U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q

COMMISSION FILE NUMBER:       000-50224

SECURITY CAPITAL CORPORATION
SECOND QUARTER 2004 INTERIM FINANCIAL STATEMENTS

TABLE OF CONTENTS
    

SECURITY CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

ITEM NO. 2   MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains “forward-looking statements” relating to, without limitation, future economic performance, plan and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. The words “expect,” “estimate,” “anticipate,” and “believe,” as well as similar expressions, are intended to identify forward-looking statements. The Company’s actual results may differ and the Company’s operating performance each quarter is subject to various risks and uncertainties that are discussed in detail in the Company’s filing of the Form 10Q with the Securities and Exchange Commission.

The subsidiary Bank represents the primary assets of the Company. On September 30, 2005, First Security Bank had approximately $433.0 million in assets compared to $374.9 million at September 30, 2004. Loans increased to $293.9 million at September 30, 2005 from $231.8 million at September 30, 2004. Deposits increased by $31.3 million from September 30, 2004 to September 30, 2005 for a total of $351.1 million. For the nine months ended September 30, 2005 and September 30, 2004, the Bank reported income of approximately $5,208,000 and $4,849,000, respectively.  

CHANGES IN FINANCIAL CONDITION
The cash and due from banks of $20.2 million at September 30, 2005 reflected an increase from the cash position of $16.1 million at December 31, 2004. This increase is attributed to a daily fluctuation due to normal bank transactions. The cash management team readily invests available cash and assesses the investment tools for the most desirable yield and the funding needs of the bank.

The earning assets at December 31, 2004 were $352.9 million and at September 30, 2005 were $387.9 million. The investments in fixed assets continue to increase with the expansion of the banking services into the Southaven area and with the purchase of real estate adjacent to the main office location to provide offices for the trust services, mortgage lending and information technology departments. The premises and equipment, net of the accumulated depreciation, at December 31, 2004 was $15.0 million as compared to $18.7 million at September 30, 2005. Other assets increased to $5.2 million at September 30, 2005 from $3.4 million at December 31, 2004, with the major component of the increase attributed to an increase in the customer liability acceptances.

Deposit liabilities at September 30, 2005 reflected a 5.3% growth or a $17.5 million increase for the first nine months in 2005. The rise in deposits decreases the need for increments on long-term borrowings. Short-term borrowings provide a tool in providing the funding for unforeseen deposit withdrawals and customer loan advances. At September 30, 2005, short-term funding was required as evidenced by $10 million of federal funds purchased and $6 million of funds borrowed from the Federal Reserve.

The net unrealized gain on available-for-sale securities reflected in the shareholder’s equity section on December 31, 2004 and on September 30, 2005 was $510 thousand and $28 thousand, respectively. The changes reflected over these reporting periods reflect the volatile nature of the market. The changes in the market affected the comprehensive income with a net increase of $847 thousand for the three months ending September 30, 2004 and a cumulative or net decrease of $391 thousand for the nine months ending September 30, 2004. In 2005, the comprehensive income reflected a net decrease of $235 thousand for the nine months ending September 30 and a decrease of $108 thousand for the three months ending September 30.

The consolidated statements of cash flows summarize the changes in the financial condition of the Company. The most prevalent of the changes for the nine months ending September 30, 2005 are: an increase of $57.3 million in loans; a net decrease in available-for-sale securities of $9.9 million resulting from purchases of $19.1 million offset by an approximate $29.0 million in maturities and sales; an increase in the investment in premises and equipment of $4.0 million; an increase of $17.5 million in deposits; an increase in the investment in bank owned life insurance of $2.1 million and an increase in borrowings attributed to $4.6 million in advances from FHLB, $6 million in borrowings from the Federal Reserve and $10 million in federal funds purchased 

NONPERFORMING ASSETS AND RISK ELEMENTS.
Diversification within the loan portfolio is an important means of reducing inherent lending risks. The loan portfolio is represented of the following mix: Commercial 5.88%; Agricultural 2.62%; Real Estate 80.59%; Consumer 10.50% and Other .41%. The major components of the real estate loans are 31.74% for construction and land development property, 23.18% for first liens on 1-4 family residential property and 36.33% for nonfarm and nonresidential property.

At September 30 2005, the subsidiary bank had loans past due as follows:

The accrual of interest is discontinued on loans which become ninety days past due unless the loans are adequately secured and in the process of collection. Nonaccrual loans totaled $29 thousand at September 30, 2005. Any other real estate owned is carried at lower of cost or current appraised value less cost to dispose. Other real estate at September 30, 2005 totaled
$767 thousand. A loan is classified as a restructured loan when the interest rate is materially reduced or the term is extended beyond the original maturity date because of the inability of the borrower to service the debt under the original terms. The subsidiary bank had no restructured loans at September 30, 2005.

For the nine months ended September 30, 2005, the Company experienced $1,036 thousand in charge-offs of loans and
$408 thousand in recoveries of loans for a net decrease effect to the Allowance for Loan Losses of $628 thousand. The net charge-offs represent 0.22 % of loans. Of the $1,036 thousand charge to the Allowance for Loan Losses, the breakdown is 26.25% for 1-4 family residential properties, 18.34% for commercial and industrial loans, 50.10% for consumer loans, 0.29% for construction and land development loans, and 5.02% for nonfarm, nonresidential properties. Consumer loan collections of
$312 thousand represent the major component of the $408 thousand in recoveries.
 

LIQUIDITY
The Company has an asset and liability management program that assists management in maintaining net interest margins during times of both rising and falling interest rates and in maintaining sufficient liquidity.As of September 30, 2005, Security Capital Corporation had a positive gap of 10.5% in a 12-month time frame. The regulatory liquidity ratio reflected 16.3%, within the policy requirement of a minimum liquidity ratio of 15%. A 1% increase in market rates will basically not affect net interest income while a decrease in market rates will reduce net interest income by .8%. The Company’s policy allows for no more than a 10% movement in NII (net interest income), in a 200 basis point ramp of market rates over a one-year period. Currently, a 200 basis point movement down would reduce NII by 1.5% while an upward movement of the same amount would decrease NII by .50%. When funds exceed the needs for reserve requirements or short-term liquidity needs, the company will increase its security investments or sell federal funds. It is management’s policy to maintain an adequate portion of its portfolio of assets and liabilities on a short-term basis to insure rate flexibility and to meet loan funding and liquidity needs.

At September 30, 2005, the tools to meet these needs are the secured and unsecured lines of credit with the correspondent banks totaling $25.5 million (to borrow federal funds) and the line of credit with the Federal Home Loan Bank that exceeded $112 million. At September 30, 2005, the Company had available (unused) line of credit of approximately $90 million.
 

CAPITAL RESOURCES
Total consolidated equity capital at September 30, 2005 was $48.8 million or approximately 11.23% of total assets. The main source of capital for the Corporation has been the retention of net income.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of Total Capital, Tier 1 Capital and Leverage Capital. Currently, the Company and the Bank have adequate capital positions as of September 30, 2005 as reflected below:

RESULTS OF OPERATIONS - QUARTERLY
The consolidated net income for the Company for the three months ending September 30, 2005 was $1.7 million which reflected a decrease of $84 thousand or 4.83% from the same period in 2004. The primary reason for the decrease is a substantial increase to the provision for loan losses and an increase in income tax expense.

Interest income increased to $6.5 million for the three months ending September 30, 2005 which was a $1.5 million increase from the $5.0 million for the three months ending September 30, 2004. Other Income for the three months ending September 30, 2005 increased to $1.6 million from $1.4 million for the three months ending September 30, 2004. The net increase of $207 thousand is primarily the results of an increase in service charges on deposit accounts of $175 thousand for the three months ending September 30, 2005.

Interest expense reflects an increase of $832 thousand to $1.9 million for the three months ending September 30, 2005 from $1.1 million for the same period in 2004. The increase in interest expense can be attributed to the competitive pricing of the deposit accounts in a rising rate market. Other expenses, consisting primarily of salaries, employee benefits and occupancy expense, for the three months ending September 30, 2005 reveal an increase of $238 thousand from the same period in 2004.

The increase in the provision for loan losses of $317 thousand results from a proactive approach in the evaluation of the quality of the loan portfolio and is consistent with the increase in the loan portfolio and the quarterly analysis of the Allowance for Loan Losses.
 

RESULTS OF OPERATIONS - YEAR TO DATE
The Company had a consolidated net income for $5.1 million for the nine months ending September 30, 2005, compared with consolidated net income of $4.8 million for the nine months ending September 30, 2004.

Total interest income increased to $17.7 million for the nine months ending September 30, 2005 from $14.0 million for the nine months ending September 30, 2004, or an increase of 26.9%. Earning assets at September 30, 2005 increased $48.6 million to $387.9 million from $339.3 at September 30, 2004 and interest-bearing liabilities of $319.0 at September 30, 2005 increased $41.30 million compared to $277.7 at September 30, 2004, reflecting an increase of 14.32% and 14.87%, respectively. The steady increase in the interest-bearing liabilities is the direct effect of a greater loan demand over the growth of the deposit base.

Noninterest income for the nine months ending September 30, 2005 was $4.7 million which is an increase from the $4.4 million for the same period in 2004, reflecting an increase of $221 thousand. The main components of the increase in the non-routine income in 2005 is attributable to $41.2 thousand received as a member of an ATM network provider on the merger with another company and a gain of $30.3 thousand on the sale of an unused strip of property adjacent to a branch location. Included in noninterest income are service charges on deposit accounts, which for each of the nine months ended September 30, 2005 and September 30, 2004, totaled $3.2 million and $2.9 million, respectively.

The provision for loan losses was $835 thousand in the first nine months of 2005 compared with $455 thousand for the same period in 2004 showing a substantial increase of $380 thousand. The Allowance for Loan Losses of $3.8 million on September 30, 2005 (approximately 1.3% of loans) is considered by management to be adequate to cover losses inherent in the loan portfolio. The Allowance for Loan Losses as of September 30, 2004 was 1.70% of loans. A re-evaluation of historical loss rates resulted in a reduction of the applied allocation rate beginning in the first quarter of 2005. The level of this allowance is dependent upon a number of factors, including the total amount of past due loans, general economic conditions, and management’s assessment of potential losses. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant change. Ultimately, losses may vary from current estimates and future additions to the allowance may be necessary. Thus, there can be no assurance that charge-offs in future periods will not exceed the Allowance for Loan Losses or that additional increases will not be required. Management evaluates the adequacy of the Allowance for Loan Losses quarterly and makes provisions for loan losses based on this evaluation.

Other expense increased by $1.1 million or 12.96% for the nine months ended September 30, 2005, when compared with the same period in 2004. Salaries and employee benefits of $6.3 million for the nine months ended September 30, 2005 represent the largest component of other expenses and steadily increases with the development of the market area and the training of future bank management, in both areas of commercial banking and trust.

Income tax expense of $2.0 million for the nine months ended September 30, 2005 is indicative of the applicable tax liability for the increase in the income for 2005 along with the adjustments for tax-exempt income and tax deferred income.

The net interest margin for the nine months ending September 30, 2005 is 4.72%. The return on equity for the nine months period ending September 30, 2005 is 15.69%. For the nine months ended September 30, 2005, the return on assets is reflected at 1.67%. These ratios, reflecting the financial status of the company, have been consistent with the ratios for prior reporting periods.
     

ITEM NO. 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes in market risk exposures that affect the quantitative and qualitative disclosures presented as of December 31, 2004 in the Company’s Form 10-K and Annual Report.
    

ITEM NO. 4 CONTROLS AND PROCEDURES
Within 90 days prior to the filing of this report, an evaluation under the direction and with the participation of our principal executive officer and principal financial officer was performed to determine the effectiveness of the design and operation of the disclosure controls and procedures. The principal executive officer and the principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports. There have been no significant changes in the Corporation’s internal controls or in other factors subsequent to the date of the evaluation that could significantly affect these controls.
  

ITEM 1. LEGAL PROCEEDINGS
Out of the normal course of business, First Security Bank may be defendant in a lawsuit. In regard to any legal proceedings, which occurred during the reporting period, management expects no material impact on the Company’s consolidated financial position or results of operation.

ITEM 2. CHANGES IN SECURITIES
None

ITEM 3. DEFAULT UPON SENIOR SECURITIES
None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
 

ITEM 5. OTHER INFORMATION

None
    

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES
    

SECURITY CAPITAL CORPORATION

Exhibit No. 31.1

Certificate pursuant to Rule 13a-14(a) or 15d-14(a) of Securities Exchange Act of 1934 as adopted pursuant to section 302 of Sarbanes-Oxley Act of 2002 – Chief Executive Officer.

I, Frank West certify that:

EXHIBIT 31.2

Certificate pursuant to Rule 13a-14(a) or 15d-14(a) of Securities Exchange Act of 1934 as adopted pursuant to section 302 of Sarbanes-Oxley Act of 2002 – Cashier and Chief Financial Officer.

I, Connie Woods Hawkins certify that:

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U. S. C., SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10Q, filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, of Security Capital Corporation (the "Company") for the period ended September 30 2005, as filed with the Securities Exchange Commission on the date hereof (the "Report"), I, Frank West, the Chief Executive Officer of the Company, certify, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Security Capital Corporation and will be retained by Security Capital Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U. S. C., SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the Quarterly Report on Form 10Q, filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, of Security Capital Corporation (the "Company") for the period ended September 30 2005, as filed with the Securities Exchange Commission on the date hereof (the "Report"), I, Connie Woods Hawkins, the Chief Financial Officer of the Company, certify, pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version
of this written statement required by Section 906, has been provided to Security Capital Corporation and will be
retained by Security Capital Corporation and furnished to the Securities and Exchange Commission or its staff
upon request.