SECURITY FEDERAL CORP (SFDL)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered stronger profitability: net income available to common shareholders rose 47.8% year over year to $2.6M and EPS to $0.81, driven by higher net interest income, modest non-interest income growth, and no provision for credit losses, partially offset by higher OpEx and preferred dividends .
• Net interest margin expanded to 3.05% (vs. 2.75% in Q1 2024), with interest expense falling on lower-cost funding and repayment of Federal Reserve borrowings; deposits grew $21.5M in the quarter .
• Credit quality stable-to-improving: non-performing assets fell quarter-over-quarter to 0.46% of assets and ACL coverage of gross loans edged up to 1.99% .
• Capital ratios remain strong (CET1 18.9%, Tier 1 leverage 10.6%); common book value per share rose to $32.57; quarterly cash dividend maintained at $0.15 (paid June 15), plus a $0.10 special dividend announced in March—ongoing capital return underpinning the stock narrative .
• Near-term catalysts: margin trajectory as rates evolve, sustained deposit inflows and funding mix optimization, and continued capital return; lack of Street estimates reduces headline “beat/miss” trading setups .

What Went Well and What Went Wrong

What Went Well

• Net interest income rose 12.5% YoY to $11.2M, supported by a widening spread and lower interest expense from FRB debt repayment; NIM reached 3.05% .
• Non-interest income increased 5.3% YoY to $2.4M, helped by rental income and gain on land sale; management noted the multi-tenant property is intended as a future full-service branch site .
• Credit provisioning tailwind: zero provision in Q1 2025 vs. $335K in Q1 2024; non-performing assets declined to 0.46% of assets .
• “As a result of our continued profitability, we are very pleased to provide this additional payment to our shareholders,” said CEO J. Chris Verenes regarding the $0.10 special dividend .

What Went Wrong

• Operating expenses rose 2.1% YoY, largely from compensation and benefits (+$255K) and higher data processing/cloud costs, partially offset by lower advertising and equipment costs .
• Deposit interest expense increased $748K YoY on a higher average balance of interest-bearing deposits, reflecting mix shift toward higher-cost CDs, even as overall interest expense fell due to FRB repayment .
• Modest loan growth: total loans receivable, net increased only $2.0M QoQ (+0.3%); commercial & agricultural loans declined $5.4M QoQ .

Financial Results

Non-interest income breakdown (YoY):

Key balance sheet and credit KPIs:

Guidance Changes

No formal revenue/EPS/margin guidance was issued in Q1 2025 materials .

Earnings Call Themes & Trends

Note: No earnings call transcript was available for Q1 2025; themes are synthesized from Q1 press release and 10-Q, and prior-quarter releases.

Management Commentary

• “Net interest income increased $1.2 million, or 12.5%, to $11.2 million as interest income increased and interest expense decreased.” (Company press release for Q1 2025) .
• “Total interest income increased $514,000… while total interest expense decreased $733,000… due to lower market interest rates and the payoff of outstanding borrowings with the Federal Reserve.” (Q1 press release) .
• “Net interest margin was 3.05% for the quarter ended March 31, 2025 compared to 2.75% for the comparable quarter in 2024.” (Q1 10-Q MD&A) .
• “As a result of our continued profitability, we are very pleased to provide this additional payment to our shareholders.” — J. Chris Verenes, CEO, on special dividend .

Q&A Highlights

• No earnings call transcript or Q&A were available for Q1 2025 based on our document search and public sources .

Estimates Context

• S&P Global consensus estimates for Q1 2025 EPS and revenue were unavailable; no coverage counts returned (microcap OTCBB listing often lacks Street coverage). Actuals: EPS $0.81 and total net revenue $13.672M (net interest + non-interest). Consensus: N/A* .
• Implication: With no formal Street consensus, “beat/miss” trading signals are muted; investors should anchor on margin trajectory, funding costs, and credit outcomes .

Values marked with * are from S&P Global data services where available; consensus was unavailable.

Key Takeaways for Investors

• Margin expansion with reduced funding costs is the core earnings driver; watch deposit mix and the pace of FRB/wholesale borrowing usage as rates evolve .
• Deposit growth resumed (+$21.5M QoQ), but mix skew to CDs lifts deposit cost; continued migration to noninterest-bearing/checking would be accretive to NIM .
• Credit quality trends are favorable (no provision, lower NPA%); stable ACL at 1.99% provides cushion as loan growth remains modest .
• Capital remains robust (CET1 18.9%, leverage 10.6%); book value per share rising and ongoing dividends (plus a recent special dividend) support total return and valuation floor .
• Securities portfolio repositioning (AFS purchases > paydowns; improved AOCI) offers potential OCI tailwinds if rates decline further, but reinvestment yields on taxable investments ticked lower QoQ—monitor asset yields .
• Loan growth is selective (residential/commercial real estate up; commercial & ag down); expect lending mix shifts to influence risk-weighted assets and capital ratios .
• With limited Street coverage, trading setups hinge on company-reported catalysts: NIM prints, deposit inflows/uninsured deposit disclosures, capital actions (dividends, buybacks), and any updates on ECIP preferred repurchase options path .