SECURITY FEDERAL CORP (SFDL)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 was strong: net income available to common rose to $3.2M with $1.01 EPS, up from $0.62 YoY, driven by a 16.0% increase in net interest income and lower interest expense following repayment of Federal Reserve borrowings .
• Credit quality improved: non‑performing assets fell to $5.7M vs. $6.8M YoY; allowance coverage remained disciplined at 1.97% of gross loans .
• Balance sheet mix improved: deposits grew to $1.37B (+8.6% YoY) while borrowings dropped 58.0% to $39.0M, strengthening funding and lowering interest costs .
• Stock reaction: shares rose ~1.7% since reporting, a modest positive move amid broader market dynamics .
• No formal guidance was provided; management emphasized operating drivers (NII growth, credit quality, deposit trends) rather than outlook ranges .

What Went Well and What Went Wrong

What Went Well

• Net interest income increased $1.7M (+16.0% YoY) to $12.1M on higher loan and investment income and lower interest expense post‑Fed borrowing repayment .
• Credit costs were favorable: Q3 reflected a reversal of provision for credit losses of $0.2M (vs. $0.58M provision YoY), boosting pre‑tax income .
• Management highlighted funding cost relief: “The decrease in interest expense was primarily due to the repayment of outstanding borrowings from the Federal Reserve” .

What Went Wrong

• Non‑interest expense rose $1.0M (+11.2% YoY) to $10.4M, driven by salaries/benefits, occupancy, and equipment depreciation, pressuring efficiency .
• Other interest‑earning assets generated $0.593M less interest YoY, partially offsetting gains from loans and investments .
• Loans declined: total loans receivable, net fell to $678.1M (‑$9.0M YTD and ‑$8.6M YoY), reflecting slower demand/runoff despite deposit growth .

Financial Results

KPIs and Balance Sheet

Note: The standalone press release shows slightly different Q3 capital ratios (Total risk‑based 19.93%, CET1 18.67%, leverage 10.14%) vs. the 8‑K exhibit; we anchor to the 8‑K and flag the discrepancy .

Guidance Changes

Earnings Call Themes & Trends

No Q3 2025 earnings call transcript was available; the company’s materials did not include a public call or transcript [ListDocuments: earnings-call-transcript none].

Management Commentary

• “The decrease in interest expense was primarily due to the repayment of outstanding borrowings from the Federal Reserve, which resulted in a lower average balance of interest‑bearing liabilities compared to the third quarter of 2024.” (Press release) .
• “During the first quarter of 2025, we purchased a multi‑tenant property resulting in an increase in rental income. The property is intended to be the future site of a full‑service branch.” (Press release) .
• “Non‑performing assets were $5.7 million at September 30, 2025…” (Press release) .

Note: The Q3 materials did not include CEO/CFO quote blocks; commentary is drawn verbatim from the press release.

Q&A Highlights

No Q&A transcript available for Q3 2025; the company did not furnish an earnings call transcript or analyst Q&A in public documents [ListDocuments: earnings-call-transcript none].

Estimates Context

• S&P Global consensus was unavailable for Q3 2025 EPS and revenue; coverage appears limited for this OTC‑listed issuer. We therefore compare actuals against prior periods only and flag estimates as not available [GetEstimates].
• S&P Global recorded Q3 “Revenue” actual at $14.913M*, which broadly aligns with operating revenue (net interest income + non‑interest income) reported in company materials ($12.079M + $2.634M = $14.713M) .

*Values retrieved from S&P Global.

Where estimates may need to adjust: With stronger NII and a net reversal of credit losses, any future sell‑side models would likely lift EPS run‑rate and temper interest expense assumptions given the lower borrowing profile .

Key Takeaways for Investors

• Earnings power is improving: EPS $1.01 and net income to common $3.2M reflect favorable NII momentum and benign credit costs, despite higher operating expenses .
• Funding mix is a tailwind: deposits +8.6% YoY and borrowings ‑58% cut interest costs; sustained deposit growth supports margin stability .
• Credit quality better than a year ago: NPAs down and ACL coverage steady at ~2%, reducing near‑term credit risk to earnings .
• Asset redeployment underway: cash down and securities up significantly YTD, indicating proactive balance sheet positioning for yield and liquidity .
• Loans softened YTD: watch for stabilization; portfolio runoff or cautious originations are modest headwinds to NII growth .
• Operating expense inflation is the main pressure point; salary/benefit and occupancy trends warrant monitoring for efficiency impacts .
• Short‑term: Positive bias to the stock on improving earnings and credit; Medium‑term: trajectory depends on deposit retention, loan demand, and continued discipline on borrowings/expenses .

Sources Read in Full

• Q3 2025 8‑K (Item 2.02) and Exhibit 99.1: Security Federal Corporation Announces Increase in Quarterly and Year‑to‑Date Earnings .
• Company press release dated Oct. 29, 2025 (duplicate of Exhibit content; noted capital ratio discrepancy) .
• Prior quarters: Q2 2025 8‑K (Item 2.02) and Exhibit 99.1 read in full ; Q1 2025 8‑K (Item 2.02) and Exhibit 99.1 read in full .
• Market reaction context: Nasdaq article and related coverage .