Security Bank Corporation (PSE: SECB), during its annual stockholdersأ† meeting on Tuesday, May 28, 2013, informed its shareholders that it delivered sustained financial results in 2012 with an all-time high net income of P 7.5 billion and industry-best return on shareholdersأ† equity of 22% and return on assets of 3.3%.

The Bank also delivered on its growth objectives, highlighted by the 30% increase in its loan portfolio to P 119.7 billion, out-pacing the banking industry’s 16% growth for the year. In support of economic development, the Bank’s loans went to critical sectors of the economy such as power, utilities, infrastructure, wholesale and retail trade, food, agriculture and consumer goods. Supported by the expansion in the Bank’s branch network, its deposits grew by 19% to P 142.4 billion, faster than the banking industry’s 7% growth rate. The growth in business volumes resulted in the 21% growth of the Bank’s total assets to P 259.3 billion.

In his management report, Security Bank President and Chief Executive Officer Mr. Alberto S. Villarosa highlighted the unprecedented 72-branch expansion of the Security Bank group in 2012, consisting of 34 new Security Bank branches and 38 branches of Security Bank Savings, the former Premiere Development Bank which Security Bank acquired in February 2012. The total branch network of the Security Bank group at 2012 year-end was 208, up from 136 branches in 2011 year-end.

Mr. Villarosa said in his report, “We are strengthening and expanding our retail banking segment to make it another major business of the Bank in the medium-term. On its first year of operation, Security Bank Savings, our thrift bank subsidiary, aligned its standards with those of parent Security Bank.”

Mr. Villarosa reported that despite the faster-than-industry growth rates of loans and deposits and the unprecedented branch network expansion, Security Bank’s financial soundness remained strong. Asset quality as reflected in the non-performing loans (NPL) ratio further improved to 0.7% from 0.9% of 2011 year-end, lower than the banking industry average NPL ratio of 1.87% as of December 2012. The Bank’s NPL reserve cover of 256% continued to be higher than the industry average. The Bank’s cost-to-income ratio increased to 42.9% in 2012 from 36.9% in 2011 due to the branch expansion, but this ratio continued to be among the best in the industry. The Bank’s capital adequacy ratios (CAR) remained strong with total CAR of 16.3% and tier 1 CAR of 14.7%.

In the first quarter of 2013, Security Bank reported a year-on-year profit growth of 11% to P 1.2 billion. This compares favourably with the 8% year-on-year profit growth the Bank reported in Q1-2012 and the 12% profit growth for the full year of 2012.

A key highlight in Security Bank’s Q1-2013 results was the 31% year-on-year growth in its total operating income driven by the Bank’s fee and other income generating core activities. Its net interest income was steady at P 2 billion despite the net interest margin squeeze to 3.6% from 4% a year ago. The 45% year-on-year increase in operating cost (excluding provisions for credit losses and impairments) was business-expansion driven. As a result, the cost-to-income ratio increased to 54% from 49% a year ago, but this number remains below the banking industry average.

In first quarter 2013, the Bank’s asset quality as indicated by the NPL ratio remained strong at 0.7%, an improvement from 1.2% a year ago. The Bank’s NPL ratio has been consistently below the banking industry average in the last six years. The Bank’s capital adequacy ratios (CAR) remained strong with total CAR of 19% and tier 1 CAR of 17%, up from 18% and 15.9%, respectively, a year ago in Q1-2012.

Security Bank sees its earnings growth to be increasingly driven by its retail banking business. Responding to reportersأ† queries, Mr. Villarosa said, “There are two dimensions to our retail business. One is our product distribution reach through our bigger branch network, which will deliver the services that Security Bank is known for in the market today. These include investment products originated by our financial markets and capital markets businesses, hedging products, and electronic banking services, which in turn feed our asset management and wealth management services.”

Mr. Villarosa said, “The prospects for our asset and wealth management business over the medium term have been greatly boosted by the investment grade status given to our country by the international credit rating institutions.”