)
Cash and due from banks	$	19,163	$	23,073
Interest-bearing deposits with banks		643		374
Total cash and cash equivalents		19,806		23,447
Certificates of deposit with other banks		198		198
Securities available-for-sale		66,156		61,028
Securities held-to-maturity (estimated fair value		7,235		7,850
(of $7,442 in 2007 and $8,150 in 2006)
Securities, other		2,028		2,250
Total securities		75,419		71,128
Loans, less allowance for loan losses of
$4,730 in 2007 and $4,334 in 2006		338,493		322,324
Interest receivable		6,158		5,091
Premises and equipment		23,072		21,969
Goodwill		3,874		3,874
Cash surrender value of life insurance		6,075		5,869
Customers' liability on acceptances		1,058		2,293
Other assets		2,377		2,136
Total Assets	$	476,530	$	458,329

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits	$	58,373	$	59,380
Interest-bearing deposits		330,360		307,319
Total deposits		388,733		366,699
Interest payable		1,953		1,591
Acceptanes outstanding		1,058		2,293
Federal funds purchased		4,000		8,000
Borrowed funds		23,472		27,380
Other liabilities		375		382
Total liabilities		419,591		406,345
Shareholders' equity:
Common stock - $5 par value, 5,000,000 shares
authorized, 2,890,811 shares and 2,753,557
shares in 2007 and 2006, respectively		14,454		13,768
Surplus		40,701		35,654
Retained earnings		1,502		2,651
Treasury stock, at par, 8,852 shares and 9,487
Total shareholders' equity		56,939		51,984
Total Liabilities and Shareholders' Equity	$	476,530	$	458,329

The accompanying notes are an integral part of these statements.

952131.1/13193.16317

SECURITY CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

	2007			2006			2005
	(In thousands, except per share data)
INTEREST INCOME
Interest and fees on loans	$	30,283		$	27,013		$	20,570
Interest and dividends on securities:
Taxable		1,772			1,596			1,705
Tax-exempt		1,631			1,698			1,938
Other		447			279			245
Total interest income		34,133			30,586			24,458

INTEREST EXPENSE
Interest on time deposits of $100,000 or more		4,229			3,101			1,452
Interest on other deposits		8,130			7,048			4,712
Interest on borrowed funds		1,340			1,374			743
Total interest expense		13,699			11,523			6,907

Net interest income		20,434			19,063			17,551

Provision for loan losses		1,155			965			1,440
Net interest income after provision for loan losses		19,279			18,098			16,111

OTHER INCOME
Service charges on deposit accounts		5,152			4,592			4,333
Other service charges and fees		415			647			388
Trust Department income		1,068			1,038			978
Securities gains (losses), net		(448	)		(253	)		(52	)
Gains (losses) on sale of other assets, net		117			454			67
Other		545			448			437
Total other income		6,849			6,926			6,151

OTHER EXPENSE
Salaries and employee benefits		10,141			9,276			8,588
Net occupancy expense		1,114			1,020			801
Furniture and equipment expense		1,188			868			752
Printing, stationery, and supplies		347			348			250
Data processing		192			366			301
Directors' fees		301			274			259
Professional fees		333			191			143
Other		1,922			2,092			1,854
Total other expense		15,538			14,435			12,948

Income before income taxes		10,590			10,589			9,314
Income taxes		3,155			3,349			2,707

Net income	$	7,435		$	7,240		$	6,607

Basic net income per share	$	2.58		$	2.51		$	2.29

The accompanying notes are an integral part of these statements.

SECURITY CAPITAL CORPORATION
CONSOIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005

															Accumulated
															Other
	Comprehensive			Common					Retained			Treasury			Comprehensive
	Income			Stock		Surplus			Earnings			Stock			Income			Total

Balance, December 31, 2004				$	12,493	$	27,826		$	3,106		$	(65	)	$	510		$	43,870

Comprehensive income:
Net income for 2005	$	6,607			-		-			6,607			-			-			6,607
Net change in unrealized gain (loss) on
securities available-for-sale, net of tax		(765	)		-		-			-			-			(765	)		(765	)
Comprehensive income	$	5,842

Cash dividends paid					-		-			(2,612	)		-			-			(2,612	)
5% stock dividend					621		3,477			(4,098	)		-			-			-
Purchase of fractional shares					-		(13	)		-			(2	)		-			(15	)
Reissuance of treasury stock					-		90			-			12			-			102

Balance, December 31, 2005				$	13,114	$	31,380		$	3,003		$	(55	)	$	(255	)	$	47,187

Comprehensive income:
Net income for 2006	$	7,240			-		-			7,240			-			-			7,240
Net change in unrealized gain (loss) on
securities available-for-sale, net of tax		214			-		-			-			-			214			214
Comprehensive income	$	7,454

Cash dividends paid					-		-			(2,744	)		-			-			(2,744	)
5% stock dividend					654		4,194			(4,848	)		-			-			-
Purchase of fractional shares					-		(15	)		-			(3	)		-			(18	)
Reissuance of treasury stock					-		95			-			10			-			105

Balance, December 31, 2006				$	13,768	$	35,654		$	2,651		$	(48	)	$	(41	)	$	51,984

Comprehensive income:
Net income for 2007	$	7,435			-		-			7,435			-			-			7,435
Net change in unrealized gain (loss) on
securities available-for-sale, net of tax		367			-		-			-			-			367			367
Comprehensive income	$	7,802

Cash dividends paid					-		-			(2,882	)		-			-			(2,882	)
5% stock dividend					686		5,016			(5,702	)		-			-			-
Purchase of fractional shares					-		(19	)		-			(2	)		-			(21	)
Purchase of treasury stock					-		(4	)		-			-			-			(4	)
Reissuance of treasury stock					-		54			-			6			-			60

Balance, December 31, 2007				$	14,454	$	40,701		$	1,502		$	(44	)	$	326		$	56,939

The accompanying notes are an integral part of these statements.

SECURITY CAPITAL CORPORATON
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005


	2007			2006			2005
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES

Net income	$	7,435		$	7,240		$	6,607
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses		1,155			965			1,440
Amortization of premiums and discounts on
securities, net		93			277			601
Depreciation and amortization		1,157			1,003			880
Deferred income taxes		51			78			(24	)
FHLB stock dividend		(76	)		(67	)		(38	)
(Gain) loss on sale of securities, net		448			253			52
(Gain) loss on sale of other assets, net		(117	)		(454	)		(67	)
Changes in:
Interest receivable		(1,067	)		(1,076	)		(877	)
Cash value of life insurance, net		(206	)		(199	)		(194	)
Other assets		(8	)		(1,496	)		(4,550	)
Interest payable		362			579			443
Other liabilities		1,242			1,140			1,569

Net cash provided by operating activities		10,469			8,243			5,842

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available-for-sale		(34,088	)		(5,622	)		(19,284	)
Proceeds of maturities and calls of securities
available-for-sale		10,280			11,611			28,386
Proceeds from sales of securities available-for-sale		19,130			12,289			6,746
Proceeds of maturities and calls of held to maturity		210
Purchase of securities held to maturity		-			(5,803	)		-
Purchase of other securities		(865	)		(727	)		(158	)
Additions to premises and equipment		(2,311	)		(4,636	)		(4,545	)
Proceeds of sale of other assets		474			1,374			284
Purchase of bank-owned life insurance		-			-			(2,000	)
Changes in:
Loans		(18,219	)		(28,713	)		(63,629	)
Federal funds sold		-			-			14,000
Certificates of deposits with other banks		-			194			199

Net cash used in investing activities		(25,389	)		(20,033	)		(40,001	)

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid on common stock	$	(2,882	)	$	(2,744	)	$	(2,612	)
Purchase of treasury stock		(4	)		-			-
Reissuance of treasury stock		60			105			102
Purchase of fractional shares		(21	)		(18	)		(15	)
Repayment of debt		(48,943	)		(48,246	)		(8,948	)
Proceeds from issuance of debt		45,035			61,530			12,913
Changes in:
Deposits		22,034			11,933			21,308
Federal funds purchased		(4,000	)		(7,000	)		15,000


Net cash provided by financing activities		11,279			15,560			37,748

Net increase in cash and cash equivalents		(3,641	)		3,770			3,589

Cash and cash equivalents at beginning of year		23,447			19,677			16,088

Cash and cash equivalents at end of year	$	19,806		$	23,447		$	19,677

		19,806			23,447			19,677

Supplemental Disclosures of Cash Flow Information

Cash paid during the year for:
Interest	$	13,337		$	10,944		$	6,464
Income taxes		3,369			3,295			2,910

Noncash activities:
Transfers of loans to other real estate and
repossessed inventory		1,195			738			1,052

The accompanying notes are an integral part of these statements.

952131.1/13193.16317

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. Consolidation

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 subsidiary, First Security Insurance, Inc. (Insurance). Significant intercompany accounts and transactions have been eliminated.

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, and Southaven. The operations of the Building Corporation and Insurance 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 )

952131.1/13193.16317

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 value, 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, 2007 and 2006.

( Continued )

952131.1/13193.16317

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), First National Banker’s Bankshares, and Federal Agricultural Mortgage Corporation. Thetransferability of these stock holdings is restricted.

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 valuation of collateral supporting impaired

( Continued )

952131.1/13193.16317

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

6. Allowance for Loan Losses (Continued)

loans, estimated losses on pools of homogeneous loans based on historical loss 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 Financial Accounting Standards Board (FASB) Statement No. 5, Accounting for Contingencies, or FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan. 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.

952131.1/13193.16317

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. The Bank writes down other real estate annually in accordance with state banking regulations. 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 operating income or expenses. At December 31, 2007, and 2006, other real estate of $716,000 and $365,000, respectively, is included in other assets.

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 for each year. 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, 2007, there were no potential dilutive common shares. All weighted average, actual shares or per share information in the financial statements have been adjusted retroactively for the effect of stock dividends.

( Continued )

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

11. Net Income per Share (Continued)

Presented below is a summary of the components used to calculate basic net income per share for the years ended December 31, 2007, 2006, and 2005 (as restated for stock dividends):

	2007		2006		2005
	(In thousands, except per share data)
Basic Net Income Per Share

Weighted average common shares outstanding		2,882		2,880		2,879

Net income	$	7,435	$	7,240	$	6,607

Basic net income per share	$	2.58	$	2.51	$	2.29

12. Statement of Cash Flows

For purposes of reporting cash flows, 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 2007 and 2006 was approximately $251,000 and $267,000, respectively.

14. Goodwill

Prior to 2002, goodwill, representing the excess of the purchase price over the fair value of the net assets of the acquired entities, was being amortized on a straight-line basis over the period of expected benefit of 15 years. Effective January 1, 2002, the Corporation and its subsidiaries adopted the provisions of FASB No. 142, Goodwill and Other Intangible Assets. Under this statement, goodwill is no longer amortized over its estimated useful life, but 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.

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.

( Continued )

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 Statement No. 131, Disclosures About Segments of an Enterprise and Related Information, 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

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies whenever assets or liabilities are required or permitted to be measured at fair value under currently existing standards. No additional fair value measurements are required under this Statement. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those years but earlier adoption is permitted. The Corporation adopted SFAS 157 in 2007 and complied with the requirements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Earlier adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of FASB Statement No. 157, Fair Value Measurements. The Corporation adopted SFAS 159 in 2007.

( Continued )

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

18. Accounting Pronouncements (Continued)

Emerging Issues Task Force (“EITF”) Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements. EITF 06-4 requires the recognition of a liability and related compensation expense for endorsement split-dollar life insurance policies that provide a benefit to an employee that extends to post-retirement periods. Under EITF 06-4, life insurance policies purchased for the purpose of providing such benefits do not effectively settle an entity’s obligation to the employee. Accordingly, an entity must recognize a liability and related compensation expense during the employee’s active service period based on the future cost of insurance to be incurred during the employee’s retirement. If the entity has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the guidance in SFAS 106, Employer’s Accounting for Postretirement Benefits Other Than Pensions. The Corporation expects to adopt EITF 06-4 effective as of January 1, 2008 as a change in accounting principle through a cumulative-effect adjustment to retained earnings. The amount of the adjustment is not expected to be significant.

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, 2007 and 2006, was $406,000 and $269,000, respectively.

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2007 and 2006, follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(In thousands)
December 31,2007:
Securities available-for-sale:
U. S. Government agencies	$	1,491	$	45	$	-	$	1,536
Mortgage-backed securities		34,318		185		51		34,452
State and local political
subdivisions		29,827		383		42		30,168

	$	65,636	$	613	$	93	$	66,156

Securities held-to maturity:
State and local political
subdivisions	$	7,235	$	209	$	2	$	7,442

December 31, 2006:
Securities available-for-sale:
U. S. Government agencies	$	5,486	$	11	$	56	$	5,441
Mortgage-backed securities		21,170		35		290		20,915
State and local political
subdivisions		34,439		451		218		34,672

	$	61,095	$	497	$	564	$	61,028

Securities held-to maturity:
State and local political
subdivisions	$	7,850	$	327	$	27	$	8,150

( Continued )

952131.1/13193.16317

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C - SECURITIES (Continued)

The scheduled maturities of securities at December 31, 2007, are as follows:

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

Due in one year or less	$	3,000	$	3,012	$	220	$	220
Due after one year through five years		13,565		13,729		995		996
Due after five years through ten years		7,954		8,011		1,535		1,578
Due after 10 years		6,799		6,952		4,485		4,648
Mortgage-backed securities		34,318		34,452		-		-

	$	65,636	$	66,156	$	7,235	$	7,442

Investment securities with a carrying value of $38,555,000 and $32,408,000 at December 31, 2007 and 2006, respectively, were pledged to secure public and trust deposits and for other purposes as required or permitted by law.

Gross gains of $0 in 2007, $39,000 in 2006 and $53,000 in 2005, and gross losses of 448,000 in 2007, $292,000 in 2006 and $105,000 in 2005, were realized on securities available-for-sale.

The details concerning securities classified as available for sale with unrealized losses as of December 31, 2007 and 2006, 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
2007
U. S. Government
agencies	$	-	$	-	$	-	$	-	$	-	$	-
Mortgage-backed
securities		3,699		11		6,060		40		9,759		51
State and local political
subdivisions		3,696		19		2,296		23		5,992		42

	$	7,395	$	30	$	8,356	$	63	$	15,751	$	93

( Continued )

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C - SECURITIES (Continued)

	Losses < 12 Months				Losses 12 Months or >				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
2006
U. S. Government
agencies	$	-	$	-	$	3,939	$	56	$	3,939	$	56
Mortgage-backed
securities		5,203		20		13,218		270		18,421		290
State and local political
subdivisions		4,337		18		14,095		200		18,432		218

	$	9,540	$	38	$	31,252	$	526	$	40,792	$	564

The details concerning securities classified as held to maturity with unrealized losses as of December 31, 2007 and 2006, 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
2007
State and local political
subdivisions	$	-	$	-	$	693	$	2	$	693	$	2


2006
State and local political
subdivisions	$	-	$	-	$	1,538	$	27	$	1,538	$	27

As of December 31, 2007, approximately 20% 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,
	2007			2006
	(In thousands)
Commercial, financial and agricultural	$	39,135		$	38,349
Real estate - construction and development		124,714			105,545
Real estate - mortgage		151,998			153,525
Installment loans to individuals		24,624			26,858
Other		2,718			2,381
		343,189			326,658
Less allowance for loan losses		(4,729	)		(4,334	)
	$	338,460		$	322,324

Included in the above are customer demand deposits in overdraft status of approximately $975,000 at December 31, 2007, and $597,000 at December 31, 2006.

Transactions in the allowance for loan losses were as follows:

	Years Ended December 31,
	2004			2006			2005
	(In thousands)
Balance at beginning of year	$	4,334		$	3,899		$	3,598
Charge-offs during year		(2,400	)		(1,214	)		(1,617	)
Receoveries on loans previously
charged off		1,640			684			478
Provision charged to opening expense		1,155			965			1,440

Balance at end of year	$	4,729		$	4,334		$	3,899

At December 31, 2007 and 2006, the recorded investment in loans considered to be impaired totaled approximately $2,329,000 and $1,935,000, respectively. The allowance for loan losses related to these loans approximated $586,000 and $472,000 at December 31, 2007 and 2006, respectively. The average recorded investment in impaired loans during the years ended December 31, 2007 and 2006, was approximately $2,137,000 and $1,365,000, respectively. For the years ended December 31, 2007, 2006, and 2005, the amount of income recognized on impaired loans was immaterial. At December 31, 2007 and 2006, nonaccrual loans amounted to approximately $1,043,000 and $819,000, respectively, and loans past due ninety days or more and still accruing interest amounted to approximately $1,725,000 and $1,489,000, respectively.

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	2007	2006
		(In thousands)
Land	-	$ 6,347	$ 4,734
Buildings and improvements	10 - 40	16,825	16,935
Furniture and equipment	3 - 10	7,059	6,936
		30,231	28,605
Less accumulated depreciation and amortization		(7,159)	(6,636)

		$ 23,072	$ 21,969

The amount charged to operating expense for depreciation was $1,072,000 for 2007, $913,000 for 2006, and $798,000 for 2005.

NOTE F - TIME DEPOSITS

The aggregate amount of time deposits in denominations of $100,000 or more at 2007 and 2006 was $90,299,000 and $77,169,000, respectively.

Projected maturities of time deposits included in interest-bearing deposits at December 31, 2007, are as follows (in thousands):

Year	Amount
2008		157,761
2009		2,805
2010		2,776
2011		918
2012		1,254
Thereafter		10,291
	$	175,805

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G - BORROWED FUNDS

Borrowed funds consisted of the following:

	December 31,
	2007		2006
	(In thousands)

FHLB Advances	$	23,082	$	25,937
Treasury tax and loan note		390		1,443

	$	23,472	$	27,380

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 March, 2008, through September, 2032. Interest is payable monthly at rates ranging from 2.790% 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 agricultural loans equal to the advances outstanding. FHLB advances available and unused at December 31, 2007, totaled $77.1 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, 2007, are as follows:

Year	Amount
	(In thousands)
2008	$	1,655
2009		3,686
2010		718
2011		751
2012		8,787
Thereafter		7,485

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H - EMPLOYEE RETIREMENT PLANS

The Bank has a defined contribution plan which incorporates the provisions of a deferred compensation plan [401(k)] covering all employees who perform 1,000 hours of service annually, have one year of service and are age twenty-one or older. The Bank’s contribution is 2% of salaries, and employees may contribute up to 15% of their salary which is matched by the Bank up to an additional 3%. Additional Bank contributions are subject to Board discretion. The Bank’s contribution was approximately $319,000 for 2007, $289,000 for 2006, and $248,000 for 2005.

The Bank also has an employee stock ownership plan (ESOP) covering the same group of employees as the 401(k) plan, which is funded 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 $289,000 for 2007, $275,000 for 2006, and $261,000 for 2005. The ESOP held 186,854 and 198,712 shares of Corporation common stock, of which 186,854 and 198,711 were allocated shares, at December 31, 2007 and 2006, respectively.

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,
	2007			2006			2005
	( In thousands)
Net unrealized (losses) gains on
available-for-sale securities		138			88			(1,273	)
Reclassification adjustment for net losses
(gains) realized in income	$	448		$	253		$	52
Net change in unrealized gains (losses)		586			341			(1,221	)
Tax effect		(219	)		(127	)		456

Net change in unrealized gains (losses) on
securities available-for-sale, net of tax	$	367		$	214		$	(765	)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J - INCOME TAXES

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

	Years Ended December 31,
	2007		2006		2005
	(In thousands)

Current:
Federal	$	2,672	$	2,820	$	2,352
State		432		451		378
Deferred		51		78		(23	)

	$	3,155	$	3,349	$	2,707

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,
	2007			2006			2005
	(In thousands)

Tax on income before income taxes	$	3,601		$	3,600		$	3,167

Increase (decrease) resulting from:
Tax-exempt income		(630	)		(636	)		(719	)
Disallowed interest expense		74			72			54
State income taxes, net of federal benefit		285			298			250
Other, net		(174	)		15			(45	)

	$	3,155		$	3,349		$	2,707

( Continued )

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J - INCOME TAXES (Continued)

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

	December 31,
	2007			2006
	( In thousands)
Deferred tax assets:
Allowance for loan losses	$	1,500		$	1,429
Unrealized loss on secuities		-			25
available for sale
Other		21			17
		1,521			1,471

Deferred tax liabilities
Premises and equipment		(156	)		(163	)
Unrealized gain on securities
available for sale		(194	)		-
Other		(963	)		(830	)
		(1,313	)		(993	)

Net deferred tax asset (liability)	$	208		$	478

Effective January 1, 2007, the Corporation adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No.109 (the Interpretation). This Interpretation provides guidance on financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. The initial adoption of this Interpretation had no impact on the consolidated financial statements.

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
	2007		2006
	(In thousands)

Commitments to extend credit	$	48,799	$	38,356
Credit card arrangements		2,491		2,352
Letters of credit		18,910		15,961

( Continued )

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

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, 2007, nor are any significant losses as a result of these transactions anticipated.

The Bank leases property for branch offices under a noncancellable 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, 2007, under the leases is approximately $51,000 which is due as follows:

Year	Amount

2008	$	10,200
2009		10,200
2010		10,200
2011		10,200
2012		10,200

	$	51,000

The annual rental expense was $9,600 for 2007, 2006, and 2005.

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 $6,218,000 and $4,749,000 at December 31, 2007 and 2006, respectively.

952131.1/13193.16317

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.

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 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, 2007, the Corporation and its subsidiary bank exceed all capital adequacy requirements.

At December 31, 2007, 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, 2007 and 2006, are presented in the following table. No amount was deducted from capital for interest-rate risk exposure.

	Security Capital
	Corporation
	(Consolidated)					Bank
	Amount		Ratio			Amount		Ratio
	($ In thousands)
December 31, 2007
Total risk-based	$	57,805		15.3	%	$	55,152		14.7	%
Tier 1 risk-based		53,106		14.1	%		50,453		13.4	%
Tier 1 leverage		53,106		11.1	%		50,453		10.6	%


December 31, 2006
Total risk-based	$	52,485		14.7	%	$	50,503		14.2	%
Tier 1 risk-based		48,151		13.5	%		46,169		13.0	%
Tier 1 leverage		48,151		10.6	%		46,169		10.2	%

( Continued )

952131.1/13193.16317

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M - REGULATORY MATTERS (Continued)

The minimum amounts of capital and ratios as established by banking regulators at December 31, 2007 and 2006, were as follows:

	Security Capital
	Corporation
	(Consolidated)					Bank
	Amount		Ratio			Amount		Ratio
	(In thousands)

December 31, 2007
Total risk-based	$	30,229		8.0	%	$	30,071		8.0	%
Tier 1 risk-based		15,114		4.0	%		15,035		4.0	%
Tier 1 leverage		14,407		3.0	%		14,348		3.0	%

December 31, 2006
Total risk-based	$	28,534		8.0	%	$	28,376		8.0	%
Tier 1 risk-based		14,267		4.0	%		14,188		4.0	%
Tier 1 leverage		13,645		3.0	%		13,586		3.0	%

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 FASB Statement No. 107, Disclosures About Fair Value of 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, First National Banker’s Bankshares, and Federal Agricultural Mortgage Corporation, is estimated to be the carrying value which is par.

( Continued )

952131.1/13193.16317

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 Statement No. 107, equal to the carrying value of such deposits. Demand deposits include noninterest-bearing demand deposits, savings 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 represent a significant value until such commitments are funded or closed. Management has determined that these instruments do not have a distinguishable fair 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, 2007				December 31, 2006
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
	(In thousands)				(In thousands)

Financial assets:
Cash and cash equivalents	$	19,806	$	19,806	$	23,447	$	23,447
Certificates of deposit with
other banks		198		198		198		198
Securities available-for-sale		66,156		66,156		61,028		61,028
Securities held-to-maturity		7,235		7,442		7,850		8,150
Securities, other		2,028		2,028		2,250		2,250
Loans		343,189		345,138		326,658		327,008
Financial liabilities:
Noninterest-bearing deposits		58,373		58,373		59,380		59,380
Interest-bearing deposits		330,360		333,457		307,319		306,118
FHLB and other borrowings		27,472		25,424		35,380		33,935

(Continued)

952131.1/13193.16317

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes the valuation of the assets and liabilities that the Corporation measures at fair value on a recurring basis, by the SFAS No. 157 pricing observability levels as of December 31, 2007, (in thousands):

	Description	Level I	Level II	Total
Available-for-sale securities		$ -	$66,156	$66,156

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, 2007 and 2006, and statements of income and cash flows for the years ended December 31, 2007, 2006, and 2005 of Security Capital Corporation (parent company only) are presented below:

BALANCE SHEETS

	December 31,
	2007		2006
	(In thousands)

Assets
Cash and cash equivalents	$	531	$	50
Investment in subsidiaries		55,206		50,515
Land and buildings		1,924		1,924
Other assets		279		401
	$	57,940	$	52,890

Liabilities and Shareholders' Equity
Notes payable	$	790	$	815
Other liabilities		211		91
Shareholders' equity		56,939		51,984
	$	57,940	$	52,890

(Continued)

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE P - CONDENSED PARENT COMPANY STATEMENTS (Continued)

STATEMENTS OF INCOME

	Years Ended December 31,
	2007		2006		2005
	(In thousands)

Income
Dividends from subsidiary	$	3,300	$	2,888	$	2,695
Other		123		89		53

		3,423		2,977		2,748

Expense (total)		311		425		202

Income before income taxes and equity in
undistributed earnings of subsidiaries		3,112		2,552		2,546
Income tax (expense) benefit		70		61		56
Income before equity in undistributed earnings
of subsidiaries		3,182		2,613		2,602
Equity in undistributed earnings of subsidiaries
in excess of dividends		4,253		4,627		4,005

Net income	$	7,435	$	7,240	$	6,607

( Continued )

952131.1/13193.16317

SECURITY CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE P - CONDENSED PARENT COMPANY STATEMENTS (Continued)

STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2007			2006			2005
	(In thousands)

Cash Flows from Operating Activities
Net income	$	7,435		$	7,240		$	6,607
Equity in subsidiaries' earnings		(4,253	)		(4,572	)		(4,005	)
Other, net		63			(74	)		80

Net cash provided by operating activities		3,245			2,594			2,682

Cash Flows From Investing Activities
Purchases of assets		-			(195	)		(1,179	)
Proceeds from sale of other asset		-			440			-
Other, net		108			-			(2	)

Net cash provided by (used in) investing activities
of subsidiaries		108			245			(1,181	)

Cash Flows From Financing Activities
Dividends paid on common stock		(2,882	)		(2,744	)		(2,611	)
Proceeds from debt obligations		-			-			930
Repayment of debit obligations		(25	)		(155	)
Other, net		35			87			87

Net cash used in financing activities		(2,872	)		(2,812	)		(1,594	)

Net increase (decrease) in cash and cash equivalents		481			27			(93	)

Cash and cash equivalents at beginning of year		50			23			116

Cash and cash equivalents at end of year	$	531		$	50		$	23

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			30-Jun		Sept. 30		Dec. 31
	(In thousands, except per share data)

2007
Total interest income	$	8,147		$	8,645	$	8,814	$	8,527
Total interest expense		3,242			3,513		3,459		3,485
Net interest income		4,905			5,132		5,355		5,042
Provision for loan losses		273			161		273		448
Net interest income after
provision for loan losses		4,632			4,971		5,082		4,594
Total noninterest income, excluding
securities gains (losses)		1,771			1,774		1,744		2,008
Securities gains (losses)		(448	)		-		-		-
Total noninterest expenses		3,739			4,018		3,705		4,076
Income taxes		700			831		804		820

Net income	$	1,516		$	1,896	$	2,317	$	1,706

Per share: (1)
Net income	$	0.53		$	0.66	$	0.80	$	0.59
Cash dividends declared		-			-		-		1.00

(1) Restated for stock dividends.

( Continued )

952131.1/13193.16317

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			30-Jun		Sept. 30		Dec. 31
	(In thousands, except per share data)

2006
Total interest income	$	7,006		$	7,685	$	8,081	$	7,814
Total interest expense		2,319			2,669		3,198		3,337
Net interest income		4,687			5,016		4,883		4,477
Provision for loan losses		241			242		241		241
Net interest income after
provision for loan losses		4,446			4,774		4,642		4,236
Total noninterest income, excluding
securities gains (losses)		1,597			1,561		1,705		2,316
Securities gains (losses)		(13	)		6		28		(274	)
Total noninterest expenses		3,451			3,587		3,537		3,860
Income taxes		797			927		926		699

Net income	$	1,782		$	1,827	$	1,912	$	1,719

Per share: (1)
Net income	$	0.62		$	0.63	$	0.66	$	0.60
Cash dividends declared		-			-		-		1.00

(1) Restated for stock dividends.

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, 2007, 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, 2007, 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, 2007 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, 2007, 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 2007 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 April 4, 2008, 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.

ITEM 11. EXECUTIVE COMPENSATION

Included under the heading "Executive Compensation" in the Company's Proxy Statement dated April 4, 2008, 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 April 4, 2008, 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 April 4, 2008, 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 April 4, 2008, 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 14, 2008

By /s/ Frank West

Frank West, Chief Executive Officer

Date: March 14, 2008 By /s/ Connie Hawkins

Connie Hawkins, Chief Financial Officer

DATE:

March 14, 2008

/s/ Larry Pratt, Director

DATE:

March 14, 2008

/s/ Frank West, Director

DATE:

March 14, 2008

/s/ Laney Funderburk, Director

DATE:

March 14, 2008

/s/ Joe Brown, Director

DATE:

March 14, 2008

/s/ Ben Smith, Director

DATE:

March 14, 2008

/s/ Ken Murphree, Director

DATE:

March 14, 2008

/s/ Will Hays, Director

DATE:

March 14, 2008

/s/ Steve Ballard, Director

DATE:

March 14, 2008

/s/ Tony Jones, 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


*	Filed on March 31, 2003, as an exhibit to the Registrant’s Registration Statement
	on Form 10-SB (File No. 000-50224),and incorporated herein by reference