<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
( ) 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: 0-16120
SECURITY FEDERAL CORPORATION
Delaware 57-0858504
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1705 Whiskey Road, Aiken, South Carolina 29801
(Address of Principal Executive Office) (Zip code)
(803) 641-3000
(Registrant's telephone number, including area code)
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 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
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of
the latest practical date.
Class Outstanding Shares at
Common Stock June 30, 1995
$0.01 Par Value 409,246
<PAGE>
INDEX
SECURITY FEDERAL CORPORATION
PART I - FINANCIAL INFORMATION (UNAUDITED) PAGE
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheet at
June 30, 1995 and March 31, 1995 1
Consolidated Statement of Income for the
Three months ended June 30, 1995 and 1994 2
Consolidated Statement of Shareholders' Equity 3
Consolidated Statement of Cash Flows 4-5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-15
PART II. OTHER INFORMATION
Other Information 16
Signatures 17
SCHEDULES OMITTED
All schedules other than those indicated above are omitted because of
the absence of the conditions under which they are required or
because the information is included in the financial statements and
related notes.
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<CAPTION>
Security Federal Corporation and Subsidiary
CONSOLIDATED BALANCE SHEET
JUNE 30
1995 MARCH 31
(unaudited) 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 7,305,731 $ 5,697,391
Investments and mortgage-backed securities:
Available for Sale 3,969,983 3,930,626
Held to Maturity 38,519,305 38,596,245
Loans Receivable net:
Held for Sale 398,869 776,631
Held for Investment 151,423,208 148,200,563
151,822,077 148,977,194
Accrued interest receivable:
Loans 773,324 755,265
Mortgage-backed securities 22,507 22,328
Investments 542,259 464,229
Premises and equipment, net 3,120,016 3,251,171
Federal Home Loan Bank stock, at cost 1,509,900 1,415,100
Real estate acquired in settlement of loans 1,724,300 1,531,251
Real estate held for development and sale 1,385,555 1,442,723
Other assets 3,958,016 3,865,211
Total Assets 214,652,973 209,948,734
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposit Accounts $ 165,870,760 $166,274,637
Advances from Federal Home Loan Bank 29,898,000 26,033,000
Advance payments by borrowers
for taxes and insurance 541,291 442,456
Other Liabilities 3,710,810 2,709,171
Total liabilities $ 200,020,861 $195,459,264
Stockholders' Equity:
Serial preferred stock, $.01 par value;
authorized shares - 200,000
issued and outstanding, none
Common stock, $.01 par value;
authorized shares 1,000,000
issued and outstanding shares 409,246 4,092 4,092
Additional paid-in capital 3,879,922 3,879,922
Unrealized net loss on securities available
for sale, net of income taxes (24,904) (51,155)
Retained earnings, substantially restricted 10,773,002 10,656,611
Total stockholders' equity 14,632,112 14,489,470
Total liabilities and stockholders' equity $ 214,652,973 $209,948,734
</TABLE>
See accompanying notes to Consolidated Financial Statements.
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<CAPTION>
Security Federal Corporation and Subsidiary
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
Three Months Ended
June 30
1995 1994
<S> <C> <C>
Interest Income:
Loans $ 3,258,689 $ 2,653,479
Mortgage-backed securities 28,510 50,755
Investment securities 532,989 580,019
Other 20,238 17,816
Total interest income 3,840,426 3,302,069
Interest on deposits:
NOW and money market accounts 275,668 284,986
Passbook accounts 94,663 104,147
Certificate accounts 1,274,240 954,405
Advances and other borrowed money 437,665 183,166
Total interest expense 2,082,236 1,526,704
Net interest income 1,758,190 1,775,365
Provision for loan losses 75,000 75,000
Net interest income after provision for
loan losses 1,683,190 1,700,365
Other income:
Net gain on sale of investments 0 0
Gain on sale of loans 17,407 77,520
Loan servicing fees 77,692 79,423
Service fees on deposit accounts 126,250 139,024
Income from real estate operations 51,425 40,419
Other 64,951 88,239
Total other income 337,725 424,625
General and administrative expenses:
Compensation and employee benefits 893,150 864,187
Occupancy 95,206 104,253
Advertising 27,728 43,518
Depreciation and maintenance of equipment 165,679 183,630
Amortization of intangibles 109,029 84,126
FDIC insurance premiums 116,310 115,110
Other 422,098 332,013
Total general and administrative expenses 1,829,200 1,726,837
Income before income taxes 191,715 398,153
Provision for income taxes 54,868 130,464
Net income $ 136,847 267,689
Net income per common share $ 0.33 $ 0.68
Cash dividend on common stock $ 0.05 $ 0.05
Weighted average shares outstanding $ 409,246 $ 395,674
</TABLE>
See accompanying notes to consolidated financial statements
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<TABLE>
<CAPTION>
Security Federal Corporation and Subsidiary
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the three months ended June 30, 1995
(unaudited)
Unrealized
Net Loss
Additional on Securities
Common Paid-In Available Retained
Stock Capital for Sale Earnings Total
<S> <C> <C> <C> <C>
Beginning balance
March 31, 1995 $ 4,092 3,879,922 (51,155) 10,656,611 14,489,470
Net income ----- ----- ----- 136,847 136,847
Cash dividend ----- ----- ----- (20,456) (20,456)
Change in unrealized
net loss on
on securities
available for sale ----- ----- 26,251 ----- 26,251
Ending balance
June 30, 1995 $ 4,092 3,879,922 (24,904) 10,773,002 14,632,112
</TABLE>
See accompanying notes to consolidated financial statements
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<CAPTION>
Security Federal Corporation And Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Three Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 136,847 $ 267,689
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation Expense 151,918 142,663
Amortization of purchase accounting adjustments 116,310 115,110
Discount accretion and premium amortization 52,023 111,096
Provisions for loan losses 75,000 75,000
Gain on sale of loans (17,407) (77,520)
Gain on sale of Real Estate (25,950) (67,141)
Amortization of deferred fees on loans (19,113) 137,524
Proceeds from sale of loans held for sale 1,589,674 5,877,809
Origination of loans for sale (1,194,505) (3,523,889)
(Increase) decrease in accrued interest
receivable:
Loans (18,059) (17,562)
Mortgage-backed securities (179) (6,939)
Investments (78,030) (74,101)
Increase (Decrease) in advance payments
by borrowers 98,835 141,164
Other, net 583,414 1,120,315
Net cash provided (used) by operating activities $ 1,450,778 4,221,218
Cash flows from investing activities
Principal repayments on mortgage-backed securities 27,872 297,947
Purchase of investment securities 0 (500,000)
Proceeds from maturities of investment securities 0 700,000
Purchase of FHLB Stock (94,800) 0
(Increase) Decrease in loans to customers (3,278,532) (13,107,424)
Investment in real estate held for development (104,632) (316,175)
Proceeds from sale of real estate held for development 187,750 201,802
Proceeds from sale of real estate acquired
through foreclosure 0 237,006
Purchase of premises and equipment (20,763) (98,189)
Net cash provided (used) by investing activities $ (3,283,105) $ (12,585,033)
</TABLE>
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<TABLE>
<CAPTION>
(Continued)
<S> <C> <C>
Cash flows from financing activities:
Increase(Decrease) in deposit accounts $ (403,877) $ (2,139,858)
Proceeds from FHLB advances 41,300,000 25,500,000
Repayment of FHLB advances (37,435,000) (15,000,000)
Dividends to share holders (20,456) (19,689)
Exercise of stock options 0 155,270
Net cash provided by financing activities 3,440,667 8,495,723
Net increase in cash and cash equivalents 1,608,340 131,908
Cash and cash equivalents at beginning of period 5,697,391 8,631,817
Cash and cash equivalents at end of period 7,305,731 8,763,725
Supplemental disclosure of cash flow information:
Cash paid during the period for :
Interest $ 1,630,524 $ 1,350,190
Income taxes $ 0 $ 0
Additions to real estate acquired
through foreclosure $ 193,049 $ 181,546
Unrealized net loss on securities
available for sale $ 24,904 $ 37,039
</TABLE>
See accompanying notes to Consolidated Financial Statements.
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Security Federal Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB and
therefore do not include all disclosures necessary for a complete
presentation of financial condition, results of operations and cash
flows in conformity with general accepted accounting principles.
Such statements are unaudited but, in the opinion of management,
reflect all adjustments, all of which are of a normal recurring
nature, necessary for a fair presentation of results for the selected
interim periods. Users of financial information produced for interim
periods are encouraged to refer to the footnotes contained in The
Annual Report to Stockholders when reviewing interim financial
statements. The results of operations for the period ended June 30,
1995 are not necessarily indicative of the results which may be
expected for the entire fiscal year.
2. Principles of Consolidation
The accompanying unaudited consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary, Security
Federal Savings Bank of South Carolina (the "Bank") and its wholly
owned subsidiary Security Financial Services Corporation. The
principal business activity of the service corporation is real estate
sales and development. In consolidation, all significant
intercompany items and transactions have been eliminated.
3. Acquisition
On October 21, 1993, the Bank acquired certain assets and certain
deposits and other liabilities of four branch offices of NationsBank
of South Carolina, NA (the "branches"). In connection with the
purchase, the Bank paid a deposit premium of approximately $4.4
million. The Bank accounted for the acquisition under the purchase
method of accounting. The purchase method of accounting resulted in
the adjustment of the assets and the liabilities acquired based
upon their fair market values on the date of acquisition. The Bank's
consolidated statements of income include the operating results of
the acquired branches.
At October 31, 1993, the respective branch locations had total assets
of $22.0 million and deposits and other liabilities of $61.1 million.
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<CAPTION>
Security Federal Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Notes to Consolidated Financial Statements (continued)
4. Investments and Mortgage-backed Securities, Held to Maturity
The amortized cost, gross unrealized gains, gross unrealized losses and market
values of investment securities held to maturity are as follows:
June 30, 1995
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U S Government and agency
obligations 36,836,826 0 751,264 36,085,562
Mortgage-backed securities 1,682,479 22,729 7,817 1,697,391
March 31, 1995
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U S Government and agency
obligations 36,885,640 0 1,516,407 35,369,233
Mortgage-backed securities 1,710,605 18,979 18,179 1,711,405
5. Investments and Mortgage-backed Securities, Available for Sale
The amortized cost, gross unrealized gains, gross unrealized losses and market
values of investment securities available for sale are as follows:
June 30, 1995
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
US Government and agency
obligations 4,010,125 0 40,142 3,969,983
Mortgage-backed securities 0 0 0 0
March 31, 1995
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
US Government and agency
obligations 4,013,080 0 82,454 3,930,626
Mortgage-backed securities 0 0 0 0
</TABLE>
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<TABLE>
<CAPTION>
Security Federal Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Notes to Consolidated Financial Statements (continued)
6. Loans Receivable, Net
Loans receivable, net at June 30, 1995, consisted of the following:
Loans held for sale:
Loans held for sale were $398,869 and $776,631 at June 30, 1995 and
March 31, 1995 respectively.
Loans held for investment: June 30, 1995 March 31, 1995
<S> <C> <C>
Residential real estate 66,930,617 66,226,289
Consumer 43,973,783 44,089,104
Commercial real estate 12,442,958 13,007,516
Commercial business 31,876,872 29,718,456
155,224,230 153,041,365
Less:
Allowance for loan loss 2,029,211 1,955,119
Loans in process 1,304,964 2,419,433
Deferred loan fees 466,847 466,250
3,801,022 4,840,802
151,423,208 148,200,563
The following is a reconciliation of the allowance for possible loan losses:
June 30, 1995
Beginning balance 1,955,119
Provision 75,000
Charge-offs (6,919)
Recoveries 6,011
Ending balance 2,029,211
7. Deposits
A summary of deposit accounts by type with weighted average rate are as follows:
June 30, 1995 March 31, 1995
Balance Rate Balance Rate
<S> <C> <C> <C> <C> Demand Accounts:
Demand Accounts:
Now 40,093,635 1.36% 41,211,492 1.40%
Money Market 15,548,618 3.40% 16,776,207 3.27%
Regular Savings 14,619,349 2.61% 14,491,809 2.61%
70,261,602 2.08% 72,479,508 2.07%
Certificate Accounts:
0 - 4.99% 24,746,970 44,023,933
5.00 - 6.99% 69,430,332 48,182,486
7.00 - 8.99% 1,431,856 1,588,710
Total certificates of deposit 95,609,158 5.98% 93,795,129 5.17%
Total deposit accounts 165,870,760 4.33% 166,274,637 3.82%
</TABLE>
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<TABLE>
<CAPTION>
Security Federal Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Notes to Consolidated Financial Statements (continued)
8. Federal Home Loan Advances
Federal Home Loan Bank Advances are summarized by year of maturity and weighted
average interest rate in the table below:
June 30, 1995 March 31, 1995
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
Fiscal
Year Due
1996 23,816,000 6.22% 19,951,000 6.40%
1997 3,414,000 6.56% 3,414,000 6.56%
1998 452,000 8.60% 452,000 8.60%
1999 490,000 8.65% 490,000 8.65%
2000 and thereafter 1,726,000 8.59% 1,726,000 8.59%
29,898,000 6.48% 26,033,000 6.65%
9. Regulatory Matters
The following table reconciles the Bank's stockholders' equity to its various
regulatory capital positions:
June 30, 1995 March 31, 1995
<S> <C> <C>
Bank's Stockholders' equity 14,154 13,981
Unrealized loss on available for sale
securities, net of tax 25 51
Reduction for nonqualifying assets (987) (1,119)
Reduction for goodwill and other
intangibles (3,261) (3,376)
Tangible capital 9,931 9,537
Qualifying core deposits and
intangible assets 1,301 1,361
Core capital 11,232 10,898
Supplemental capital 1,800 1,756
Risk-based capital 13,032 12,654
The following table compares the Bank's capital levels relative to the requirements applicable
under FIRREA at June 30, 1995. (dollars in thousands)
Amount Percent Actual Excess
Required Required Amount Percent Excess Percent
<S> <C> <C> <C> <C> <C> <C>
Tangible capital 3,151 1.5% 9,931 4.73% 6,780 3.23%
Core capital 6,341 3.0% 11,232 5.31% 4,891 2.31%
Risk-based capital 11,517 8.0% 13,032 9.05% 1,515 1.05%
</TABLE>
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<PAGE>
Security Federal Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Changes in Financial Condition
Total assets of the Company increased $4.7 million or 2.2% during the
three months ended June 30, 1995, primarily due to an increase of
$3.2 million in loans held for investment. Cash and cash equivalents
increased $1.6 million, while investments and mortgage-backed
securities remained steady at a balance of $42.5 million.
Federal Home Loan Bank stock increased 6.7% during the three months
ended June 30, 1995, due to an increase in the required stock amount
caused by an increase in Federal Home Loan Bank advances. Real
estate acquired through foreclosure increased $193,049 mainly due to
capital improvements on an acquired real estate development. Real
estate acquired for development decreased $57,168 during the period
due to sales of real estate.
Deposits decreased $403,877 during the June 1995 quarter, while
Federal Home Loan Bank advances grew $3.9 million or 14.9% in order
to fund the Bank's growth. Other liabilities increased $1.0 million
due mainly to an increase in accrued interest payable on deposits during
the three months ended June 30, 1995.
The Board of Directors declared the eighteenth consecutive quarterly
dividend of $.05 per share in May 1995, which totalled $20,456.
Unrealized net losses on securities available for sale decreased by
$26,251 during the three months ended June 30, 1995. Net income for
the quarter was $136,847. These items combined to increase the
Company's stockholders' equity by $142,642 or 1.0% during the three
months ended June 30, 1995. Book value per share stood at $35.75
compared to $35.41 at March 31, 1995.
Liquidity and Capital Resources
In accordance with the Office of Thrift Supervision regulations, the
Bank is required to maintain a liquidity ratio at specified levels
which are subject to change. Currently, a minimum of 5.0% of the
combined total of deposits and certain borrowings must be maintained
in the form of cash or eligible investments. During the three months
ended June 30, 1995, Security Federal maintained an average liquidity
of 6.38% compared to 19.2% for the same period in 1994. This
decrease is due to the increase in demand for adjustable rate
mortgage loans, which are held for investment, and increases in
originations of consumer and commercial loans. The Bank's current
liquidity level is in line with management's objectives and deemed
adequate to meet requirements of normal operations, potential deposit
outflows and loan demand while still allowing for optimal investment
of funds and return on assets.
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Security Federal Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Liquidity and Capital Resources (continued)
Loan repayments and maturities of investments are a significant
source of funds to the Bank, whereas loan disbursements are a primary
use of Security Federal's funds. During the three months ended June
30, 1995, loan disbursements exceeded loan repayments resulting in a
$2.8 million or 1.9% increase in total net loans receivable.
Deposits and other borrowings are also an important source of funds
for the Bank. During the three month period ended June 30, 1995,
deposits decreased $403,877 while Federal Home Loan Bank advances
increased $3.9 million. At June 30, 1995, Security Federal has $74.7
million of certificates of deposit coming due within one year. Based
on previous experience, a major portion of these certificates will be
redeposited.
Capital resources at June 30, 1995 are sufficient to meet outstanding
mortgage loan commitments of $663,000 and unused lines of credit of
$24.6 million. Management believes that the Bank's short-term and
long-term liquidity needs will continue to be supported by the Bank's
deposit base and borrowing capacity.
Accounting and Reporting Changes
Financial Accounting Standards Board ("FASB") Statement 106,
"Employers Accounting for Post-retirement Benefits Other Than
Pensions," became effective for the Bank beginning in fiscal 1994.
Since the Bank does not offer any post-retirement benefits other than
pensions, this new standard did not impact the Bank.
FASB Statement 107, "Disclosure about Fair Value Instruments"
became effective for the Bank for the fiscal year ended March 31,
1996. FASB No. 107 will require the Bank to disclose the fair value
of financial instruments.
In May 1993, the FASB issued Statement No. 114 "Accounting by
Creditors for Impairment of a Loan" which became effective for
the Bank beginning April 1, 1995. This statement requires a lender
to consider a loan to be impaired if the lender believes it is
probable that it will be unable to collect all principal and interest
due according to the contractual terms of the loan. If a loan is
impaired, the lender will be required to record a loan valuation
allowance equal to the present value of the estimated future cash
flows discounted at the loan's effective rate. This accounting
change will significantly change the troubled debt restructuring
accounting by lenders presently allowed under FASB Statement 15.
Adoption of this statement will not have a material adverse effect on
the financial condition or results of operation of the Bank.
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Security Federal Corporation and Subsidiary
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Accounting and Reporting Changes (continued)
In May 1993, the FASB issued Statement 115 "Accounting for Certain
Investments in Debt and Equity Securities." The statement expands
the required use of fair value accounting for investments in debt and
equity securities, and allows debt securities to be classified as
"held to maturity" and reported in financial statements at amortized
cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Furthermore, the statement
makes clear that securities which might be sold in response to
changes in market interest rates, changes in the security's repayment
risk, increase in loan demand, or other similar factors cannot be
classified as "held to maturity." Adoption of this statement on
March 31, 1994 did not have a material adverse effect on the
financial condition or results of operation of the Bank.
In October 1994, the FASB issued SFAS 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial
Instruments." The Statement requires disclosures about amounts,
nature, and terms of derivative financial instruments. The statement
amends SFAS 105 "Disclosure of Information about Financial
Instruments with Off-Balance-Sheet Risk and Financial Instruments."
The statement is effective for the Association for the fiscal year
ending March 31, 1996. In light of the Bank's current portfolio,
this statement is not expected to have a significant impact on the
Bank.
In May, 1995, the FASB issued Statement 122, "Accounting for Mortgage
Servicing Rights, an amendment of FASB Statement No. 65." The
Statement requires that rights to service mortgage loans for others
be recognized as a separate asset, however those rights are acquired.
The Statement also requires that an entity assess its capitalized
mortgage servicing rights for impairment based on the fair value of
those rights. The Statement applies prospectively in the Bank's
fiscal year ended March 31, 1997 to transactions in which an
enterprise sells or securitizes mortgage loans with servicing rights
retained and to impairment evaluations of all amounts capitalized as
mortgage servicing rights, including those purchased prior to
adoption of the Statement. Based on the Bank's current mortgage
banking activities, this Statement is not expected to have a material
impact on the Bank.
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<PAGE>
Security Federal Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Impact of Inflation and Changing Prices
The consolidated financial statements, related notes, and other
financial information presented herein have been prepared in
accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results
in terms of historical dollars, without considering changes in
relative purchasing power over time due to inflation. Unlike most
industrial companies, substantially 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 does the effect of
inflation.
RESULTS OF OPERATIONS
Net Income
Security Federal's net income decreased $130,842 or 48.9% to $136,847
for the three months ended June 30, 1995, compared to the same period
in 1994 primarily due to a decrease in other income and an increase
in general and administrative expenses.
Net Interest Income
Net interest income decreased by $17,175 or 1.0% during the three
months ended June 30, 1995, compared to the same period in 1994 due
primarily to higher rates paid on certificates of deposit and
increases in volume and rates on Federal Home Loan Bank advances,
offset almost in full by increased yields and balances in net loans
outstanding.
Total interest income increased $538,357 or 16.3% during the three
months ended June 30, 1995. Interest income on loans increased
$605,210 or 22.8% during the period while interest income on
mortgage-backed securities decreased $22,245 due to principal
payments and no additional investments. Interest income on U.S.
government and agency securities decreased by $47,030 during the June
1995 quarter compared to the same period in 1994 due to lower
balances in those investments.
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<PAGE>
Security Federal Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Net Interest Income (continued)
Total interest expenses increased $555,532 or 36.4% during the three
month period ended June 30, 1995. Interest on NOW, money market
accounts, and regular savings accounts decreased by $18,802 while
interest expense on certificate accounts increased by $319,835 or
33.5% due to increased rates paid on renewing and new certificates.
Interest expense on Federal Home Loan Bank advances increased by
$254,499 due to an increase in advance balances and an increase in
interest rates paid on advances.
Provision for Loan Losses
Security Federal's provision for loan losses remained the same for
the June quarter in both 1995 and 1994 at $75,000. During the three
months ended June 30, 1995, the Bank had net charge-offs of $908
compared to $13,994 for the three months ended June 30, 1994. The
Bank stops accruing interest on any loan that is 60 or more days
delinquent. Non-accrual loans at June 30, 1995 were $749,000 while
they were $708,000 a year earlier. The allowance for loan losses as
a percentage of total loans was 1.32% at June 30, 1995 and 1.31% at
June 30, 1994. The Aiken area's largest employer, the Savannah River
Site, has begun reducing its work force which has led to some
uncertainties for the local economy and slower real estate sales.
Future additions to the Bank's allowance for loan losses are
dependent on the performance of the Bank's loan portfolio, the
economy, changes in real estate values, and interest rates. There
can be no assurance that additions to the allowance will not be
required in future periods. Management continues to monitor its loan
portfolio for the impact of local economic changes.
Other Income
Total other income decreased $86,900 or 20.5% in the three months
ended June 30, 1995 compared to the June 1994 period primarily due to
a decrease in the gain on sale of loans.
During the June 1995 quarter, the Bank's gain on sale of loans
decreased to $17,407 from $77,520 for the same period in 1994, for a
decrease of $60,113. This is due to a decrease in the origination of
fixed rate mortgage loans, which are generally held for sale. The
Bank has concentrated its efforts in the mortgage loan area in the
origination of adjustable rate loans, which are held for investment.
- 14 -
<PAGE>
Security Federal Corporation and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Other Income (continued)
Service fees on deposit accounts decreased by $12,774 or 9.2% during
the three months ended June 30, 1995 compared to the same period last
year. Income from real estate operations increased $11,006 or 27.2%.
Other income, which encompasses commissions on credit life insurance,
safe deposit box rental income, and miscellaneous fees, decreased
$23,288 or 26.4% during the June 1995 quarter compared to the same
period in 1994.
General and Administrative Expenses
General and administrative expenses increased $102,363 or 5.9% due
mainly to increases in compensation and benefits, FDIC premiums, and
other expenses, offset partially by decreases in occupancy,
advertising, and depreciation and maintenance of equipment during the
three month period ended June 30, 1995 compared to the same period
last year.
Compensation and employee benefits increased 3.4% during the three
months ended June 30, 1995, compared to the same period in 1994 due
to normal cost of living increases. Occupancy expenses decreased
$9,047 and advertising decreased $15,790 during the period.
Depreciation and maintenance of equipment decreased $17,951 during
the June 1995 quarter compared to 1994, while FDIC premiums on
deposits increased $24,903. The amortization of intangibles arising
from the October 1993 branch acquisitions were $116,310 in the three
months ended June 30, 1995, and $115,110 during the same period in
1994. Other expenses increased $90,085 during this period due to
data processing costs which were outsourced in July 1994, and thus
not reflected in the June 1994 quarter.
- 15 -
<PAGE>
Security Federal Corporation and Subsidiary
OTHER INFORMATION
Item 1 Legal Proceedings
The Corporation is not engaged in any legal proceedings of a
material nature at the present time. From time to time, it is
a party to legal proceedings in the ordinary course of
business wherein it enforces its security interest in mortgage
loans it has made.
Item 2 Changes in Securities
Not applicable.
Item 3 Defaults upon Senior Securities
Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
The election of directors was presented for vote to
Shareholders on July 18, 1995. Votes for Gasper L. Toole, III
were as follows: 237,606 votes for, 50 votes withheld, and
9,663 broker non-votes. Votes for Thomas L. Moore were as
follows: 237,431 votes for, 225 votes withheld, and 9,663
broker non-votes.
Item 5 Other Information
None.
Item 6 Exhibits and Reports on Form 8-K
None.
- 16 -
<PAGE>
Security Federal Corporation and Subsidiary
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934,
the registrant has duly caused this report to the signed on its
behalf by the undersigned thereunto duly authorized.
SECURITY FEDERAL CORPORATION
Date: By:
Roy G. Lindburg
Treasurer/CFO
Duly authorized representative
- 17 -
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
[TYPE] EX-27
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE QUARTERLY REPORT ON FORM 10QSB FOR THE FISCAL QUARTER
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 7,305,731
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,969,983
<INVESTMENTS-CARRYING> 38,519,305
<INVESTMENTS-MARKET> 0
<LOANS> 151,822,077
<ALLOWANCE> 0
<TOTAL-ASSETS> 214,652,973
<DEPOSITS> 165,870,760
<SHORT-TERM> 23,816,000
<LIABILITIES-OTHER> 4,252,101
<LONG-TERM> 6,082,000
<COMMON> 4092
0
0
<OTHER-SE> 14,628,020
<TOTAL-LIABILITIES-AND-EQUITY> 214,652,973
<INTEREST-LOAN> 3,258,689
<INTEREST-INVEST> 561,499
<INTEREST-OTHER> 20,238
<INTEREST-TOTAL> 3,840,426
<INTEREST-DEPOSIT> 1,644,571
<INTEREST-EXPENSE> 437,665
<INTEREST-INCOME-NET> 1,758,190
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,829,200
<INCOME-PRETAX> 191,715
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 136,847
<EPS-PRIMARY> .33
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 777
<LOANS-PAST> 777
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,955,119
<CHARGE-OFFS> 6,919
<RECOVERIES> 6,011
<ALLOWANCE-CLOSE> 2,029,211
<ALLOWANCE-DOMESTIC> 2,029,211
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
