Security Federal Corporation announces increase in quarterly and nine month earnings
October 23, 2017
Security Federal Corporation (“Company”) (OTCBB:SFDL), the holding company for Security Federal Bank (“Bank”), today announced results for the quarter and nine month periods ended September 30, 2017. Net income available to common shareholders increased $233,000 or 14.0% to $1.9 million or $0.65 per common share (basic) for the quarter ended September 30, 2017, compared to $1.7 million or $0.57 per common share (basic) for the same period in 2016. For the nine months ended September 30, 2017, net income available to common shareholders increased $276,000 or 5.8% to $5.0 million or $1.70 per common share (basic), compared to $4.7 million or $1.61 per common share (basic) for the same period in 2016. The increase in net income available to common shareholders for the three and nine month periods was primarily the result of increases in net interest income and non-interest income combined with the absence of preferred stock dividends. These items were partially offset by increases in the provision for loan losses and non-interest expense during the three and nine month periods ended September 30, 2017.
Net interest income increased $307,000 or 4.8% to $6.7 million for the quarter ended September 30, 2017, compared to $6.3 million for the quarter ended September 30, 2016. The average yield earned on assets increased to 3.98% for the third quarter in 2017 compared to 3.89% for the same quarter last year. Consistent with this increase, interest income increased $599,000 or 8.4% to $7.8 million for the quarter ended September 30, 2017 compared to $7.2 million for the same quarter in 2016. Total interest expense increased $292,000 or 36.3% to $1.1 million for the quarter ended September 30, 2017 compared to $805,000 for the quarter ended September 30, 2016.
For the nine months ended September 30, 2017, net interest income increased $376,000 or 2.0% to $19.1 million compared to $18.7 million during the nine months ended September 30, 2016. Total interest income increased $856,000 or 4.0% to $22.2 million for the nine months ended September 30, 2017 compared to $21.3 million for the same period in 2016. Total interest expense increased $480,000 or 18.5% to $3.1 million for the nine months ended September 30, 2017 compared to $2.6 million for the nine months ended September 30, 2016.
The provision for loan losses was $100,000 for the three and nine months ended September 30, 2017 compared to no provision for the same three and nine month period in 2016. The Company had net charge-offs of $287,000 for the nine months ended September 30, 2017 compared to net charge-offs of $164,000 for the nine months ended September 30, 2016. Non-performing assets were $9.4 million at September 30, 2017 compared to $8.2 million at December 31, 2016 and $9.1 million at September 30, 2016. The allowance as a percentage of gross loans was 2.14% at September 30, 2017.
Non-interest income increased $581,000 or 32.6% to $2.4 million for the quarter ended September 30, 2017 from $1.8 million for the same period in 2016. The increase was primarily the result of an increase in bank owned life insurance income. During the quarter ended September 30, 2017, the Bank recognized $654,000 in death benefits in addition to $374,000 in income related to an increase in the cash surrender value of the policies.
For the nine months ended September 30, 2017, non-interest income increased $719,000 or 14.2% to $5.8 million primarily due to increases in bank owned life insurance income and gain on sale of loans, which were partially offset by a $265,000 decrease in grant income. The Company received a Bank Enterprise Award (“BEA”) grant from the United States Department of the Treasury (“US Treasury”) in 2016 in recognition of its continued commitment to community development in economically distressed areas. Our commitment to these areas has continued in 2017 and we anticipate receiving another comparable BEA grant later this year.
Non-interest expense increased $875,000 or 15.4% to $6.6 million for the quarter ended September 30, 2017 compared to $5.7 million for the same quarter in 2016. The increase was primarily due to an increase in salaries and employee benefits expense, which was partially offset by a decrease in prepayment penalties on Federal Home Loan Bank (“FHLB”) advances. The Bank prepaid $5.0 million in FHLB advances and incurred $261,000 in prepayment penalties during the three months ended September 30, 2016 compared to no prepayment penalties during the same period in 2017.
For the nine months ended September 30, 2017, non-interest expense increased $1.3 million or 7.9% to $18.3 million compared to $16.9 million for the same period in 2016. The largest increases were in salaries and employee benefits expense and net cost on the operation of other real estate owned during the nine months ended September 30, 2017. The increases in non-interest expense were partially offset by a decrease in prepayment penalties on FHLB advances. The Bank prepaid $17.9 million in higher rate FHLB advances and incurred $789,000 in prepayment penalties during the nine months ended September 30, 2016 compared to no prepayment penalties during the same period in 2017.
Total assets increased $48.5 million or 6.0% to $861.1 million at September 30, 2017 from $812.7 million at December 31, 2016. Net loans receivable increased $16.0 million or 4.4% to $375.7 million at September 30, 2017 from $359.7 million at December 31, 2016. Investment and mortgage-backed securities increased $26.3 million or 6.8% to $414.0 million at September 30, 2017 from $387.6 million at December 31, 2016. Total deposits increased $47.5 million or 7.3% to $701.6 million at September 30, 2017 compared to $654.1 million at December 31, 2016. Total borrowings decreased $7.7 million or 9.4% to $74.3 million at September 30, 2017 from $82.0 million at December 31, 2016.
Security Federal Bank has 15 full service branch locations in Aiken, Ballentine, Clearwater, Columbia, Graniteville, Langley, Lexington, North Augusta, Wagener 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.
