Security Federal Posts Stable Q2 Earnings Amid Asset Growth

TL;DR

**SFDL is a steady regional bank with solid asset growth, making it a safe bet for long-term investors.**

AI Summary

SECURITY FEDERAL CORP (SFDL) reported a net income of $14,007 for the three months ended June 30, 2025, a slight increase from $13,894 in the same period of 2024. For the six months ended June 30, 2025, net income was $82,949, consistent with the $82,949 reported for the six months ended June 30, 2024. The company's total assets stood at $3,458,722 as of June 30, 2025, up from $3,184,218 at December 31, 2024, representing an 8.6% increase. Total liabilities also increased to $3,458,050 from $3,186,571 over the same period. The company's common stock outstanding remained at 5,000,000 shares. The filing indicates a stable financial performance with modest growth in assets, suggesting a consistent operational strategy. Specific reserves for loans decreased from $18,000 at December 31, 2024, to $6,000 at June 30, 2025, potentially indicating improved asset quality or a change in risk assessment.

Why It Matters

For investors, SFDL's consistent net income and 8.6% asset growth signal stability in a competitive banking landscape, potentially making it an attractive option for dividend-focused portfolios. Employees benefit from a stable employer, while customers can expect continued reliable banking services from a growing institution. In the broader market, SFDL's performance reflects the resilience of regional banks, especially with its decrease in specific loan reserves, which could indicate a healthier loan book compared to some peers. This stability is crucial in a sector often sensitive to economic shifts and interest rate changes.

Risk Assessment

Risk Level: low — The risk level is low due to consistent net income of $82,949 for the six months ended June 30, 2025, and a significant 8.6% increase in total assets from $3,184,218 to $3,458,722. Additionally, specific reserves for loans decreased from $18,000 to $6,000, suggesting improved asset quality.

Analyst Insight

Investors should consider holding SFDL for its stability and consistent performance, especially given its asset growth and reduced loan loss reserves. This filing suggests a reliable regional bank, suitable for those seeking steady returns rather than aggressive growth.

Financial Highlights

debt To Equity

N/A

revenue

$116,430

operating Margin

N/A

total Assets

$3,458,722

total Debt

$3,458,050

net Income

$14,007

eps

$0.01

gross Margin

N/A

cash Position

$274,504

revenue Growth

N/A

Key Numbers

• $14,007 — Net Income (Q2 2025) (Slight increase from $13,894 in Q2 2024.)
• $82,949 — Net Income (H1 2025) (Consistent with H1 2024, indicating stable profitability.)
• $3,458,722 — Total Assets (June 30, 2025) (Increased by 8.6% from $3,184,218 at December 31, 2024.)
• $6,000 — Specific Reserves (June 30, 2025) (Decreased from $18,000 at December 31, 2024, suggesting improved asset quality.)
• 5,000,000 — Common Stock Outstanding (Remained stable, indicating no dilution from new share issuance.)

Key Players & Entities

• SECURITY FEDERAL CORP (company) — filer of the 10-Q
• Bloomberg (company) — publisher of the analysis
• SEC (regulator) — recipient of the 10-Q filing
• $14,007 (dollar_amount) — net income for Q2 2025
• $13,894 (dollar_amount) — net income for Q2 2024
• $82,949 (dollar_amount) — net income for H1 2025 and H1 2024
• $3,458,722 (dollar_amount) — total assets as of June 30, 2025
• $3,184,218 (dollar_amount) — total assets as of December 31, 2024
• $6,000 (dollar_amount) — specific reserves at June 30, 2025
• $18,000 (dollar_amount) — specific reserves at December 31, 2024

FAQ

Risk Factors

• Loan Loss Reserves Reduction [medium — financial]: Specific reserves for loans decreased significantly from $18,000 at December 31, 2024, to $6,000 at June 30, 2025. This reduction could indicate improved asset quality or a more optimistic assessment of future loan performance by management.
• Interest Rate Sensitivity [medium — financial]: The company's financial statements reference SOFR and LIBOR rates, indicating exposure to interest rate fluctuations. Changes in these benchmark rates can impact net interest income and the valuation of financial instruments.

Industry Context

SECURITY FEDERAL CORP operates within the commercial banking sector, a highly competitive and regulated industry. Key trends include evolving interest rate environments, increasing digital banking adoption, and ongoing regulatory scrutiny. Banks are focused on managing credit risk, optimizing net interest margins, and adapting to changing customer preferences for service delivery.

Regulatory Implications

As a commercial bank, SFDL is subject to stringent regulations from federal and state authorities, including capital requirements, liquidity standards, and consumer protection laws. Compliance with these regulations is critical for maintaining operational licenses and public trust. Changes in banking regulations or enforcement priorities could impact the company's operations and profitability.

What Investors Should Do

1. Monitor loan portfolio quality and reserve levels.
2. Analyze interest income trends.
3. Evaluate asset growth sustainability.

Key Dates

• 2025-06-30: End of Second Quarter 2025 — Reporting period for the 10-Q, showing financial performance and position as of this date.
• 2025-08-12: Filing Date of 10-Q — The date the company officially submitted its quarterly report to the SEC, making the information publicly available.
• 2025-06-30: Specific Reserves for Loans as of June 30, 2025 — Indicates a reduction in the provision for potential loan losses compared to the previous year-end.
• 2024-12-31: Specific Reserves for Loans as of December 31, 2024 — Provides a baseline for comparison to assess changes in loan loss provisioning.

Glossary

SOFR

Secured Overnight Financing Rate, a benchmark interest rate that represents the cost of borrowing cash overnight collateralized by Treasury securities. (Indicates the company's exposure to floating interest rate environments and its use of this benchmark.)

LIBOR

London Interbank Offered Rate, a benchmark interest rate that represents the average interest rate for a bank to borrow short-term unsecured debt from other member banks. (While being phased out, its mention suggests historical or ongoing use in the company's financial contracts.)

Specific Reserves

An allowance set aside by a financial institution to cover potential losses on specific loans or pools of loans that are deemed to be at higher risk. (A decrease in these reserves suggests management's improved outlook on the quality of the loan portfolio.)

ASC 606

Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. This standard provides a single, comprehensive revenue model for all customer contracts. (The filing explicitly states that revenue recognition is not within the scope of ASC 606, likely due to the nature of its core banking operations.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, SECURITY FEDERAL CORP shows a slight increase in net income for Q2 2025 ($14,007 vs $13,894). However, the first six months of 2025 show net income remaining consistent at $82,949. Total assets have grown by 8.6% since year-end 2024, indicating expansion, while total liabilities have also increased proportionally. A notable change is the reduction in specific loan reserves, from $18,000 at year-end 2024 to $6,000 as of June 30, 2025, suggesting a potential improvement in perceived loan asset quality.

Key Financial Figures

• $0.01 — AT: SHARES: Common Stock, par value $0.01 per share August 12, 2025 3,123,691

Filing Documents

• sfdl20250630_10q.htm (10-Q) — 3256KB
• ex_824681.htm (EX-31.1) — 14KB
• ex_824682.htm (EX-31.2) — 14KB
• ex_824683.htm (EX-32) — 8KB
• 0001437749-25-026114.txt ( ) — 14595KB
• sfdl-20250630.xsd (EX-101.SCH) — 70KB
• sfdl-20250630_cal.xml (EX-101.CAL) — 72KB
• sfdl-20250630_def.xml (EX-101.DEF) — 547KB
• sfdl-20250630_lab.xml (EX-101.LAB) — 443KB
• sfdl-20250630_pre.xml (EX-101.PRE) — 584KB
• sfdl20250630_10q_htm.xml (XML) — 3961KB

Financial Statements (unaudited)

Financial Statements (unaudited): 3 Consolidated Balance Sheets at June 30, 2025 and December 31, 2024 3 Consolidated Statements of Income for the Three and Six Months Ended June 30, 2025 and 2024 4 Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024 5 Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended June 30, 2025 and 2024 6 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 7

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 29 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 38 Item 4.

Controls and Procedures

Controls and Procedures 38 PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 39 Item 1A.

Risk Factors

Risk Factors 39 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 39 Item 3. Defaults Upon Senior Securities 39 Item 4. Mine Safety Disclosures 39 Item 5. Other Information 39 Item 6. Exhibits 40

Signatures

Signatures 41 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 consolidated financial statements and related notes. 2 Table of Contents SECURITY FEDERAL CORPORATION AND SUBSIDIARIES Part 1. Financial Information

Financial Statements

Item 1. Financial Statements Consolidated Balance Sheets June 30, 2025 December 31, 2024 Dollars in thousands, except per share amounts (Unaudited) (Audited) ASSETS: Cash and Cash Equivalents $ 142,190 $ 178,277 Certificates of Deposit with Other Banks 1,250 1,250 Investments: Available For Sale ("AFS") 588,207 525,623 Held To Maturity ("HTM") Net of Allowance for Credit Losses of $ 0 (Fair Value of $ 116,430 and $ 130,902 at June 30, 2025 and December 31, 2024, Respectively) 119,402 135,200 Total Investments 707,609 660,823 Loans Receivable, Net: Held For Sale 2,229 599 Held For Investment (Net of Allowance for Credit Losses of $ 14,007 and $ 13,894 at June 30, 2025 and December 31, 2024, Respectively) 685,501 686,550 Total Loans Receivable, Net 687,730 687,149 Accrued Interest Receivable 5,096 5,374 Operating Lease Right-of-Use ("ROU") Assets 1,262 927 Land Held for Sale 702 938 Premises and Equipment, Net 33,390 29,321 Federal Home Loan Bank ("FHLB") Stock, at Cost 1,130 1,089 Bank Owned Life Insurance ("BOLI") 29,016 28,660 Goodwill 1,200 1,200 Other Assets 14,661 16,765 Total Assets $ 1,625,236 $ 1,611,773 LIABILITIES: Deposit Accounts $ 1,383,201 $ 1,324,033 Borrowings from Federal Reserve Bank ("FRB") - 50,000 Other Borrowings 24,411 27,809 Junior Subordinated Debentures 5,155 5,155 Subordinated Debentures 10,000 10,000 Operating Lease Liabilities 1,292 959 Other Liabilities 9,898 11,428 Total Liabilities 1,433,957 1,429,384 SHAREHOLDERS' EQUITY: Senior Non-Cumulative Perpetual Preferred Stock, Series ECIP, $ 1,000 Par Value; 82,949 Shares Authorized, Issued and Outstanding at June 30, 2025 and December 31, 2024 82,949 82,949 Common Stock, $ 0.01 Par Value; 5,000,000 Shares Authorized; 3,458,722 Shares Issued and 3,184,218 Shares Outstanding at June 30, 2025 and 3,458,050 Shares Issued and 3,186,571 Shares Outstanding at December 31, 2024, Respectively 35 35

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10 -Q and accounting principles generally accepted in the United States of America ("GAAP"); therefore, they do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows. Such statements are unaudited but, in the opinion of management, reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of results for the selected interim periods. The information included in Security Federal Corporation's (the "Company") Form 10 -K for the year ended December 31, 2024 (" 2024 Form 10 -K") should be referred to when reviewing interim financial statements. The unaudited consolidated results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or any other period. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - PRINCIPLES OF CONSOLIDATION The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Security Federal Bank (the "Bank") and the Bank's wholly owned subsidiaries, Security Federal Investments, Inc. ("SFINV") and Security Federal Insurance, Inc. ("SFINS"). SFINV was formed to hold investment securities and allow for better management of the securities portfolio. SFINS is an insurance agency offering auto, business

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements NOTE 4 - EARNINGS PER SHARE Accounting guidance specifies the computation, presentation and disclosure requirements for earnings per share ("EPS") for entities with publicly held common stock or potential common stock such as options, warrants, convertible securities or contingent stock agreements if those securities trade in a public market. Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding. Diluted EPS is computed similar to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive common shares had been issued. The dilutive effect of options outstanding under the Company's stock option plan is reflected in diluted EPS by application of the treasury stock method. There were no stock options outstanding at June 30, 2025 or 2024 ; therefore, no dilutive options were included in the calculation of diluted EPS for those periods. The following tables include a summary of the Company's basic EPS for the periods indicated. Three Months Ended June 30, 2025 2024 Dollars and shares in thousands Income (1) Shares EPS Income (1) Shares EPS Basic EPS $ 2,375 3,186 $ 0.75 $ 2,129 3,220 $ 0.66 Six Months Ended June 30, 2025 2024 Dollars and shares in thousands Income (1) Shares EPS Income (1) Shares EPS Basic EPS $ 4,966 3,186 $ 1.56 $ 3,882 3,224 $ 1.20 ( 1 ) Net income available to common shareholders NOTE 5 - STOCK-BASED COMPENSATION Certain officers and directors of the Company participate in incentive and non-qualified stock option plans. Options are granted at exercise prices not less than the fair value of the Company's common stock on the date of the grant. At June 30, 2025 and 2024 , the Company had no options outstanding and there was no activity during the three and six months ended June 30, 2025

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements NOTE 6 - INVESTMENTS, AVAILABLE FOR SALE ("AFS") AFS securities are recorded at fair market value. There was no allowance for credit losses for AFS securities as of June 30, 2025 and December 31, 2024 . The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of AFS securities at the dates indicated were as follows: June 30, 2025 Dollars in thousands Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Student Loan Pools $ 52,934 $ 48 $ ( 449 ) $ 52,533 Small Business Administration ("SBA") Bonds 56,241 280 ( 1,960 ) 54,561 Tax Exempt Municipal Bonds 6,692 — ( 916 ) 5,776 Taxable Municipal Bonds 64,406 — ( 9,885 ) 54,521 Mortgage-Backed Securities ("MBS") 442,289 270 ( 21,743 ) 420,816 Total AFS Securities $ 622,562 $ 598 $ ( 34,953 ) $ 588,207 December 31, 2024 Dollars in thousands Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Student Loan Pools $ 39,670 $ 117 $ ( 203 ) $ 39,584 SBA Bonds 66,491 337 ( 2,402 ) 64,426 Tax Exempt Municipal Bonds 6,746 — ( 688 ) 6,058 Taxable Municipal Bonds 64,530 — ( 11,970 ) 52,560 MBS 389,592 346 ( 26,943 ) 362,995 Total AFS Securities $ 567,029 $ 800 $ ( 42,206 ) $ 525,623 Student Loan Pools are typically 97% guaranteed by the United States government while SBA bonds are 100% backed by the full faith and credit of the United States government. The majority of the Bank's MBS are issued or guaranteed by an agency of the United States government such as the Government National Mortgage Association ("Ginnie Mae,"), or by Government Sponsored Entities ("GSEs"), including the Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage Corp. ("Freddie Mac."). Ginnie Mae MBS are backed by the full faith and credit of the United States government, while those issued by GSEs are not. The following tables summarize gross unrealized losses and

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements At June 30, 2025 our AFS investment portfolio consisted of 511 individual AFS securities, 369 of which were in an unrealized loss position. At December 31, 2024 , 369 individual AFS securities were in an unrealized loss position. The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether an allowance for credit loss is deemed necessary. Management's evaluation of those securities as of June 30, 2025 is discussed below. Student Loan Pools - Securities in this group are typically 97 % guaranteed by the U.S. government. At June 30, 2025 , there were 46 AFS student loan pool securities, 38 of which had unrealized losses. Of the 38 securities in a loss position, 37 were rated AA or higher by Moody's, Bloomberg, and/or S&P. The remaining security in a loss position had an unrealized loss of less than $ 1,000 at June 30, 2025. Each of the individual securities have credit enhancements further reducing potential realized losses. The unrealized losses on these securities are believed to be caused by the current interest rate environment, and not credit quality. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, unrealized losses were not recognized into income during the six months ended June 30, 2025 . SBA Bonds - SBA Bonds are fully bac

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