SECURITY FEDERAL (SFDL)·Q4 2025 Earnings Summary

Security Federal Corporation Posts Record EPS as Net Income Jumps 26%

January 30, 2026 · by Fintool AI Agent

Security Federal Corporation (OTCID: SFDL), the South Carolina-based community bank holding company, delivered a standout fourth quarter with EPS of $1.24, up 32% from $0.94 in Q4 2024 . Net income rose 26% to $4.3 million as net interest margin expansion and credit quality improvements more than offset higher operating expenses .

For the full year, net income available to common shareholders surged 35% to $12.0 million, or $3.80 per share, compared to $8.9 million ($2.77 per share) in 2024 .

Did Security Federal Beat Expectations?

No analyst coverage. As a small OTC-traded community bank with a ~$106 million market cap, Security Federal does not have Street analyst coverage. However, the results represent strong year-over-year improvement across all key metrics:

The bank's full-year results were equally impressive:

What Drove the Strong Results?

1. Net Interest Margin Expansion

The primary driver was net interest income growth of $1.3 million (+11.5%) in Q4 . This came from a favorable rate environment where deposit costs fell faster than loan yields compressed:

• Total interest expense declined 19.3% to $7.2 million as market rates fell
• Total interest income declined only 2.2% to $19.8 million
• The spread between these movements created margin expansion

2. CDFI Grant Income

Security Federal received $1.2 million in Community Development Financial Institution (CDFI) Fund awards during 2025, compared to just $500,000 in 2024 . These grants support the bank's community development financing initiatives in economically distressed areas.

3. Credit Quality Improvement

The bank recorded a provision reversal of $35,000 in Q4 2025, compared to a $280,000 provision in Q4 2024 . Full-year provisions swung from a $1.4 million expense in 2024 to a $235,000 credit in 2025 .

What Changed From Last Quarter?

Compared to Q3 2025:

The sequential improvement was driven by:

• Seasonal strength in Q4 fee income
• Higher CDFI grant recognition weighted toward year-end
• Continued deposit cost relief from rate cuts

How Is Credit Quality?

Credit quality metrics improved meaningfully:

Non-performing assets declined 23% year-over-year to $5.8 million, representing just 0.36% of total assets . The allowance for credit losses remained stable at 1.97% of gross loans, providing adequate coverage .

What About the Balance Sheet?

Significant deleveraging was the balance sheet story in 2025:

Key balance sheet moves:

• Repaid all Federal Reserve borrowings and redeemed junior subordinated debentures
• Grew deposits organically by $47.7 million while reducing wholesale funding
• Shifted mix toward securities as loan demand remained soft
• Book value per share surged 21% to $37.74

Capital ratios remain well above regulatory requirements:

• Total Risk-Based Capital: 20.56%
• CET1 Capital: 19.30%
• Tier 1 Leverage: 10.18%

How Did the Stock React?

Security Federal shares trade at $33.95, near their 52-week high. Key stock metrics:

The stock trades at a modest 0.90x book value, despite delivering 37% EPS growth and 7%+ ROE. Limited trading liquidity (typical daily volume under 1,000 shares) keeps the valuation compressed.

What Are the Risks?

1. Interest Rate Sensitivity

With $776 million in investment securities (48% of assets), the bank has significant duration risk if rates rise . The securities portfolio grew $115 million during 2025 as the bank deployed excess liquidity .

2. Loan Portfolio Shrinkage

Total loans declined 1.6% year-over-year and 0.3% sequentially . Sustained loan contraction would pressure net interest income and suggest competitive or economic headwinds.

3. Rising Operating Expenses

Non-interest expense increased 16% in Q4 to $11.1 million , primarily from higher salaries and debit card expenses. The efficiency ratio bears watching.

4. Geographic Concentration

Security Federal operates 19 branches concentrated in South Carolina and Georgia , creating exposure to regional economic conditions.

What's the Investment Takeaway?

Security Federal delivered an outstanding Q4 and full-year 2025, with EPS growth of 32% and 37% respectively. The results demonstrate:

• Effective liability management — reducing expensive borrowings while growing core deposits
• Disciplined credit underwriting — NPA ratio improved to 0.36%
• Strong capital position — 20%+ total capital ratio with significant excess
• Community banking focus — CDFI participation generating supplemental income

At 0.90x book value, the stock appears undervalued relative to its earnings power, though the OTC listing and minimal liquidity limit the investable universe.

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Data sourced from Security Federal Corporation 8-K filing dated January 30, 2026 and S&P Global.