UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                             Form 10-Q

(Mark One)
[X]   QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [No Fee Required]

      For the quarterly period ended March 31, 1999 or

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

      For the transition period from _______to_________
                     .

      Commission file number    0-27590

                   SECURITY BANK HOLDING COMPANY
        (Exact name of issuer as specified in its charter)

          Oregon                              93-0800253          
          ------                              ----------
      (State or other jurisdiction of       (I.R.S. Employer Identification No.)
      incorporation or organization)

      170 S. Second St., Coos Bay, Oregon              97420   
      -----------------------------------              -----
     (Address of Principal Executive Offices)        (Zip Code)

                           (541) 267-5356
                           --------------
                     (Issuer's telephone number)


Check whether the issuer (1)filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   YES   X  NO
                                                ----   ----

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

           Class                        Outstanding at April 30, 1999
      Common Stock, $5.00 par value            4,458,263







<PAGE>



===================================================================

                    Form 10-Q Table of Contents



      Part I

Item 1.  Condensed Consolidated Financial Statements

Item 2.  Management's Discussion and Analysis

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

      Part II

Item 1.  Legal Proceedings

Item 2.  Changes in Securities and Use of Proceeds

Item 3.  Defaults Upon Senior Securities

Item 4.  Submission of Matters to a Vote of Security Holders

Item 5.  Other Information

Item 6.  Exhibits and Reports on form 8-K

      Signatures



<PAGE>


                   PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements.

           SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
               CONDENSED CONSOLIDATED BALANCE SHEETS
                      (DOLLARS IN THOUSANDS)

ASSETS                                              Mar. 31, 1999  Dec. 31, 1998
                                                    -------------  -------------
                                                      (Unaudited)
Cash and cash equivalents:
   Cash and due from banks                               $  9,258   $ 10,686
   Federal funds sold                                      18,347      7,667
                                                         --------   --------
      Total cash and cash equivalents                      27,605     18,353

Investment securities available for sale                   78,044     87,575
Loans, net                                                145,304    142,209
Mortgage loans held for sale, at cost which
 approximates market                                        4,254      5,920
Net investment in direct financing leases                   2,578      2,813
Premises and equipment, net                                11,080     10,518
Federal Home Loan Bank stock, at cost                       2,063      2,007
Federal Reserve Bank stock, at cost                           649        649
Other assets                                                4,690      3,595
                                                         --------   --------
      Total assets                                       $276,267   $273,639
                                                         ========   ========

LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY
Liabilities:
  Deposits:
    Demand                                               $ 39,458   $ 40,539
    NOW accounts                                           34,282     35,777
    Money market accounts                                  44,283     40,883
    Savings accounts                                       22,200     21,341
    Time deposit                                           93,211     88,255
                                                          -------   --------
      Total deposits                                      233,434    226,795
                                                                    
Securities sold under agreements to repurchase              7,573     10,388
Short term borrowings                                         118         32
Other borrowings                                              800       --
Other liabilities                                           3,632      5,168
                                                         --------   --------
      Total liabilities                                   245,557    242,383
                                                         --------   --------

Minority interest in subsidiary                             2,219      2,224
Shareholders' equity:
   Nonvoting preferred stock, $5 par value
      Authorized 5,000,000 shares; none issued               --         --
   Voting preferred stock, $5 par value
      Authorized 5,000,000 shares; none issued               --         --   
   Common stock, $5 par value
      Authorized 10,000,000 shares - issued and outstanding
      4,458,183 shares in 1999 (4,451,196 shares in 1998)  22,291     22,256
Surplus                                                     3,899      3,863
Retained earnings                                           2,167      2,454
Accumulated other comprehensive income                        134        459
                                                         --------   --------
      Total shareholders' equity                           28,491     29,032
                                                         --------   --------

Total liabilities, minority interest and shareholders'
equity                                                   $276,267   $273,639
                                                         ========   ========


    See accompanying notes to consolidated financial statements
<PAGE>

           SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF INCOME
     (UNAUDITED-DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                    Three months ended March 31,
                                                             1999       1998
                                                          -------    -------
Interest income:
   Interest on loans                                       $3,372     $3,294
   Interest and dividends on securities:
      Taxable                                                 918      1,101
      Exempt from Federal income tax                          192        187
   Dividend income on Federal Home Loan Bank stock             39         39
   Dividend income on Federal Reserve Bank stock               10         --
   Interest on Federal funds sold                             150        226
   Income on direct financing leases                           63         70
                                                          -------    -------
        Total interest income                               4,744      4,917

Interest expense:
   Deposits
      NOW                                                     119        114
      Money market                                            377        313
      Savings                                                 122        117
      Time                                                  1,143      1,155
   Securities sold under agreements to repurchase              92         83
   Short term borrowings                                        3          6
   Federal Home Loan Bank borrowings                           --        223
                                                            -----     ------
        Total interest expense                              1,856      2,011
                                                            -----      -----

      Net interest income                                   2,888      2,906
Provision for loan losses                                     104         61
                                                         --------    -------
      Net interest income after provision for loan losses   2,784      2,845

Other income:
   Service charges on deposit accounts                        312        281
   Gain on sale/call of investments available for sale, net   184          2
   Loan servicing fees                                         77         61
   Sold real estate loan fees                                 631        609
   Other                                                      196        180
                                                            -----        ---
      Total other income                                    1,400      1,133

Other expense:
   Salaries and employee benefits                           1,971      1,746
   Occupancy of bank premises                                 207        191
   Furniture and equipment                                    227        235
   Professional fees                                          175        214
   FDIC assessment                                              7          8
   Supplies                                                   135         90
   ESOP compensation                                           --        168
   Other                                                      560        532
                                                           ------     ------
      Total other expense                                   3,282      3,184
                                                           ------     ------

      Income before provision for income taxes                902        794
Provision for income taxes                                    302        284
                                                             ----       ----
      Net income before minority interest                     600        510
Net (income) loss attributable to minority interest             5        (9)
                                                             ----       ---- 
      Net income                                             $605       $501
                                                             ====       ====
      Net income per share - Basic                           $.14       $.12
                                                             ====       ====
      Net income per share - Diluted                         $.14       $.12
                                                             ====       ====

     See accompanying notes to consolidated financial statements



<PAGE>


           SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
     CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                (UNAUDITED-DOLLARS IN THOUSANDS)


                                                    Three months ended March 31,
                                                             1999       1998
                                                             ----       ----

Net Income                                                   $605       $501

Other comprehensive income, net of income tax:

      Unrealized loss on investment securities              (325)       (30)
                                                             ----       ---- 

Comprehensive income                                         $280       $471
                                                             ====       ====


     See accompanying notes to consolidated financial statements



<PAGE>


                               SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
                       CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                       (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                               
                                                                             Accumulated     
                              Common Stock                        Unearned     Other          Total
                                                       Retained  ESOP Shares Comprehensive  Shareholders'
                            Shares   Amount  Surplus   Earnings   At Cost      Income         Equity
                            ------   ------  -------   --------   -------      ------         ------
<S>                      <C>        <C>       <C>       <C>       <C>           <C>          <C> 

Balance, Dec. 31, 1997   4,442,097  $22,210   $1,596    $5,629    $(1,469)      $457         $28,423

Net loss                        --       --       --    (1,549)         --        --         (1,549)

Dividends                       --       --       --    (1,626)         --        --         (1,626)

Sale of common stock         3,579       18      (1)         --         --        --              17

Stock options exercised      5,520       28        3         --         --        --              31

Release of ESOP shares          --       --    2,265         --      1,469        --           3,734

Unrealized gain on securities 
   available for sale           --       --       --         --         --         2               2
                         ---------------------------------------------------------------------------
Balance, Dec. 31, 1998   4,451,196  $22,256   $3,863     $2,454        $--      $459         $29,032

(UNAUDITED)

Net income                      --       --       --        605         --        --             605

Dividends                       --       --       --      (892)         --        --           (892)

Sale of common stock         6,987       35       36         --         --        --              71

Unrealized loss on securities
       available for sale       --       --       --         --         --     (325)           (325)        
                         ---------------------------------------------------------------------------
Balance, March 31, 1999  4,458,183  $22,291   $3,899     $2,167        $--      $134         $28,491
                         ===========================================================================
</TABLE>

                     See accompanying notes to consolidated financial statements


<PAGE>


           SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                (UNAUDITED-DOLLARS IN THOUSANDS)
                                                    Three months ended March 31,
                                                             1999       1998
                                                             ----       ----
Cash flows provided by operating activities:
Net income                                                   $605       $501
Adjustments to reconcile net income to net cash provided by 
operating activities:
   Depreciation and amortization                              265        206
   Deferred taxes related to
    available for sale securities                             207         19
   Provision for loan losses                                  104         61
   Origination of mortgage loans held for sale           (30,230)   (30,490)
   Proceeds from mortgage loans sold                       31,896     29,626
   Net gain on call of investment securities
    available for sale                                      (184)        (2)
   Federal Home Loan Bank stock dividend                     (38)       (35)
   ESOP related compensation expense                           --        227
   (Increase) decrease in other assets                    (1,095)         93
   (Decrease) increase in other liabilities               (1,536)        707
    Minority interest in subsidiary                           (5)          9
                                                             ----       ----
           Net cash (used in) provided by
            operating activities                             (11)        922

Cash flows from investing activities:
   Purchase of investment securities
    available for sale                                   (16,428)    (5,833)
   Proceeds from sale of securities
    available for sale                                     17,470         --
   Proceeds from maturities and call of investment
    securities available for sale                           8,029     12,297
   Net loan originations (repayments)                       (635)        975
   Purchase of participations                             (2,564)         --
   Additions to premises and equipment                      (715)      (834)
   Purchase of Federal Home Loan Bank stock                  (18)       (21)
   Originations of direct financing leases                   (94)      (165)
   Gross payments on direct financing leases                  329        264
                                                            -----      -----
           Net cash provided by investing activities        5,374      6,683

Cash flows from financing activities:
   Net increase in deposits                                 6,639      1,781
   Decrease in securities sold with agreements to
    repurchase                                            (2,815)      (711)
   Decrease of Federal Home Loan Bank borrowings               --    (2,000)
   Increase in other borrowings                               800         --
   Proceeds from issuance of common stock                      71         41
   Payment of dividends                                     (892)      (812)
   (Decrease) increase in short term borrowings                86      (297)
                                                           ------     ------
      Net cash provided by (used in) financing activities   3,889    (1,998)

      Net increase in cash and cash equivalents             9,252      5,607

Cash and cash equivalents at beginning of period           18,353     29,252
                                                           ------     ------
Cash and cash equivalents at end of period               $ 27,605   $ 34,859
                                                         ========   ========

Supplemental disclosures of cash flow information:  
Cash paid during the period for:
        Interest                                           $1,839     $2,011
        Income taxes                                          $22        $58
Supplemental disclosures of investing activities:
   Unrealized loss on investment
        securities available for sale, net of tax          $(325)       (30)
   Loans transferred to other real estate owned               $--        $--
    
            See accompanying notes to consolidated financial statements


<PAGE>


           SECURITY BANK HOLDING COMPANY & SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            (UNAUDITED)


(1)  Basis of Financial Statement Presentation
     -----------------------------------------
The interim  consolidated  financial statements include the accounts of Security
Bank Holding Company (the Company),  a bank holding  company,  its  wholly-owned
subsidiaries,  Security  Bank,  Pacific  State Bank  (Pacific  State) and Family
Security  Bank  (Family  Security),  its  majority-owned  subsidiaries,  Lincoln
Security Bank (Lincoln  Security) and McKenzie State Bank (McKenzie State),  and
Security  Bank's  wholly-owned   subsidiary,   Alland,   Inc..  All  significant
intercompany  accounts and transactions  have been eliminated in  consolidation.
The interim  consolidated  financial statements are not audited, but include all
adjustments that the Company considers  necessary for a fair presentation of the
results of operations for such interim  periods.  In preparing the  consolidated
financial  statements,  management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the
balance  sheets and income and expenses for the periods.  Actual  results  could
differ from those estimates.  The balance sheet data as of December 31, 1998 was
derived from audited financial statements,  but does not include all disclosures
contained  in the  Company's  1998 Annual  Report to  Shareholders.  The interim
consolidated  financial  statements  should  be read  in  conjunction  with  the
December  31,  1998  consolidated  financial  statements,  including  the  notes
thereto,  included in the Company's 1998 Annual Report to Shareholders.  Certain
amounts for 1998 have been  reclassified to conform with the 1999  presentation.
The results of  operations  for the interim  period shown in this report are not
necessarily  indicative of results for any future  interim  period or the entire
fiscal year.


(2)  Earnings Per Share
     ------------------
Basic and diluted earnings per share are based on the weighted average number of
common shares outstanding during each period,  with diluted including the effect
of potentially dilutive common shares. For the three months ended March 31, 1998
the weighted average number of common shares outstanding did not include 384,784
shares held by the  Company's  ESOP as these  shares had not been  allocated  to
participant accounts,  nor had they been committed to be released.  The weighted
average  number of  common  shares  outstanding  for  basic  earnings  per share
computations   were  4,451,209  and  4,060,135  at  March  31,  1999  and  1998,
respectively.  For diluted  earnings per share,  25,791 and 44,004 were added to
weighted   average  shares   outstanding   for  1999  and  1998,   respectively,
representing potential dilution for stock options outstanding,  calculated using
the treasury stock method.


(3)   Other Borrowings
      ----------------
At March 31,  1999 the Company had  $800,000  in  borrowings  from a third party
bank. The one year,  $1,000,000 Draw Note Line of Credit was secured to complete
the capitalization of Oregon State Bank, which commenced  operations on April 1,
1999. The Draw Note Line of Credit is a variable rate note based on prime, which
was 7.75% at March 31, 1999.




<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition 
         and Results of Operations.


For the Quarter ended March 31, 1999 and 1998

GENERAL.  Net income  increased to $605,000 for the three months ended March 31,
1999 from $501,000 for the same period in 1998, a 21% increase.  The increase in
net income is mostly  attributable  to increases in other income due to gains on
the sale of investment  securities available for sale and an increase in service
charge  income on deposit  accounts  due to an  increase  in  average  deposits,
coupled with no ESOP compensation expense in 1999 as the Company deleveraged the
ESOP in December 1998.

NET INTEREST  INCOME.  Net interest  income is the difference  between  interest
income  (principally from loans and investment  securities) and interest expense
(principally  on customer  deposits  and  borrowings).  Changes in net  interest
income  result from  changes in volume,  net interest  spread,  and net interest
margin. Volume refers to the average dollar level of interest earning assets and
interest  bearing  liabilities.  Net interest  spread refers to the  differences
between the average  yield on interest  earning  assets and the average  cost of
interest bearing liabilities.  Net interest margin refers to net interest income
divided by average interest earning assets.  The Company's  profitability,  like
that of many  financial  institutions,  is  dependent to a large extent upon net
interest  income.  Since the Company  tends to be asset  sensitive,  as interest
earning assets mature or reprice more quickly than interest bearing  liabilities
in a given period, a significant  decrease in the market rates of interest could
adversely affect net interest income. In contrast,  an increasing  interest rate
environment  could  favorably  impact net interest  income.  Competition and the
economy also impact the Company's net interest income.

Net interest  income before the provision for loan losses  decreased  $18,000 or
 .62% for the three months ended March 31, 1999 over the same period in 1998.  Of
the net decrease of $18,000,  an increase in volume accounted for an increase in
net  interest  income of  $42,000,  while a decrease in spread  accounted  for a
decrease in net interest  income of $60,000.  Average  interest  earning  assets
increased $4.5 million,  while average  interest bearing  liabilities  increased
$5.9  million.  The  increase in average  interest  earning  assets and interest
bearing liabilities resulted from an increase in deposits,  offset by a decrease
in average borrowings from the Federal Home Loan Bank of $14.6 million.

The average net interest  spread  decreased  from 4.61% to 4.54%,  mainly due to
decreased average earning asset yields which declined 43 basis points from 8.12%
to 7.69%.  The  low/flat  interest  rate yield  curve has caused  variable  rate
repricing  on assets  over the period  decreasing  asset  yields.  In  addition,
certain fixed rate loans and investments have  refinanced/repriced  at the lower
rates over the period.  Average rates paid decreased 35 basis points to 3.16% in
the first  quarter  of 1999 from 3.51% in the first  quarter of 1998,  primarily
from a reduction  in deposit  cost,  and the  repayment of all Federal Home Loan
Bank advances in December 1998. The Company's net interest  margin for the first
quarter of 1999 was  4.68%, a decrease of 12 basis points from 4.80% for the
first quarter of 1998.

PROVISION FOR LOAN LOSSES. The loan loss provision during the three-month period
ended March 31, 1999,  was $104,000 and $61,000 for the same period in 1998. The
increase is primarily due to  maintaining  the reserve  balance at 1.5% of total
loans at March 31, 1999 as compared to 1% at March 31, 1998. The increase in the
reserve ratio to 1.5% in December 1998 was in response to regulatory
recommendations, which did not address specific loans within the Bank's
portfolio, but rather recommended the reserve be increased to more closely match
the Company's  peer group.  The loss reserve ratio for the Company's  peer group
ranges from 1.2% to 1.5%.  Net  charge-offs  during the three month periods were
$29,000 and $45,000 for 1999 and 1998, respectively.

Management  believes  the loan loss  provision  maintains  the  reserve for loan
losses at an  appropriate  level.  The reserve for loan losses was $2,369,000 at
March 31, 1999, as compared to $1,445,000 at March 31, 1998.

Non-performing  assets (defined as loans on non-accrual  status, 90 days or more
past due, and other real estate owned) were $796,000 and $1,085,000 at March 31,
1999 and 1998,  respectively.  Management  believes  the  loans  are  adequately
secured and that no significant losses will be incurred.
<PAGE>

OTHER INCOME.  Other income  increased  24% to  $1,400,000  for the three months
ended March 31, 1999 as compared to $1,133,000  for the same period in 1998. The
increase in other  income is due to gains on the sale of  investment  securities
available for sale and an increase in service charge income on deposit  accounts
due  to  an  increase  in  average  deposits.  The  Company  utilized  overnight
borrowings  at December  31, 1998 to pay-off  longer term Federal Home Loan Bank
advances in December 1998. In January 1999,  facing the  possibility of a rising
interest  rate  environment,  the  Company  sold  approximately  $8  million  in
investments available for sale to repay the overnight borrowings.

OTHER EXPENSE.  Other expense (including ESOP Compensation  expense as discussed
below)  increased  3% to  $3,282,000  for the three  months ended March 31, 1999
compared  to  $3,184,000  for the same  period in 1998.  Salaries  and  employee
benefits,  the largest non interest  expense,  increased  12.9%. The increase in
salaries is  primarily  due to the  addition of McKenzie  State Bank in November
1998,  and of  staff to  support  the  growth  with  the new  banks.  Additional
increases were experienced in other expense resulting from the Company's overall
growth strategy.

ESOP COMPENSATION EXPENSE. The Company sponsors an Employee Stock Ownership Plan
(ESOP), a leveraged  employee-retirement  benefit plan which owns  approximately
22% of the common  stock of the  Company.  In 1998,  the ESOP debt was repaid in
full, thereby releasing all remaining  shares for allocation and reducing ESOP
compensation expense to zero for 1999.

FINANCIAL CONDITION
Total assets have remained relatively constant from December 31, 1998,
increasing $2,628,000 to $276.3 million at March 31, 1999.

Net loans and leases increased in the period from $150.9 million at December 31,
1998 to $152.1  million at March 31, 1999.  The  increase  is due to the growth
strategy of the Company and the addition of the new banks,  McKenzie  State Bank
and Oregon State Bank. McKenzie State Bank's net loans increased $1.6 million to
$3.2 million at March 31, 1999 compared to $1.6 million at December 31, 1998.

The low interest rate  environment has resulted in increased  calls on callable
agency investment securities, and has accelerated repayments on mortgage backed
investment securities.  Due to the flat yield curve, the Company has taken a
defensive posture and retained the majority of these funds in Federal funds
sold. At the time a more typical positive slope to the yield curve occurs, the
Company will increase the maturities.  Until that time, the Company does not
believe extending maturities is adequately rewarding.

The increase in premises and equipment during the first quarter of 1999 results
from expansion activities underway by the Company.  Additions represent costs
incurred at McKenzie State Bank and for the construction of the new main branch
of Security Bank in Coos Bay, Oregon.

Deposit growth has continued for the first quarter of 1999, increasing $6.6
million to $233.4 million at March 31, 1999, compared to $226.8 million at
December 31, 1998. The growth in 1999 has been predominantly in money market and
time deposits.

Securities sold under agreements to repurchase decreased $2.8 million to $7.6
million at March 31, 1999, compared to $10.4 million at December 31, 1998.  The
decrease is related to the payoff of Federal Home Loan Bank (FHLB) borrowings in
1998.  As these securities were no longer required as collateral for FHLB
borrowings, the securities were sold to reduce Federal Funds Purchased.

Other borrowings increased to $800,000 at March 31, 1999. The increase is due to
borrowings from a third party bank to complete the capitalization of Oregon
State Bank, which commenced operations April 1, 1999.

LIQUIDITY
Liquidity enables the Company to meet the withdrawals of its depositors and the
borrowing needs of its loan customers.  The Company  maintains  its  liquidity
position through maintenance of cash resources and a stable core deposit base. A
further source of liquidity is the Company's ability to borrow  funds.  The
Company maintains three unsecured lines of credit totaling $11.0 million for the
purchase of funds on an overnight  basis.  The Company is also a member of the
Federal Home loan Bank which  provides a secured line of credit in the amount of
$55.4 million, and other funding opportunities for liquidity and asset/liability
matching.  Over the past four years these lines have been used periodically.  As
of March 31, 1999 no funds were borrowed under the Company's unsecured lines of
<PAGE>

credit and no funds were  borrowed  from the  Federal  Home Loan Bank.  Interest
rates  charged on the lines are  determined  by market  factors.  The Company's
liquidity has been stable and adequate over the past several  years.  Short-term
deposits have continued to grow and excess investable cash is invested on a
short-term basis into Federal funds sold. The Company's  primary source of funds
is consumer deposits and commercial accounts.  These funds are not subject to
significant movements as a result of changing interest rates and other economic
factors, and therefore enhance the Company's long term liquidity.

CAPITAL RESOURCES
Beginning in 1990, federal regulators required the calculation of Risk-based
Capital.  This is an analysis that weights balance sheet and off-balance  sheet
items for their  inherent  risk. It requires  minimum  standards for  Risk-based
Capital by Capital Tier.  Full implementation of this analysis was required in
1992, requiring a minimum total Risk-based Capital ratio of 8.00%, a minimum
Tier 1 Capital Ratio of 4.00% and a minimum Leverage Capital Ratio of 4.00%.

At March 31, 1999, the Company's estimated regulatory capital ratios were as
follows:  Total Risk-based Capital Ratio of 17.34%, Tier 1 Capital Ratio of
16.10% and Leverage Capital Ratio of 10.82%. This was compared to 17.15%, 15.94%
and 10.72% for total Risk-based Capital Ratio, Tier 1 Capital Ratio and Leverage
Capital Ratio, respectively, at December 31, 1998.  If the Company were fully
leveraged, further growth would be restricted to the level attainable through
generation and retention of net income unless the Company were to seek
additional capital from outside sources.

YEAR 2000 ISSUES

INTRODUCTION.  The Year 2000 creates challenges with respect to the automated
systems used by financial institutions and other companies.  Many software
programs are not able to recognize the year 2000, since most programs and
systems were designed to store calendar years in the 1900's by assuming the "19"
and storing only the last two digits of the year. For example,  these  automated
systems would recognize a year stored as "00" as the year "1900", rather than as
the year "2000".  If these automated systems are not appropriately re-coded,
updated or replaced before the year 2000, they will likely confuse data, crash
or fail in some  manner.  In addition, many software programs and automated
systems will fail to recognize the year 2000 as a leap year.  The problem is not
limited to computer systems.  Year 2000 issues will potentially affect every
system that has an embedded microchip, such as automated teller machines,
elevators and vaults.

The year 2000 challenge is especially problematic for financial institutions,
since  many transactions such as  interest accruals and payments are date
sensitive.  It also may affect the operations of third parties with whom the
Company does business, including the Company's vendors, suppliers, utility
companies and customers.

THE COMPANY'S STATE OF  READINESS.  The Company is committed to addressing  
these year 2000 challenges in a prompt and responsible manner and has dedicated
resources to do so.  Management has completed an assessment of its automated
systems and has implemented a plan to resolve these issues, including purchasing
appropriate computer technology.  The Company's year 2000 compliance plan ("Y2K
Plan") has five phases. These phases are (1) project management, (2) awareness,
(3) assessment, (4) testing, and (5) renovation and implementation.  The Company
has substantially completed phases one through four, although appropriate
follow-up activities are continuing to occur, and the Company is currently
involved in the renovation and implementation phase of the Y2K Plan.

Project  Management.  The Company has assigned primary responsibility for year
2000 project management to its Vice President-Data Processing.  The Company has
also formed a year 2000 compliance committee, consisting of appropriate
representatives from its critical operational areas including each of the
affiliate banks, to assist the Vice President-Data Processing in implementing
the Y2K Plan. In addition,  the Company provides monthly reports to its Board of
Directors and to the Boards of Directors of each of its subsidiaries in order to
assist them in overseeing the Company's year 2000 readiness.

Awareness.  The Company has completed several projects designed to promote
awareness of year 2000 issues throughout our organization and our customer base.
These projects include communication through local seminars in each of the
communities the Company serves, mailing information brochures to deposit and
loan customers, providing training for lending officers and other staff, and
responding to vendor, customer, and shareholder inquiries.

<PAGE>

Assessment.  Assessment is the process of identifying all mission-critical
applications that could potentially be negatively  affected by dates in the year
2000 and beyond.  The Company's assessment phase is substantially complete.
Systems examined during this phase included telecommunications systems,
account-processing applications, and other software and hardware used in
connection with customer accounts. The Company's operations, like those of many
other companies, are intertwined with the operations of certain of its business
partners.  Accordingly, the Company's operations could be materially affected if
the operations of those companies who provide the Company with mission  critical
applications, systems, and services are materially affected.  For example, the
Company depends upon vendors who provide equipment, technology, and software to
it in connection with its business operations. Failure of these software vendors
to achieve year 2000 readiness could substantially  affect the operations of the
Company.  In  addition, lawsuits and other financial challenges materially
affecting the financial  viability of these vendors could materially affect the
Company.  In response to this concern, the Company has identified and contacted
those vendors who provide our mission-critical applications.  The Company has
assessed their year 2000 compliance  efforts and will continue to monitor their
progress as the year 2000 approaches.

Testing.  Updating and testing of the Company's mission-critical automated
systems has been completed.  All mission-critical systems were successfully
tested to verify that dates in the year 2000 are being appropriately recognized
and processed.  Testing of renovations and new systems will continue throughout
1999.

Renovation and Implementation.  This phase involves obtaining and implementing
renovated software applications provided by our vendors. As these applications
are received and implemented, the  Company will test them for year 2000
compliance.  This phase also involves upgrading and replacing automated systems
where appropriate and will continue throughout 1999. Although this phase will be
substantially complete before the end of 1999, additional follow-up activities
may take place in the year 2000 and beyond.

ESTIMATED  COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES.  The total financial
effect of these year 2000 challenges on the Company cannot be predicted with
certainty at this time.  In fact, in spite of all efforts being made to rectify
these problems, the success of these efforts cannot be predicted until the year
2000 actually  arrives.  The Company will upgrade or replace  certain  automated
systems  before the year 2000;  however some of these systems would have been
replaced before the year 2000 without regard to year 2000 compliance issues, due
to technology updates and Company expansion. In 1998, the Company established an
accrual for Year 2000 related costs incurred in 1998 of $160,000.  This accrual
was established for consulting costs associated with on-going Year 2000 efforts
and equipment replacement.

Management does not believe that expenses related to meeting the Company's year
2000 challenges will have a material effect on the  operations or  financial
performance of the Company.  However, factors beyond the control of management,
such as the effects on vendors of our mission-critical software and systems, the
effects of year 2000 issues on the  economy, and the development of the risks
identified below under "The Risks of the  Company's  Year 2000  Issues," among
other things, could  have a material effect on the operations or financial
performance of the Company.

THE RISKS OF THE  COMPANY'S  YEAR 2000 ISSUES.  The year 2000 presents certain
risks to the Company and its operations. Some of these risks are present because
the Company purchases technology applications from other parties who face year
2000 challenges. Other of these risks are inherent in the business of banking or
are  risks faced by many companies with stock traded on a national stock
exchange.  Although it is impossible to identify every possible risk that the
Company may face moving into the new millennium, Management has to date
identified the following potential risks:

     1. Commercial banks, such as the Company, may experience a contraction in
     their deposit base, if a significant amount of deposited funds are
     withdrawn by customers prior to the year 2000, and interest rates may
     increase in the latter part of 1999.  This potential deposit contraction
     could make it necessary for the Company to change its sources of funding
     and could materially impact future earnings. The Company has incorporated a
     contingency plan for addressing this situation, should it occur, into its
     asset and liability management policies. This plan includes maintaining the
<PAGE>
     ability to borrow funds in an amount at least equal to 50% of the Company's
     allowed  borrowing from the Federal Home Loan Bank of Seattle.  Significant
     demand for funds by other banks could reduce the amount of funds  available
     for the  Company to borrow. If insufficient funds are available from a
     Federal Home Loan Bank or other correspondents, the Company may also sell
     investment  securities or other liquid assets to meet liquidity  needs.
     Despite these efforts, a significant deposit contraction could materially
     impact the Company's earnings or future operations, particularly if funds
     availability at the Federal Home Loan Bank is impaired.

     2. The Company lends significant amounts to businesses in its' market area.
     If these businesses are adversely affected by year 2000 issues, their
     ability to repay loans could be impaired.  This increased credit risk could
     affect the Company's financial performance.  During the assessment phase of
     the Company's Y2K Plan, significant borrowers were identified.  Management
     is currently monitoring the year 2000 compliance efforts of these credit
     customers.

     3. The Company's operations, like those of many other companies, can be
     affected by the year 2000 triggered  failures of other companies upon whom
     the Company depends for the functioning of its automated systems.
     Accordingly, the Company's operations could be materially affected, if the
     operations of those companies who provide the Company with mission critical
     applications, systems, and services are materially affected.  As described
     previously, the Company has identified its mission-critical vendors and is
     monitoring their year 2000 compliance progress.

     4. All companies with stock traded on a national stock exchange, including
     the Company, could experience a drop in stock price as investors change
     their investment portfolios or sell stock prior to the new millennium.  At
     this time, it is impossible to predict  whether or not this will in fact be
     the case with respect to the stock of the Company or any other company.

     5. The Company's ability to operate effectively in the year 2000 could be
     affected by communications abilities and access to utilities, such as
     electricity, water, telephone, and others, to the extent access is
     interrupted due to the effects of year 2000 issues on these and other
     utilities.

THE COMPANY'S CONTINGENCY  PLANS. The Company has developed contingency plans
related to year 2000 issues.  These plans range from obtaining mission-critical
system back-up capabilities to funds management contingencies.

FORWARD LOOKING STATEMENTS.  The previous discussion, entitled "Year 2000
Issues," includes certain "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 ("PSLRA").  This statement is
included for the express  purpose of availing the Company of the  protections of
the safe harbor provisions of the PSLRA. Management's ability to predict results
or effects of issues related to the year 2000 is inherently  uncertain, and is
subject to factors that may cause actual results to differ materially from those
projected.  Factors that could affect the actual results include the possibility
that protection procedures, contingency plans, and remediation efforts will not
operate as intended, and the Company's failure to timely or completely identify
all software or hardware applications requiring remediation, unexpected costs,
and the uncertainty associated with the impact of year 2000 issues on the
banking industry and on the Company's customers, vendors, and others with whom
it does business.  Readers are cautioned not to place undue reliance on these
forward looking statements.


<PAGE>


Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

OVERVIEW.  Interest rate, credit, and operations risks are the most significant
risks impacting the Company's performance.  Other types of market risk, such as
foreign currency exchange rate risk and commodity price risk do not arise in the
normal course of the Company's business  activities.  The Company relies on loan
reviews, prudent loan underwriting standards and an adequate reserve for loan
loss to mitigate credit risk.

The Company defines interest sensitivity (or interest rate risk) as the risk
that the Company's earnings or capital will change when interest  rates change.
Market, or economic risk, by comparison, is the risk that the value of the
Company's assets will change when interest rates change.  To ensure  consistent
measurement, the  Company has developed comprehensive Asset and Liability
Management policies that are followed by all affiliate banks.

"Exposure" is the change in pre-tax earnings, over a 12-month period, when the
Fed Funds rate changes.  "Leverage" is the Company's exposure calculated as a
percent of capital and therefore is expressed in terms of a pre-tax Return on
Equity.

If the Company's earnings move in the same direction as interest rates, then the
Company is "asset  sensitive" (i.e.  interest income changes more than interest
expense).  If the  earnings move in the opposite direction from the change in
rates, then the Company is "liability  sensitive" (i.e. interest expense changes
more than interest income).

CALCULATION OF INTEREST RATE RISK. A change in earnings as a result of changes
in interest rates is caused by two factors.  First, the rate on each asset and
liability changes by a different amount and at a different time.  Second, there
are different volumes of assets and liabilities maturing and repricing (the
traditional gap). The combination causes a change in the Company's net interest
margin.

EXPOSURE CALCULATION OF INTEREST RATE RISK:  The Company will use change in
earnings exposure as its primary measure of interest rate risk. It is the policy
of the Company to control the  exposure  of the  Company's  earnings to changing
interest rates by generally maintaining a position within a reasonable range
around an "earnings neutral" or "balanced" position.  This is defined as the mix
of assets and liabilities that generate a net interest margin that is not
affected by interest rate changes.

There are three reasons for establishing a target range rather than an exact
earnings neutral position. Measuring interest rate risk is not an exact science.
We can only estimate the earnings impact of a change in rates, and this estimate
may change as the rate environment  changes (this is often called "basis risk").
Also, the mix of assets and  liabilities  available in the Company's  market may
not produce an exact earnings neutral position, thus forcing the Company to
forego good business opportunities if it must keep a totally balanced position.
Lastly, a neutral position does not allow the Company to modestly position
itself to take advantage of a rising or falling rate trend (i.e.  keeping
investments shorter when rates are rising).

There can be exceptions to this general rule. If, for example, the Company has a
liquidity or capital problem then this takes priority and the Company would
employ a strategy that protects liquidity by maintaining an asset sensitive
position (i.e. having assets that will reprice quickly to reflect a change in
interest rates). This would keep assets at current rates to allow their sale, if
needed, without recognizing a significant loss.

Interest Rate Risk Exposure/Leverage Limits:
--------------------------------------------
The Company shall normally maintain a mix of assets and liabilities that
produces interest rate risk that will change the Company's net interest income
over the next 12 months less than the following  limits, if the Fed Funds rate
changes 2%:

                       Change in ROE
                         Leverage
                         --------

      Asset sensitive      4.0%

      Liability sensitive  2.0%

<PAGE>


There is a lower risk limit for liability sensitivity because, in a liability
sensitive Company, interest rate risk and market risk move in the same
direction, thereby exaggerating the impact of changing  rates. If the Company
were asset sensitive, these two risks would tend to offset each other.

Interest rate risk is calculated  quarterly and reported to the  Asset/Liability
Management Committee and then to the respective Boards of Directors. Significant
changes in the structure of the Company's finances can be modeled during the
quarters to ensure continued compliance with these policy limits.  At no time
during 1998 were these limitations exceeded.  Management has assessed these
limits and believes that there has been no material change since December 31,
1998.

INFLATION
The primary impact of inflation on the Company's operations is increased asset
yields, deposit costs and operating overhead.  Unlike most industrial companies,
virtually all of the assets and liabilities of a financial institution are
monetary in nature.  As a result, interest rates generally have a more
significant impact on a financial institution's performance than the effects of
general levels of inflation.  Although interest rates do not necessarily move in
the same direction or to the same extent as the prices of goods and services,
increases in inflation  generally have resulted in increased interest rates. The
effects of inflation can magnify the growth of assets, and if significant, would
require that equity capital increase at a faster rate than would otherwise be
necessary.


<PAGE>



                    PART II. OTHER INFORMATION

Item 1.    Legal Proceedings.

           None.


Item 2.    Changes in Securities.

           Not applicable.


Item 3.    Defaults Upon Senior Securities.

           Not applicable.


Item 4.    Submission of Matters to a Vote of Securities Holders.

           None.


Item 5.    Other Information.

           Not applicable.


Item 6.    Exhibits and Reports on Form 8-K.

      (a)  Exhibits.
           The following exhibit is being filed here with:
           Exhibit 27 Financial Data Schedule

      (b)  Reports on Form 8-K.
           None.



<PAGE>





                            SIGNATURES


Pursuant to the requirements 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.


DATED:    April 30, 1999.

                               SECURITY BANK HOLDING COMPANY


                               By:  /s/ Charles D. Brummel         
                                   ------------------------------------
                                  Charles D. Brummel
                                  Chairman and Chief Executive Officer