SOURCE: Security Federal Corporation

July 27, 2015 13:36 ET

Security Federal Corporation Announces Increase in Quarterly and Six Month Earnings

AIKEN, SC--(Marketwired - July 27, 2015) - Security Federal Corporation ("Company") (OTCBB: SFDL), the holding company for Security Federal Bank ("Bank"), today announced results for the quarter and six month periods ended June 30, 2015. The Company reported net income available to common shareholders of $1.4 million or $0.48 per common share (basic) for the quarter ended June 30, 2015, an increase of $46,000 or 3.4% compared to the quarter ended June 30, 2014. The increase in earnings is the result of an increase in non-interest income offset slightly by a decrease in net interest income after the provision for loan losses.

The Company's net interest spread increased nine basis points to 3.14% for the quarter ended June 30, 2015 compared to the same period in 2014. The improvement in net interest spread was achieved through lower cost of funds as total interest expense decreased 29.1% for the quarter ended June 30, 2015 compared to the same period in the prior year. There was no provision for loan losses for the second quarter of 2015, compared to $100,000 for the second quarter of 2014. The decrease in the provision for loan losses is the result of a decrease in net charge-offs. Net charge-offs declined $711,000 or 85.3% to $123,000 for the second quarter of 2015 from $834,000 for the comparable quarter in 2014, with the ratio of annualized net charge-offs to gross loans decreasing to 0.15% for the second quarter of 2015 from 0.94% for the same quarter one year ago.

For the six months ended June 30, 2015, net income available to common shareholders increased $249,000 or 9.7% to $2.8 million or $0.95 per common share (basic), compared to net income available to common shareholders of $2.6 million or $0.87 per common share (basic) for the same period in 2014. The increase in earnings for the six month period is primarily a result of an increase in non-interest income combined with an increase in net interest income after the provision for loan losses.

The Company's net interest spread increased 14 basis points to 3.07% for the six months ended June 30, 2015 compared to the same period in 2014. The improvement in net interest spread was achieved through lower cost of funds as total interest expense decreased 26.7% for the six months ended June 30, 2015 compared to the same period in the prior year. The decrease in interest expense was partially offset by slightly lower interest income.

The provision for loan losses decreased to $100,000 for the six months ended June 30, 2015 compared to $200,000 for the same period in 2014. Net charge-offs for the six months ended June 30, 2015 were $662,000, a decline of $668,000 or 50.2% from $1.3 million for the comparable period in 2014, with the ratio of annualized net charge-offs to gross loans decreasing to 0.41% for the six months ended June 30, 2015 from 0.75% for the same period one year ago.

Non-interest income increased $1.2 million or 40.8% to $4.0 million for the six months ended June 30, 2015 from $2.9 million for the same period in 2014. The increase is primarily the result of a $1.6 million increase in net gain on sale of investments partially offset by a $300,000 decrease in grant income and a $230,000 decrease in bank owned life insurance income. The Bank elected to sell investments and use the gain to offset a $788,000 prepayment penalty on Federal Home Loan Bank ("FHLB") advances. During the six months ended June 30, 2015 the Bank prepaid $15.0 million in FHLB advances with a weighted average rate of 4.8% in order to reduce interest expense in future periods and improve net interest spread. This prepayment penalty was the primary reason for the increase in non-interest expense, which increased $947,000 or 8.9% to $11.6 million for the six months ended June 30, 2015 compared to $10.6 million for the six months ended June 30, 2014.

Total assets at June 30, 2015 were $803.0 million, a decrease of $22.3 million or 2.7%, compared to $825.4 million at December 31, 2014. Net loans receivable decreased $23.3 million or 6.9% to $316.5 million at June 30, 2015 from $339.9 million at December 31, 2014. Total deposits decreased $910,000 or 0.1% to $659.2 million at June 30, 2015 compared to $660.1 million at December 31, 2014. FHLB advances, other borrowings, convertible senior debentures and subordinated debentures decreased $22.1 million or 30.5% to $50.5 million at June 30, 2015 from $72.7 million at December 31, 2014.

Security Federal Bank has 13 full service branch locations in Aiken, Clearwater, Graniteville, Langley, Lexington, North Augusta, Wagener, Columbia and West Columbia, South Carolina and Evans, Georgia. A full range of financial services, including trust and investments, are provided by the Bank and insurance services are provided by the Bank's wholly owned subsidiary, Security Federal Insurance, Inc.

The Bank held a groundbreaking ceremony on January 15, 2015 for its newest branch in Ballentine, South Carolina. The new location, scheduled for opening later this year, will be a full-service branch offering depository banking as well as commercial, personal and mortgage lending.

Forward-looking statements:

Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding the Company's mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. The Company's actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to, interest rate fluctuations; economic conditions in the Company's primary market area; demand for residential, commercial business and commercial real estate, consumer, and other types of loans; success of new products; competitive conditions between banks and non-bank financial service providers; legislative or regulatory changes that adversely affect the Company's business including changes in regulatory policies and principles, and changes related to the Basel III requirements, the impact of the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations, including the interpretation of regulatory capital or other rules; the ability to attract and retain deposits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; technology factors affecting operations; pricing of products and services; and other risks detailed in the Company's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2014. Accordingly, these factors should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. The Company undertakes no responsibility to update or revise any forward-looking statement.

             
SECURITY FEDERAL CORPORATION
UNAUDITED CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, except for Earnings per Share and Ratios)
             
   INCOME STATEMENT HIGHLIGHTS
             
   Quarter Ended June 30,  Six Months Ended June 30,
   2015  2014  2015  2014
Total interest income  $7,066  $7,637  $14,015  $14,830
                 
Total interest expense   1,068   1,507   2,241   3,057
                 
Net interest income   5,998   6,130   11,774   11,773
                 
Provision for loan losses   0   100   100   200
                 
Net interest income after provision for loan losses   5,998   6,030   11,674   11,573
                 
Non-interest income   1,387   1,332   4,039   2,868
                 
Non-interest expense   5,335   5,317   11,590   10,643
                 
Income before income taxes   2,050   2,045   4,123   3,798
                 
Provision for income taxes   527   568   1,095   1,019
                 
Net income  $1,523  $1,477  $3,028  $2,779
                 
Preferred stock dividends   110   110   220   220
                 
Net income available to common shareholders  $1,413  $1,367  $2,808  $2,559
                 
Earnings per common share (basic)  $0.48  $0.46  $0.95  $0.87
                 
Earnings per common share (diluted)  $0.46  $0.44  $0.91  $0.83
                 
             
             
   BALANCE SHEET HIGHLIGHTS  
              
   June 30, 2015   December 31, 2014   %  
              
Total assets  $803,029   $825,364   -2.7 %
                
Cash and cash equivalents   9,521    10,193   -6.6 %
                
Total loans receivable, net   316,548    339,874   -6.9 %
                
Investment & mortgage-backed securities   427,934    429,701   -0.4 %
                
Deposits   659,205    660,115   -0.1 %
                
Borrowings   50,524    72,662   -30.5 %
                
Shareholders' equity   87,492    87,435   0.1 %
                
Book value per share  $22.23   $22.23   0.0 %
                
Total risk based capital ratio (1)   25.16 %  24.43 % 3.0 %
                
Common equity tier one ratio (1)   23.89 %  N/A   N/A  
                
Non performing assets   13,510    16,971   -20.4 %
                
Non performing assets to total assets   1.68 %  2.06 % -18.4 %
                
Allowance as a percentage of gross loans, held for investment   2.42 %  2.41 % 0.4 %
                
(1)- This ratio is calculated using Bank only information and not consolidated information  
     

Contact Information

  • For additional information, contact:
    Jessica Cummins
    Chief Financial Officer
    (803) 641-3000