| PART I. |
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| Item 1. | Business | 1 |
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| Item 1A. | Risk Factors | 17 |
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| Item 1B. | Unresolved Staff Comments | 25 |
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| Item 1C. | Cybersecurity | 25 |
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| Item 2. | Properties | 25 |
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| Item 3. | Legal Proceedings | 25 |
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| Item 4. | Mine Safety Disclosures | 25 |
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| PART II. |
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| Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 26 |
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| Item 6. | Reserved | 26 |
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| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 27 |
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| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 37 |
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| Item 8. | Financial Statements and Supplementary Data | 39 |
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| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 79 |
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| Item 9A. | Controls and Procedures | 79 |
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| Item 9B. | Other Information | 80 |
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| Item 9C. | Disclosure Regarding Jurisdictions the Prevent Inspections | 80 |
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| PART III. |
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| Item 10. | Directors, Executive Officers and Corporate Governance | 80 |
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| Item 11. | Executive Compensation | 80 |
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 80 |
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 80 |
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| Item 14. | Principal Accountant Fees and Services | 80 |
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| Item 15. | Exhibits and Financial Statement Schedules | 81 |
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| Signatures | 82 |
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.
Forward-Looking Statements
This Form 10-K, including information incorporated by reference herein, contains, and future filings by Security Federal Corporation ("Company") on Form 10-Q, and Form 8-K, and future oral and written statements by the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, expectations of the business environment in which we operate, projections of future performance and operations or financial condition, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management's expectations and may, therefore, involve risk and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors, including, but not limited to:
| • | potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets; including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth; |
| • | changes in the interest rate environment, including the recent past increases in the Board of Governors of the Federal Reserve System (the “Federal Reserve”) benchmark rate and duration at which such elevated interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; |
| • | the impact of continuing elevated inflation and the current and future monetary policies of the Federal Reserve in response thereto; |
| • | the effects of any federal government shutdown; |
| • | the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for credit losses and provision for credit losses that may be affected by deterioration in the housing and commercial real estate markets which may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for credit losses not being adequate to cover actual losses, and require us to materially increase our reserves; |
| • | changes in general economic conditions, either nationally or in our market areas; |
| • | changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; |
| • | fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas; |
| • | secondary market conditions for loans and our ability to sell loans in the secondary market; |
| • | results of examinations of the Company by the Federal Reserve and the Bank by the Federal Deposit Insurance Corporation ("FDIC") and the South Carolina State Board of Financial Institutions ("State Board"), or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings; |
| • | legislative or regulatory changes that adversely affect our business, including changes in banking, securities and tax laws, and in regulatory policies and principles, or the interpretation of regulatory capital or other rules; |
| • | our ability to attract and retain deposits; |
| • | our ability to control operating costs and expenses; |
| • | our ability to implement our business strategies; |
| • | the use of estimates in determining the fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; |
| • | difficulties in reducing risk associated with the loans on our balance sheet; |
| • | staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; |
| • | disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing; |
| • | our ability to attract and retain key members of our senior management team; |
| • | costs and effects of litigation, including settlements and judgments; |
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| • | our ability to manage loan delinquency rates; |
| • | increased competitive pressures among financial services companies; |
| • | changes in consumer spending, borrowing and savings habits; |
| • | the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; |
| • | our ability to pay dividends on our common stock; |
| • | adverse changes in the securities markets; |
| • | inability of key third-party providers to perform their obligations to us; |
| • | changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board ("FASB"), including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; |
| • | other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and |
| • | other risks described elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K") and in the Company's other reports filed with or furnished to the Securities and Exchange Commission (the “SEC”). |
Any of the forward-looking statements that we make may turn out to be inaccurate as a result of our beliefs and assumptions we make in connection with the factors set forth above or because of other unidentified and unpredictable factors. Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements and you should not rely on such statements. The Company undertakes no obligation to publish revised forward- looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof. These risks could cause our actual results for 2024 and beyond to differ materially from those expressed in any forward-looking statements by or on behalf of us, and could negatively affect the Company’s consolidated financial condition and consolidated results of operations, liquidity and stock price performance.
As used throughout this report, the terms "we," "our," or "us" refer to Security Federal Corporation and our consolidated subsidiary, Security Federal Bank.
Available Information
The Company provides a link on its investor information page atwww.securityfederalbank.com to the SEC website (www.sec.gov) for purposes of providing copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as soon as reasonably practicable after we have electronically filed such material with, or furnished such material to, the SEC. Other than an investor’s own internet access charges, these filings are available free of charge at the SEC’s website atwww.sec.gov. The information contained on the Company’s website is not included as part of, or incorporated by reference into, this 2023 Form 10-K.
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