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SFDL News Security Federal Corporation Announces Increase in Third Quarter Earnings

AIKEN, S.C.--(BUSINESS WIRE)--Security Federal Corporation (OTCBB:SFDL), the holding company of Security Federal Bank, today announced earnings for the third quarter of its fiscal year ending March 31, 2007. The Company reported net income of $977,000 or $0.37 per share (basic) for the three months ending December 31, 2006, a 2.0% increase from net income of $958,000 or $0.38 per share (basic) for the three months ending December 31, 2005. For the nine months ending December 31, 2006, net income increased 6.7% to $3.0 million or $1.16 per share (basic) from $2.8 million or $1.12 per share (basic) for the nine months ending December 31, 2005. The increase in quarterly earnings is the result of a $196,000 increase in net interest income, a $354,000 increase in non-interest income, and a $66,000 decrease in provision for income taxes offset partially by a $612,000 increase in non-interest expense. For the nine months ending December 31, 2006, the increase in earnings is the result of a $987,000 increase in net interest income and a $764,000 increase in non-interest income offset partially by a $1.6 million increase in non-interest expense.

Total assets at December 31, 2006 were $714.6 million compared to $658.7 million at March 31, 2006, an increase of $55.9 million or 8.5% for the nine-month period. Net loans receivable increased $46.4 million or 12.4% to $421.5 million at December 31, 2006 from $375.1 million at March 31, 2006. Total deposits increased $28.4 million or 5.9% to $507.6 million at December 31, 2006 compared to $479.2 million at March 31, 2006. Federal Home Loan Bank advances, other borrowings, and junior subordinated debentures increased $21.7 million or 15.7% to $160.4 million at December 31, 2006 from $138.7 million at March 31, 2006.

During the three months ended December 31, 2006, the Company acquired land in northeast Richland County to further expand its branch network. The Company previously acquired lots in north Aiken and Ballentine, South Carolina, and in Evans, Georgia, which it intends to use for future branches. Construction began recently on the Evans branch facility. These additional branches will diversify the Company’s markets from primarily Aiken and Lexington Counties to also include Richland County, South Carolina and Columbia County, Georgia. In June 2006, the Company acquired Collier Jennings, a local insurance agency in order to diversify its revenue base. It is believed that these expansions will have a short-term negative impact on earnings, but should have a positive impact on earnings over the long term.

Security Federal Bank has eleven full service branch locations in Aiken, Clearwater, Graniteville, Langley, Lexington, North Augusta, Wagener, and West Columbia, South Carolina. Additional financial services are provided by three of the Bank’s wholly owned subsidiaries, Security Federal Insurance, Inc., Security Federal Investments, Inc., and Security Federal Trust, Inc.

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; regulatory and accounting changes; 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 March 31, 2006. 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.