8-K: Security Federal Reports Strong Q4, Full-Year Earnings Growth

Security Federal Corporation announced significant increases in net income for both the fourth quarter and full year ended December 31, 2025, driven by higher net interest and non-interest income.

Summary

• Net income available to common shareholders for the fourth quarter ended December 31, 2025, increased to $3.9 million, or $1.24 per common share, up from $3.0 million, or $0.94 per common share, in Q4 2024.
• Year-to-date net income available to common shareholders for 2025 rose to $12.0 million, or $3.80 per common share, compared to $8.9 million, or $2.77 per common share, for 2024.
• The increase in net income was primarily attributed to higher net interest income and non-interest income, coupled with reductions in the provision for credit losses.
• Net interest income for Q4 2025 grew by 11.5% to $12.6 million, as a $1.7 million decrease in total interest expense (19.3%) outpaced a $437,000 decrease in total interest income (2.2%).
• Non-interest income for Q4 2025 increased by 35.4% to $3.9 million, primarily due to increases in grant income ($1.2 million in CDFI awards in 2025) and rental income from a newly purchased multi-tenant property.
• Non-interest expense for Q4 2025 increased by 16.0% to $11.1 million, mainly due to higher salaries, employee benefits, and debit card expenses.
• For the full year 2025, net interest income increased by 12.8% to $47.2 million, and non-interest income increased by 12.5% to $11.5 million.
• A reversal of provision for credit losses of $235,000 was recorded for the full year 2025, compared to a $1.4 million provision in 2024.
• Non-performing assets decreased to $5.8 million at December 31, 2025, from $7.6 million at December 31, 2024, with non-performing assets to total assets improving to 0.36% from 0.47%.
• Total assets increased by 0.4% to $1.62 billion, while deposits grew by 3.6% to $1.37 billion.
• Borrowings decreased significantly by 62.1% to $35.3 million, driven by the repayment of Federal Reserve borrowings and junior subordinated debentures.
• Total shareholders' equity increased to $200.5 million, and common equity book value per share rose to $37.74 at year-end 2025.
• Bank-only capital ratios improved, with Total risk-based capital to risk weighted assets at 20.56%, CET1 capital to risk weighted assets at 19.30%, and Tier 1 leverage capital ratio at 10.18%.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong positive report, reflecting robust earnings growth, improved credit quality, and a strengthened capital position, indicating solid operational performance and financial health.

Positives

• Net income available to common shareholders increased by 29.7% for Q4 2025 and 35.3% for the full year 2025.
• Earnings per common share increased to $1.24 for Q4 2025 and $3.80 for the full year 2025.
• Net interest income grew by 11.5% in Q4 2025 and 12.8% for the full year 2025, driven by a significant reduction in interest expense.
• Non-interest income increased by 35.4% in Q4 2025 and 12.5% for the full year 2025, boosted by CDFI grant income and rental income.
• A reversal of provision for credit losses of $35,000 in Q4 2025 and $235,000 for the full year 2025 indicates improved credit quality.
• Non-performing assets decreased year-over-year from $7.6 million to $5.8 million, and non-performing assets to total assets improved from 0.47% to 0.36%.
• Deposits increased by 3.6% to $1.37 billion, demonstrating strong funding growth.
• Borrowings decreased substantially by 62.1% to $35.3 million due to debt repayments, strengthening the balance sheet.
• Total shareholders' equity increased to $200.5 million, and common equity book value per share rose to $37.74.
• All key bank-only capital ratios improved, including Total risk-based capital (20.56%), CET1 capital (19.30%), and Tier 1 leverage capital (10.18%).

Negatives

• Total interest income decreased by 2.2% in Q4 2025 and only increased by 1.7% for the full year 2025.
• Non-interest expense increased by 16.0% in Q4 2025 and 9.1% for the full year 2025, primarily due to salaries, employee benefits, and debit card expenses.
• Cash and cash equivalents decreased by 57.7% year-over-year to $75.3 million, primarily due to investment purchases and debt repayment.
• Total loans receivable, net, decreased by $1.9 million during Q4 2025 and by $11.0 million year-over-year.

Risks

• Potential adverse impacts to economic conditions in the local market area or other aspects of the Company's business, operations, or financial markets, including employment levels, labor shortages, inflation, a potential recession, or slowed economic growth.
• Demand for residential, commercial business, commercial real estate, consumer, and other types of loans.
• Success of new products and competitive conditions between banks and non-bank financial service providers.
• Changes in management's business strategies, including expectations regarding key growth initiatives and strategic priorities.
• Legislative or regulatory changes that adversely affect the Company's business, including regulatory capital or other rules.
• Ability to attract and retain deposits and the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions.
• Adverse changes in the securities markets.
• Changes in accounting policies and practices, as may be adopted by financial institution regulatory agencies or the Financial Accounting Standards Board.
• Technology factors affecting operations, including disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, information technology systems or third-party vendors.
• Pricing of products and services.
• Environmental, social, and governance goals and targets.
• Effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on the business.

Future Outlook

The Company's forward-looking statements indicate expectations regarding the business environment, future performance, perceived market opportunities, and potential future credit experience. These statements are subject to various risks and uncertainties, including economic conditions, demand for loans, competitive pressures, regulatory changes, technology disruptions, and broader external events. The Company does not commit to updating or revising any forward-looking statements.

Industry Context

StockSavvy.ai notes that Security Federal Corporation's strong earnings growth, particularly in net interest income despite a decrease in total interest income, reflects effective liability management in a potentially fluctuating interest rate environment. The significant increase in non-interest income, driven by Community Development Financial Institution (CDFI) grants and rental income from strategic property acquisitions, highlights a successful diversification of revenue streams and a commitment to community development, which can enhance brand reputation and market presence in its South Carolina and Georgia markets. The improvement in credit quality and robust capital ratios positions the bank favorably compared to regional peers navigating economic uncertainties.

Comparison to Industry Standards

• NA

Stakeholder Impact

• Shareholders: Benefited from increased net income, earnings per share, and common equity book value per share.
• Employees: Non-interest expense increases included higher salaries and employee benefits.
• Customers: Community Development Financial Institution (CDFI) grants support the Bank's initiatives in economically distressed communities, and a new full-service branch is planned.
• Creditors: Borrowings significantly decreased due to repayment of outstanding borrowings and junior subordinated debentures, reducing financial leverage.

Next Steps

• The multi-tenant property purchased in the first quarter of 2025 is intended to be the future site of a full-service branch for Security Federal Bank.

Key Dates

Recommendation

The company demonstrated robust financial performance with significant increases in net income and earnings per share for both the quarter and full year. Key drivers include improved net interest income, strong non-interest income growth, and a reversal of credit loss provisions. Furthermore, credit quality metrics improved, and capital ratios strengthened, indicating a healthy balance sheet and effective risk management. The reduction in borrowings also points to prudent financial stewardship. These factors collectively suggest a positive outlook for investors.

Keywords

Regional Banking, Financial Results, Earnings Report, Net Income, Net Interest Income, Non-Interest Income, Credit Quality, Capital Ratios, Community Development, South Carolina, Georgia, Deposits, Borrowings