SECURITY FEDERAL CORP

NOTE1 - SIGNIFICANT ACCOUNTING POLICIES

The following is a description of the more significant accounting and reporting policies used in the preparation and presentation of the accompanying consolidated financial statements. All significant intercompany transactions have been eliminated in consolidation.

Basis of Consolidation and Nature of Operations

The accompanying consolidated financial statements include the accounts of Security Federal Corporation (the “Company”) and its wholly owned subsidiary, Security Federal Bank (the “Bank”) and the Bank’s wholly owned subsidiaries, Security Federal Investments, Inc. ("SFINV") and Security Federal Insurance, Inc. (“SFINS”). SFINV was formed to hold investment securities and allow for better management of the securities portfolio. SFINS is an insurance agency offering auto, business, and home insurance. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company also has a wholly owned subsidiary, Security Federal Statutory Trust (the “Trust”), which issued and sold fixed and floating rate capital securities of the Trust. However, under current accounting guidance, the Trust isnot consolidated in the financial statements. The Bank is primarily engaged in the business of accepting savings and demand deposits and originating mortgage loans and other loans to individuals and small businesses for various personal and commercial purposes.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing balances in other banks, and federal funds sold. Cash equivalents have original maturities ofthree months or less.

Investment Securities

Investment securities are classified inone ofthree categories: HTM, AFS, or trading. Management determines the appropriate classification of debt securities at the time of purchase. Investment securities are classified as HTM when the Company has the positive intent and ability to hold the securities to maturity. These securities are recorded at cost and adjusted for amortization of premiums and accretion of discounts over a level yield basis. Callable debt securities held at a premium are amortized until the earliest call date. Prepayment assumptions on mortgage-backed securities are anticipated.

Management classifies investment securities that arenot considered to be HTM as AFS. This type of investment is stated at fair value with unrealized gains and losses, net of tax, reported in a separate component of shareholders' equity (“accumulated other comprehensive income (loss)”). Gains and losses from sales of AFS investment securities are determined using the specific identification method. The Company hadno investment securities classified as trading.

Allowance for Credit Losses – Available for Sale Securities

Management evaluates all AFS investment securities in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely thannot that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings. If either of the above criteria isnot met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company* mayconsider various factors including the extent to which fair value is less than amortized cost, performance of any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit losses, limited by the amount that the fair value is less than the amortized cost basis. Any unrealized loss that hasnot* been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (reversal of) credit losses. Losses are charged against the allowance for credit losses when management believes an AFS security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At* December 31, 2024*, there wasno allowance for credit losses related to the AFS portfolio. Accrued interest receivable on AFS securities totaled $2.5 million at* December 31, 2024* and was excluded from the estimate of credit losses.

Allowance for Credit Losses – Held to Maturity Securities

Management measures expected credit losses on HTM debt securities on a collective basis by major security type. The estimate of expected credit losses is primarily based on the ratings assigned to the securities by debt rating agencies and the average of the annual historical loss rates associated with those ratings. The Company then multiplies those loss rates, as adjusted for any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining lives of each individual security to arrive at a lifetime expected loss amount. Additionally, private label collateralized mortgage obligation ("CMO") securities which arenot explicitly or implicitly guaranteed by the U.S. government are evaluated utilizing underlying pool data such as historical loss rates, loan-to-value ratios and credit enhancement data. See "Note3 - Investments, Held to Maturity" for additional information regarding the major HTM security types. There wasno allowance for credit losses on HTM securities at* December 31, 2024*. Accrued interest receivable on HTM securities totaled $589,000 at* December 31, 2024* and was excluded from the estimate of credit losses.

Loans Receivable Held for Investment

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs. Accrued interest receivable related to loans is reported in accrued interest receivable on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.

The accrual of interest is generally discontinued when a loan becomes90 days past due and isnot well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest willnot be collectible in the normal course of business. Past due status is based on contractual terms of the loan. A loan is considered past due when a scheduled payment hasnot been received30 days after the contractual due date.

All accrued interest is reversed against interest income when a loan is placed on nonaccrual status. Interest received on such loans is accounted for using the cost- recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income isnot recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured.

Allowance for Credit Losses on Loans

The allowance for credit losses on loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries donot exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses. The allowance for credit losses on loans represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses on loans is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

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The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company has identified the following portfolio segments:

Real Estate

Commercial and Agricultural - Commercial and agricultural loans consist of loans or lines of credit to finance accounts receivable, inventory or other general business needs, business credit cards, and lease financing agreements for equipment, vehicles, or other assets. The primary risk associated with commercial and agricultural loans is the ability of borrowers to achieve business results consistent with those projected at origination. Failure to achieve these projections presents risk the borrower will be unable to service the debt consistent with the contractual terms of the loan or lease.

Consumer loans

The Company calculates the allowance for credit losses on loans for each pool of loans using a remaining life loss methodology with atwo quarter reasonable and supportable forecast period and an immediate reversion period. Management believes that the Company’s historical loss experience provides the best basis for its assessment of expected credit losses on loans to determine the allowance for credit losses on loans. The Company uses its own internal data to measure historical credit loss experience within the loan pools with similar risk characteristics over an economic cycle. The Company then forecasts the calculated historical loss rates over the calculated remaining life of loans by pool.

Additionally, the allowance for credit losses on loans calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments* mayincrease or reduce reserve levels and include adjustments for lending management experience and risk tolerance, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, industry concentrations, trends in underlying collateral, external factors and economic conditionsnot* already captured.

Loans that donot share risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses on loans are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate.

Management evaluates the carrying value of the loans periodically and the allowance is adjusted accordingly. While management uses the best information available to make evaluations, future adjustments* maybe necessary if economic conditions differ substantially from the assumptions used in making these evaluations. The allowance for credit losses is subject to periodic evaluations by bank regulatory agencies that may*require adjustments to be made to the allowance based upon the information that is available at the time of their examination.

Allowance for Credit Losses – Unfunded Commitments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses - unfunded commitments unless the commitments to extend credit are unconditionally cancellable, through a charge to provision for unfunded commitments, which is included in the provision for credit losses in the Company’s consolidated income statements. The allowance for credit losses – unfunded commitments is estimated by loan segment at each balance sheet date using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as anythird-party guarantees. The allowance for credit losses - unfunded commitments is included in other liabilities on the Company’s consolidated balance sheets.

Loans Receivable Held for Sale

The Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed butnot yet settled with institutional investors are carried in the Company’s loans held for sale portfolio. These loans are fixed rate residential loans that have been originated in the Company’s name and have closed. Virtually all these loans have commitments to be purchased by investors and the majority of these loans were locked in by price with the investors on the same day or shortly thereafter that the loan was locked in with the Company’s customers. Therefore, these loans present little market risk for the Company. The Company usually delivers to, and receives funding from, the investor within30 days. Commitments to sell these loans to the investor are considered derivative contracts and are sold to investors on a “best efforts" basis. The Company isnot obligated to deliver a loan or pay a penalty if a loan isnot delivered to the investor. As a result of the short-term nature of these derivative contracts, the fair value of the mortgage loans held for sale in most cases is the same as the value of the loan amount at its origination.

Other Real Estate Owned

Other real estate owned represents real estate and other assets acquired through foreclosure or repossession and are initially recorded at the estimated fair value less costs to sell. Subsequent improvements are capitalized. Costs of holding real estate, such as property taxes, insurance, general maintenance and interest expense, are expensed as a period cost. Fair values are reviewed regularly and allowances for possible losses are established when the carrying value of the asset owned exceeds the fair value less estimated costs to sell. Fair values are generally determined by reference to an outside appraisal.

Premises and Equipment

Premises and equipment are carried at cost, net of accumulated depreciation. Depreciation of premises and equipment is amortized on a straight-line method over the estimated useful life of the related asset. Estimated lives are 7 to 40 years for buildings and improvements and generally 3 to 10 years for furniture, fixtures and equipment. Maintenance and repairs are charged to current expense. The cost of major renewals and improvements are capitalized.

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Land Held for Sale

Land held for sale is reported at the lower of the carrying amount and fair value less costs to sell. No write-downs on land held for sale were recorded during2024 or2023.

Goodwill

The Company's goodwill is a result of the excess of the cost over the fair value of net assets resulting from the acquisition of Collier Jennings Financial Corporation in* July 2006.Goodwill is reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may**not* be recoverable.

Income Taxes

Income tax expense or benefit is recognized for the net change in the deferred tax liability or asset during the year. That amount together with income taxes currently payable is the total amount of income tax expense or benefit for the year. Deferred taxes are provided for by the differences in financial reporting bases for assets and liabilities compared with their tax bases. Generally, a current tax liability or asset is established for taxes presently payable or refundable and a deferred tax liability or asset is established for future tax items. A valuation allowance, if applicable, is established for deferred tax assets that* may**not* be realized. Deferred income taxes are provided for differences between the provision for credit losses for financial statement purposes and those allowed for income tax purposes.

The Company adopted accounting guidance which prescribes a threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosures. There have beenno gross amounts of unrecognized tax benefits or interest or penalties related to uncertain tax positions since adoption. There areno unrecognized tax benefits that would, if recognized, affect the effective tax rate. There areno positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next12 months.

Advertising Expense

Advertising and public relations costs are generally expensed as incurred. External costs relating to direct mailing are expensed in the period in which the direct mailings are sent. Advertising and public relations costs of $1.0 million and $980,000 were included in the Company’s results of operations for the years ended* December 31, 2024and2023,* respectively.

Stock-Based Compensation

The Company accounts for compensation costs under its stock option plans using the fair value method. This method requires the measurement of the cost of employee services received in exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the award is recognized in the income statement over the vesting period of the award.

Net Income Per Common Share

Accounting guidance specifies the computation, presentation and disclosure requirements for earnings per share (“EPS”) for entities with publicly held common stock or potential common stock such as options, warrants, convertible securities or contingent stock agreements if those securities trade in a public market. Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding. Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive common shares had been issued. The dilutive effect of options outstanding under the Company’s stock option plan is reflected in diluted EPS by application of the treasury stock method.

There wereno stock options outstanding as of* December 31, 2024and2023*; and therefore,no dilutive options in the calculation of diluted EPS for those periods. The following tables show the Company’s net income per common share for the years indicated.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes include:

Segment Reporting

The Company adopted Accounting Standards Update2023-07 “Segment Reporting (Topic280*) - Improvement to Reportable Segment Disclosures*” on* January 1, 2024.The Company has determined that all of its banking divisions and subsidiaries meet the aggregation criteria of ASC280,* Segment Reporting, as its current operating model is structured whereby banking divisions and subsidiaries serve a similar base of primarily commercial clients utilizing a company-wide offering of similar products and services managed through similar processes and platforms that are collectively reviewed by the Company’s Executive Committee, which has been identified as the chief operating decision maker (“CODM”).

The CODM regularly assesses performance of the aggregated single operating and reporting segment and decides how to allocate resources based on net income calculated on the same basis as is net income reported in the Company’s consolidated statements of income and other comprehensive income. The CODM is also regularly provided with expense information at a level consistent with that disclosed in the Company’s consolidated statements of income and other comprehensive income. The measure of segment assets is reported on the balance sheet as total consolidated assets.

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Reclassifications

Certain amounts in prior years’ consolidated financial statements have been reclassified to conform to current period classifications. There wereno changes to previously reported net income or shareholders' equity.

Recently Issued or Adopted Accounting Standards

The following is a summary of recent authoritative pronouncements that could affect accounting, reporting, and disclosure of financial information by the Company:

On* January 1, 2023,the Company adopted Accounting Standards Update (“ASU”)2016-13 Financial Instruments – Credit Losses (Topic326*): Measurement of Credit Losses on Financial Instruments Accounting Standards Codification (“ASC”)326. This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and HTM debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.

In addition, CECL made changes to the accounting for AFS debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on AFS debt securities if management doesnot intend to sell and doesnot believe that it is more likely thannot, they will be required to sell. The Company adopted ASC326 and all related subsequent amendments thereto effective* January 1, 2023using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The transition adjustment of the adoption of CECL included an increase in the allowance for credit losses on loans of $784,000, which is presented as a reduction to net loans outstanding, and an increase in the allowance for credit losses on unfunded loan commitments of $1.2 million, which is recorded within "Other Liabilities." The Company recorded a net decrease to retained earnings of $1.6 million as of January 1, 2023for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded. Results for reporting periods beginning after January 1, 2023are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”). The Company electednot* to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the instrument is90 days past due, or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that this policy results in the timely reversal of uncollectible interest. The adoption of CECL had an insignificant impact on the Company's HTM and AFS securities portfolios.

In* January 2023,the Company adopted ASU2022*-02, “Financial Instruments – Credit Losses (Topic326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, for public business entities, the guidance requires disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic326-20. The Company adopted the guidance using the modified retrospective method. Upon adoption of this guidance, the Company isno longer required to establish a specific reserve for modifications to borrowers experiencing financial difficulty. Instead, these modifications are included in their respective cohort and a historical loss rate is applied to the current loan balance to arrive at the quantitative baseline portion of the allowance. The difference between the allowance previously determined and the current allowance wasnot material to the Company’s financial statements.

In* December 2022,the FASB issued amendments to extend the time preparers can use the reference rate reform relief guidance under ASC Topic848* from* December 31, 2022,to December 31, 2024,to address the fact that all London Interbank Offered Rate ("LIBOR") tenors werenot* discontinued as of* December 31, 2021,and some tenors will be published until June 2023.The amendments are effective immediately for all entities and are applied prospectively. These amendments didnot* have a material effect on the Company's financial statements.

In* December 2023,the FASB amended the Income Taxes topic in the ASC to improve the transparency of income tax disclosures. The amendments are effective for annual periods beginning after December 15, 2024.Early adoption is permitted for annual financial statements that havenot* yet been issued or made available for issuance. The Company doesnot expect these amendments to have a material effect on its financial statements.

On* January 1, 2024,the Company adopted ASU2023*-07, “Segment Reporting (Topic280) - Improvement to Reportable Segment Disclosures”. The Company has determined that all of it's banking divisions and subsidiaries meet the aggregation criteria of ASC280, Segment Reporting, as its current operating model and the adoption didnot have a material effect on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting authorities arenot expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Risks and Uncertainties

In the normal course of its business, the Company encounterstwo significant types of risk: economic and regulatory. There arethree main components of economic risk: interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on different bases, than its interest-earning assets. Credit risk is the risk of default on the Company’s loan portfolio that results from borrowers’ inability or unwillingness to make contractual payments. Market risk reflects changes in the value of collateral underlying loans receivable, the valuation of real estate held by the Company, and the valuation of loans held for sale and securities available for sale. The Company is subject to the regulations of various government agencies. These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the bank regulatory agencies, which* may*subject it to further changes with respect to asset valuations, amounts of required loss allowances, and operating restrictions, resulting from the regulators’ judgments based on information available to them at the time of their examination.

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NOTE2 - INVESTMENTS, AVAILABLE FOR SALE

AFS securities are recorded at fair market value. There wasno allowance for credit losses for AFS securities as of* December 31, 2024*. The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of AFS securities at the dates indicated were as follows:

Student Loan Pools are typically97% guaranteed by the United States government while SBA bonds are100% backed by the full faith and credit of the United States government. The majority of the Bank's MBS are issued or guaranteed by an agency of the United States government such as Ginnie Mae, or by Government Sponsored Entities ("GSEs"), including Fannie Mae and Freddie Mac. Ginnie Mae MBS are backed by the full faith and credit of the United States government, while those issued by GSEs arenot. Also included in MBS are private label collateralized mortgage obligation ("CMO") securities, which are issued by non-governmental real estate mortgage investment conduits and arenot backed by the full faith and credit of the United States government. At* December 31, 2024* the Bank held an amortized cost and fair value of $80.3 million and $76.0 million in private label CMO securities, compared to an amortized cost and fair value of $83.3 million and $76.7 million at* December 31, 2023*, respectively.

The amortized cost and fair value of AFS securities at* December 31, 2024* are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without call or prepayment penalties. Since MBS arenot due at a single maturity date, they are disclosed separately, rather than allocated over the maturity groupings below.

The amortized cost and fair value of AFS securities pledged as collateral for certain deposit accounts, FHLB advances, FRB, and other borrowings were $483.9 million and $446.1 million at* December 31, 2024*, and $533.7 million and $490.5 million at* December 31, 2023*, respectively.

During the year ended* December 31, 2024*, we received $13.7 million in gross proceeds from sales of AFS securities and recognized gross gains of $408,000 and gross losses of $371,000. There wereno sales of AFS securities during the year ended* December 31, 2023*.

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The following tables summarize gross unrealized losses and the related fair value, aggregated by investment category and length of time that individual AFS securities have been in a continuous unrealized loss position at the dates indicated.

At* December 31, 2024*, AFS securities consisted of 495 securities,369 of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s SBA bonds, MBS, and taxable municipal bonds. Management’s evaluation of those securities is discussed below. The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether an allowance for credit loss is deemed necessary.

SBA Bonds

At* December 31, 2024*, there were 114 SBA Bonds,58 of which had unrealized losses. These unrealized losses related principally to changes in market interest rates. The contractual terms of the investments donot permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company doesnot intend to sell the investments and it is more likely thannot that the Company willnot be required to sell the investments before recovery of their amortized cost bases, which* maybe maturity, the Company didnot* recognize unrealized losses into income at* December 31, 2024*. SBA securities are fully backed by the U.S. government.

MBS

At* December 31, 2024*, approximately 79% of the AFS MBS held by the Company were issued or guaranteed by an agency of the U.S. government such as Ginnie Mae, or by Government Sponsored Entities ("GSEs"), including Fannie Mae and Freddie Mac. The contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. At* December 31, 2024*, there were 179 of these securities in an unrealized loss position. This impairment is believed to be caused by the current interest rate environment. Because the decline in market value is attributable to the current interest rate environment andnot credit quality, and because the Company doesnot intend to sell the investments and it isnot more likely thannot that the Company will be required to sell the investments before recovery of their amortized cost bases, which* maybe maturity, unrealized losses werenot* recognized into income as of* December 31, 2024*.

Also included in MBS are private label collateralized mortgage obligation ("CMO") securities, which are issued by non-governmental real estate mortgage investment conduits and arenot backed by the full faith and credit of the U.S. government. At* December 31, 2024* we held 56 private label CMO securities with an amortized cost and fair value of $80.3 million and $76.0 million, respectively. At that date,42 of these securities had unrealized losses. Of the 42 securities in a loss position,32 were rated AA or higher by Moody’s, Bloomberg, and/or S&P. In addition, each of the individual securities have credit enhancements and LTVs further reducing potential realized losses. This impairment is believed to be caused by the current interest rate environment. Because the decline in market value is attributable to the current interest rate environment andnot credit quality, and because the Company doesnot intend to sell the investments and it isnot more likely thannot that the Company will be required to sell the investments before recovery of their amortized cost bases, which* maybe maturity, unrealized losses werenot* recognized into income as of* December 31, 2024*.

Municipal Bonds

At* December 31, 2024* there were 5 tax exempt municipal securities and 59 taxable municipal securities that had unrealized losses. The Company believes the unrealized losses on those investments were caused by the interest rate environment and donot relate to the underlying credit quality of the issuers. Because the Company doesnot intend to sell the investments and it isnot more likely thannot that the Company will be required to sell the investments before recovery of their amortized cost bases, which* maybe maturity, unrealized losses werenot* recognized into income as of* December 31, 2024*. Each of the Municipal securities held were rated*“A2”* (Moody’s) or “AA-” (S&P) or better.

Accrued interest receivable on AFS securities totaled $2.5 million at* December 31, 2024* and was excluded from the estimate of credit losses.

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NOTE3 - INVESTMENTS, HELD TO MATURITY

HTM securities are recorded at amortized cost. The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of HTM securities at the dates indicated were as follows:

At* December 31, 2024*, the amortized cost and fair value of HTM securities that were pledged as collateral for certain deposit accounts, FRB and other borrowings were $94.1 million and $89.8 million compared to an amortized cost and fair value of $107.5 million and $103.8 million at* December 31, 2023*, respectively.

At* December 31, 2024*, HTM securities had a combined book value of $135.2 million and an average book yield of 4.67%, which was calculated by multiplying the carrying value of each HTM security by its yield and dividing the sum of these results by the total carrying value. The following table includes a summary of the amortized cost and average book yield of HTM securities by contractual maturity at* December 31, 2024*. Since MBS donot have fixed maturity dates, they are disclosed separately.

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The following tables summarize gross unrealized losses and the related fair value, aggregated by investment category and length of time that individual HTM securities have been in a continuous unrealized loss position at the dates indicated.

At* December 31, 2024and2023*,47 and 55 individual HTM securities were in a loss position, respectively. We believe, based on industry analyst reports and credit ratings, that the deterioration in value was attributable to changes in market interest rates and wasnot in the credit quality of the issuer. We have the ability and intent to hold these securities to maturity.

The estimate of expected credit losses on HTM securities is primarily based on the ratings assigned to the securities by debt rating agencies and the average of the annual historical loss rates associated with those ratings. The Company then multiplies those loss rates, as adjusted for any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining lives of each individual security to arrive at a lifetime expected loss amount. Additionally, private label CMO securities which arenot explicitly or implicitly guaranteed by the U.S. government are evaluated utilizing underlying pool data such as historical loss rates, loan-to-value ratios and credit enhancement data. At* December 31, 2024*, we held an amortized cost and fair value of $9.0 million and $8.9 million in HTM private label CMO securities, compared to an amortized cost and fair value of $14.6 million and $14.3 million at* December 31, 2023*, respectively. All MBS issued by government-sponsored corporations are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history ofno credit losses. The state and local governments securities held by the Company are highly rated by major rating agencies.

As a result of the analysis, the allowance for credit losses for HTM securities wasnot considered to be material as of* December 31, 2024*. The following table summarizes the amortized cost and credit ratings of our HTM securities that were considered to have greater than zero percent credit loss probability at* December 31, 2024*.

As of* December 31, 2024*, there wereno HTM securities that were classified as either nonaccrual or90 days or more past due and still accruing. Accrued interest receivable on HTM securities totaled $589,000 at* December 31, 2024* and was excluded from the estimate of credit losses.

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NOTE4 - LOANS RECEIVABLE, NET

Loans receivable, net, at the dates indicated are summarized as follows:

Credit Quality Indicators

The Bank categorizes loans into risk categories based on relevant information regarding the borrowers' ability to pay off their loan in accordance with its terms. This information includes; but isnot limited to, current financial and credit documentation, payment history, public information and current economic trends, among other factors. Risk ratings are used to rate the credit quality of loans for the purposes of determining the Bank’s allowance for credit losses. The following definitions are used for credit quality risk ratings:

Pass - loans that are performing and are deemed adequately protected by the net worth of the borrower or the underlying collateral value. These loans are considered to have the least amount of risk in terms of determining the allowance for credit losses.

Caution - loans that donot currently expose the Bank to sufficient risk to warrant adverse classification but possess weaknesses.

Special Mention - loans that donot currently expose the Bank to sufficient risk to warrant adverse classification but possess more weaknesses than Caution loans.

Substandard- loans that typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value. All loans90 days or more past due are automatically classified in this category.

Doubtful- loans that have all the weaknesses of Substandard loans and those weaknesses make collection or liquidation highly questionable and improbable based on current conditions and values.

**Loss -**loans that are considered uncollectible and of such little values that their continuance as assets isnot warranted.

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The following table presents the Company's recorded investment in loans, excluding loans held for sale, by credit quality indicators, loan segment and year of origination as of* December 31, 2024*.

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The table below summarizes the balance by credit quality rating and loan segment, excluding loans held for sale, at* December 31, 2023*.

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Past Due and Non-accrual Loans

The following tables present an age analysis of past due balances by category at the dates indicated.

At* December 31, 2024and2023*, the Bank didnot have any loans that were90 days or more past due and still accruing interest. At* December 31, 2024*, $4.1 million in non-accrual loans were current, $287,000 were30-59 days past due, and $714,000 were60-89 days past due. The remaining non-accrual loans were90 or more days past due. Our strategy is to work with our borrowers to reach acceptable payment plans while protecting our interests in the existing collateral. In the event an acceptable arrangement cannot be reached, we* may*have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them.

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The following table shows non-accrual loans by category at the dates indicated. There wereno non-accrual loans with an allowance at* December 31, 2023*.

The Company didnot recognize any interest income on nonaccrual loans during the year ended* December 31, 2024*. The following table represents the accrued interest receivables written off by reversing interest income during the year ended* December 31, 2024* :

Allowance for Credit Losses

The table below shows the activity in the allowance for credit losses on loans by loan category for the years ended year* December 31, 2024* and2023.

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Allowance for Credit Losses and Collateral Dependent Loans

The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

In accordance with our policy, non-accrual commercial loans under $200,000 and non-accrual consumer loans under $100,000 are excluded from the review of individual loans when calculating the allowance for credit losses due to materiality. These loans are included in the pooled loans balances of the allowance for credit losses calculation. The following table summarizes the amortized cost of collateral dependent loans:

Modifications to Borrowers Experiencing Financial Difficulty

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

Modifications made to borrowers experiencing financial difficulty typically have their impact already factored into the allowance for credit losses. This is due to the measurement methodologies utilized in estimating the allowance. Consequently, a change to the allowance for credit losses is generallynot recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically,one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness,* maybe granted. As such multiple types of modifications mayhave been made on the same loan within the current reporting period. The combination is at leasttwo* of the following: a term extension, principal forgiveness, and interest rate reduction. Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

The Company hadno modified loans to borrowers experiencing financial difficulty during the years ended* December 31, 2024and2023*.

Allowance for Credit Losses - Unfunded Commitments

The Company maintains an allowance for credit losses - unfunded commitments for credit exposures such as unfunded balances for existing lines of credit and commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit isnot unconditionally cancellable (i.e., commitment cannot be canceled at any time). The allowance for credit losses - unfunded commitments is adjusted through the provision for (reversal of) credit losses. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans, and are discussed in this footnote. The allowance for credit losses - unfunded commitments at* December 31, 2024* is separately classified on the balance sheet within "Other Liabilities."

The following table presents the balance and activity in the allowance for credit losses - unfunded loan commitments.

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NOTE5 - PREMISES AND EQUIPMENT, NET AND LEASES

Premises and equipment, net, at the dates indicated are summarized as follows:

Construction in progress of $281,000 at* December 31, 2024* primarily included building and construction costs associated with renovations to our existing branches. Depreciation expense on premises and equipment was $2.1 million for both the years ended* December 31, 2024and2023*. Loss on disposal of premises and equipment was $1,000 and $29,000 during2024 and2023, respectively.

The Company has operating leases onsix of its branches. During the year ended* December 31, 2024*, the Company made cash payments in the amount of $475,000 for operating leases. The lease expense recognized during this period was $514,000 and is included in occupancy expense within the Consolidated Statements of Income. The operating lease liability had a net decrease of $483,000 during the year ended* December 31, 2024*. At* December 31, 2024*, the Company had operating lease ROU assets of $927,000 and an operating lease liability of $959,000 recorded on its consolidated balance sheet compared to operating lease ROU assets of $1.4 million and an operating lease liability of$1.4 million at* December 31, 2023*. The lease agreements have maturity dates ranging from2025 through2028, some of which include options for multiplefive orten year extensions. At* December 31, 2024*, the remaining weighted average lease term was 2.3 years and the weighted average discount rate used was 3.2%.

The ROU asset and lease liability are recognized at lease commencement by calculating the present value of lease payments over the lease term. The ROU assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by any lease incentives.

At* December 31, 2024*, future undiscounted lease payments for operating leases with initial terms ofone year or more were as follows:

NOTE6 - GOODWILL

Goodwill was $1.2 million at both* December 31, 2024and2023*. In accordance with accounting guidance, the Company conducts an annual evaluation of its goodwill as of* December 31each year. Following these evaluations, the Company concluded thatno* impairment existed. As a result, there wasno goodwill write-down for the years ended* December 31, 2024and2023*.

NOTE7 - FHLB STOCK

The Bank, as a member of the FHLB of Atlanta, is required to acquire and hold shares of capital stock in the FHLB of Atlanta in an amount equal to a membership component, which was equal to 0.07% of total Bank assets at both* December 31, 2024and2023*, plus a transaction component equal to 4.75% of outstanding advances (borrowings) from the FHLB of Atlanta at* December 31, 2024and2023*, respectively. The Bank was in compliance with this requirement with an investment in FHLB of Atlanta stock of $1.1 million and $922,000 at* December 31, 2024and2023*, respectively. As there isno readily available market for this stock andno quoted fair value, it is carried at cost, consistent with the historical practice of redeeming the stock at par.

NOTE8 - OTHER REAL ESTATE OWNED

The Bank hadno OREO at* December 31, 2024and2023*. Transactions in OREO for the years indicated are summarized as follows:

There wereno sales of OREO property andno OREO transactions during the year ended* December 31, 2024*. There wasone OREO property sold during the year ended* December 31, 2023* for gross proceeds of $107,000, which resulted in a related gain on sale of OREO in the amount of $2,000.

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NOTE9 - DEPOSITS

Deposits outstanding at the dates indicated are summarized below by account type as follows:

The Bank had $5.4 and $5.0 million in brokered deposits which are included in checking and money market deposits above at* December 31, 2024and2023*. In addition, the Bank had $25.8 million and $6.5 million in brokered time deposits at* December 31, 2024and2023*, respectively, with a weighted average interest rate of 4.50% and 4.54%, respectively. Brokered time deposits are included in certificates of deposit above and below. At* December 31, 2024and2023*, the Bank had $55,000 and $57,000, respectively, in overdrafts that were reclassified to loans.

Total uninsured deposits (those that met or exceeded the FDIC insurance limit of*$250,000*) totaled $365.8 million and $327.7 million at* December 31, 2024and2023*, respectively. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements. The Bank hadno deposit relationships greater than5.0% of outstanding deposits at* December 31, 2024*, compared toone deposit relationship totaling approximately 5.2% of outstanding deposits at* December 31, 2023.*

Certificate of deposits that exceeded the FDIC insurance limit of*$250,000* totaled $96.0 million and $50.2 million at* December 31, 2024and2023*, respectively.

The amounts and scheduled maturities of all certificates of deposit at the dates indicated were as follows:

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NOTE10 - FHLB ADVANCES AND FRB BORROWINGS

FHLB advances are secured by a blanket collateral agreement with the FHLB by pledging the Company’s portfolio of residentialfirst mortgage loans and investment securities. The Bank's total pledged collateral for FHLB advances had an amortized cost and fair value of $48.1 million and $39.3 million at* December 31, 2024* and $53.6 million and $44.1 million at* December 31, 2023*, respectively. At* December 31, 2024and2023*, the Company had $453.5 million and $424.4 million, respectively, in borrowing capacity at the FHLB based on the collateral value of pledged investment securities and loans. There wereno outstanding FHLB advances at* December 31, 2024and2023*.

The Company had $50.0 million in outstanding borrowings under the FRB Term Funding Program (“BTFP”) with a weighted average borrowing rate of 4.76% at* December 31, 2024* compared to $119.2 million with a weighted average borrowing rate of 4.60% at* December 31, 2023*. During2023, we elected to participate in the BTFP to refinance existing FRB discount window borrowings at a lower fixed rate. Advances under the program have aone-year term and are priced at the OIS rate plus 10 basis points on the day the advance is made. Effective* January 24, 2024,the FRB announced that future advances through the program’s expiration on March 11, 2024,would be set atno* lower than the interest rate on reserve balances in effect at the time of the advance.

Depository institutions* mayborrow from the FRB discount window for periods as long as90* days, and borrowings are prepayable and renewable by the borrower daily. At* December 31, 2024*, we had pledged as collateral for these borrowings investment securities with an amortized cost and fair value of $370.2 million and $341.0 million, compared to an amortized cost and fair value of $381.0 million and $350.6 million, respectively, at* December 31, 2023*.

During thethird quarter of2023, the Company entered the FRB’s Borrower-In-Custody ("BIC") program, which allows for the pledging of various loan types to secure FRB borrowings. As of* December 31, 2024*, the Company had pledged loan collateral for FRB borrowings with an amortized cost and collateral value of $84.9 million and $66.2 million, respectively, compared to pledged loan collateral with an amortized cost and collateral value of $93.5 million and $65.5 million at* December 31, 2023*, respectively.

NOTE11 - OTHER BORROWINGS

The Bank had $27.8 million and $19.2 million in other borrowings at* December 31, 2024and2023*, respectively. These borrowings consist of short-term repurchase agreements with certain commercial demand deposit customers for sweep accounts. The repurchase agreements typically mature withinone tothree days and the interest rate paid on these borrowings floats monthly with money market type rates. At both* December 31, 2024and2023*, the interest rate paid on the repurchase agreements was 1.49%. The maximum amount outstanding at any month end during the year ended* December 31, 2024* was $28.0 million compared to $29.5 million during the year ended* December 31, 2023*. The Bank had pledged as collateral for these repurchase agreements investment securities with amortized costs and fair values of $42.1 million and $39.7 million at* December 31, 2024* and $44.7 million and $42.0 million at* December 31, 2023*, respectively.

NOTE12 - JUNIOR SUBORDINATED DEBENTURES

On* September 21, 2006,*Security Federal Statutory Trust (the “Trust”), a wholly-owned subsidiary of the Company, issued and sold fixed and floating rate capital securities of the Trust (the “Capital Securities”), which are reported on the consolidated balance sheet as junior subordinated debentures, generating proceeds of $5.2 million. The Trust loaned these proceeds to the Company to use for general corporate purposes, primarily to provide capital to the Bank.

As of a result of the discontinuation of LIBOR, effective* June 30, 2023,the Capital Securities transitioned from its floating rate ofthree* month LIBOR plus 170 basis points to a replacement floating rate ofthree month Secured Overnight Financing Rate ("SOFR") as adjusted by the relevant spread adjustment of 0.26161 plus 170 basis points. As of* December 31, 2024and2023,* this was a rate per annum equal to 6.32% and 7.35%, respectively.

The distribution rate payable on the Capital Securities is cumulative and payable quarterly in arrears. The Company has the right, subject to events of default, to defer payments of interest on the Capital Securities for a periodnot to exceed20 consecutive quarterly periods, provided thatno extension period* mayextend beyond the maturity date of December 15, 2036.The Company hasno* current intention to exercise its right to defer payments of interest on the Capital Securities. The Capital Securities mature or are mandatorily redeemable upon maturity on* December 15, 2036,or upon earlier optional redemption as provided in the indenture. The Company has had the right to redeem the Capital Securities in whole or in part since September 15, 2011.*

NOTE13 - SUBORDINATED DEBENTURES

In* November 2019,the Company sold and issued to certain institutional investors $17.5 million in aggregate principal amount of 5.25% fixed-to-floating rate subordinated notes due2029* (the*“10*-Year Notes”) and $12.5 million in aggregate principal amount of 5.25% fixed-to-floating rate subordinated notes due2034 (the*“15*-Year Notes”, and together with the10-Year Notes, the “Notes”).

The10-Year Notes have a stated maturity of* November 22, 2029,and bear interest at a fixed rate of 5.25% per year, from and including November 22, 2019but excluding November 22, 2024.From and including November 22, 2024to but excluding the maturity date or early redemption date, the interest rate shall reset semi-annually to an interest rate equal to the then-currentthree*-month LIBOR rate plus 369 basis points. The15-Year Notes have a stated maturity of* November 22, 2034,and bear interest at a fixed rate of 5.25% per year, from and including November 22, 2019but excluding November 22, 2029.From and including November 22, 2029to but excluding the maturity date or early redemption date, the interest rate for the15*-Year Notes shall reset semi-annually to an interest rate equal to the then-currentthree-month LIBOR rate plus 357 basis points. The Notes are payable semi-annually in arrears on* June 1and December 1of each year commencing June 1, 2020.*

The Notes arenot subject to redemption at the option of the holder and* maybe redeemed by the Company only under certain limited circumstances prior to November 22, 2024,with respect to the10*-Year Notes, and* November 22, 2029,with respect to the15*-Year Notes. The Company* mayredeem the10*-Year Notes and the15-Year Notes at its option, in whole at any time, or in part from time to time, after* November 22, 2024and November 22, 2029,*respectively. The Notes are unsecured, subordinated obligations of the Company and rank junior in right to payment to the Company’s current and future senior indebtedness, and each Note is equal in right to payment with respect to the other Notes.

In* November 2024,the Company redeemed the10*-Year Notes, which had an aggregate principal balance of $16.5 million. At* December 31, 2024,we had a remaining balance of $10.0 million, comprised of all15*-Year Notes. We* mayredeem the15*-Year Notes at our option, in whole at any time, or in part from time to time, after* November 22,*2029.The Notes included a remedy in the event that LIBOR is discontinued. The Company will evaluate the remedy to determine an appropriate benchmark replacement for LIBOR at the early redemption date.

The Notes have been structured to qualify as Tier2 capital for the Company under applicable regulatory guidelines. The Company used the net proceeds from the sale of the Notes to fund the redemption of the convertible senior debentures and for general corporate purposes to support future growth.

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NOTE14 - INCOME TAXES

Income tax expense was comprised of the following for the years indicated below:

The Company's income taxes differ from those computed at the statutory federal income tax rate for the years indicated, as follows:

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at* December 31, 2024and2023* are presented below. Net deferred tax assets or liabilities were included in other assets or other liabilities at* December 31, 2024and2023*.

The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Deferred tax assets represent the future tax benefit of deductible differences and, if it is more likely thannot that a tax asset willnot be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. As of* December 31, 2024*, management has determined that it is more likely thannot that the total deferred tax asset will be realized except for the deferred tax asset associated with state net operating loss carryforwards, and, accordingly, has established a valuation allowance only for this item. The change in the valuation allowance was approximately $63,000. The Company had state net operating losses attributable to the non-bank entities of $8.3 million and $10.2 million for the years ended* December 31, 2024and2023*, respectively.

Retained earnings at* December 31, 2024* included tax bad debt reserves of $2.1 million, for whichno provision for federal income tax has been made. If, in the future, these amounts are used for any purpose other than to absorb bad debt losses, including dividends, stock redemptions, or distributions in liquidation, or the Company ceases to be qualified as a bank holding company, they* maybe subject to federal income tax at the prevailing corporate tax rate. At December 31, 2024*, the Company hadno material unrecognized tax benefits or accrued interest and penalties. It is the Company's policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense. Tax returns for 2021 and subsequent years are subject to examination by taxing authorities.

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NOTE15 - REGULATORY MATTERS

The Bank, as a state-chartered, federally insured savings bank, is subject to the capital requirements established by the FDIC. Under the FDIC's capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

The Company is a bank holding company registered with the Board of Governors of the Federal Reserve System (the "Federal Reserve"). Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of1956, as amended, and the regulations of the Federal Reserve. For a bank holding company with less than*$3.0* billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company's subsidiary banks to be well-capitalized under the prompt corrective action regulations.** **

Based on its capital levels at* December 31, 2024*, the Bank exceeded all regulatory capital requirements as of that date. Consistent with the Bank's goals to operate a sound and profitable organization, it is the Bank's policy to maintain a "well-capitalized" status under the regulatory capital categories of the FDIC. Based on capital levels at* December 31, 2024*, the Bank was considered to be "well-capitalized" under applicable regulatory requirements. Management monitors the capital levels to provide for current and future business opportunities and to maintain the Bank's "well-capitalized" status.

The tables below provide the Bank’s regulatory capital requirements and actual results at* December 31, 2024and2023*.

In addition to the minimum capital requirements, the Bank must maintain a capital conservation buffer, which consists of additional Common Equity Tier1 capital greater than2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At* December 31, 2024* the Bank’s conservation buffer was 12.0%.

NOTE16 - EMPLOYEE BENEFIT PLANS

The Company participates in a multiple employer defined contribution employee benefit plan covering substantially all employees withsix months or more of service. The Company matches a portion of the employees’ contributions and the plan has a discretionary profit sharing provision. Total employer contributions were $404,000 and $368,000 for the years ended* December 31, 2024and2023*, respectively, which are included within Compensation and Employee Benefits within the Company's Consolidated Statements of Income.

The Company has an Employee Stock Purchase Plan (“ESPP”). The ESPP allows employees of the Company to purchase stock quarterly through a payroll deduction at a discount calculated as 15% of the market value with a floor equal to the Company’s book value. The ESPP, which was approved by stockholders in* April 2018,became effective July 1, 2018.Participation in the ESPP is voluntary. Employees are limited to investing $25,000 or 5% of their annual salary, whichever is lower, during the year. There were 1,914 shares of common stock purchased through the ESPP during the year ended December 31, 2024* compared to 2,319 shares purchased during2023.

In2014, the Company implemented an Incentive Compensation Plan (the "Plan"). Incentive awards are based on the financial and operating performance of the Company as well as other participant specific objectives. The Plan allows employees of the Company to earn up to7.5 days of their annual salary for successfully completing specific goals established by the participants and their respective supervisors plus an additional2.5 days of their annual salary if the Company meets an annual predetermined net operating income amount determined by the Board of Directors.

In2016, the Company implemented a Quarterly Branch Incentive Compensation Plan (the "Branch Incentive Plan"), and all branch employees were moved from the Plan to the Branch Incentive Plan. This plan is for retail branch employees only and pays incentive on a quarterly basis based on specific performance goals established for each branch location.

The Company also implemented an Incentive Compensation Plan for executive level officers (the "Executive Plan"). Under this plan, incentive awards are based on contributions to performance as measured by critical operating and financial ratios, and other participant specific objectives. The Company must meet the annual predetermined net operating income amount determined by the Board of Directors for any incentive awards to be paid under the Executive Plan. If the Company doesnot meet the required net income amount,no incentives are paid under the Executive Plan regardless of the executive's performance on individual objectives or entity wide objectives.

Participation in the ESPP, the Plan, the Branch Incentive Plan and the Executive Plan is voluntary. During the years ended* December 31, 2024and2023*, the Company incurred expenses of $225,000 and $238,000, respectively, related to these incentive plans, which are included in Compensation and Employee Benefits within the Company's Consolidated Statements of Income.

Certain officers of the Company participate in a supplemental retirement plan. These benefits arenot qualified under the Internal Revenue Code and they arenot funded. During the years ended* December 31, 2024and2023*, the Company incurred expenses of $471,000 and $411,000, respectively, for this plan, which are included in Compensation and Employee Benefits within the Company's Consolidated Statements of Income.

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NOTE17 - BANK OWNED LIFE INSURANCE

BOLI provides key person life insurance on certain officers of the Company. The cash value of the life insurance policies is recorded as a separate line item in the accompanying balance sheets at $28.7 million and $28.0 million at* December 31, 2024and2023*, respectively. The earnings portion of the insurance policies grows tax deferred and helps offset the cost of the Company’s benefits programs. The Company recorded earnings of $706,000 and $636,000 for the growth in the cash surrender value of life insurance during the years ended* December 31, 2024and2023*, respectively. The Company receivedno death benefits during the years ended* December 31, 2024and2023*.

NOTE18 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Bank has various outstanding commitments and contingent liabilities that arenot reflected in the accompanying consolidated financial statements. In addition, the Bank is a defendant in certain claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters isnot expected to have a material adverse effect on the consolidated financial condition of the Company.

In conjunction with its lending activities, the Bank enters into various commitments to extend credit. The Bank also issues letters of credit. Loan commitments (unfunded loans and unused lines of credit) and letters of credit are issued to accommodate the financing needs of the Bank's customers. Loan commitments are agreements by the Bank to lend at a future date, so long as there areno violations of any conditions established in the agreement. Letters of credit commit the Bank to make payments on behalf of customers when certain specified events occur.

Financial instruments where the contract amount represents the Bank's credit risk include commitments under pre-approved but unused lines of credit of $147.1 million and $157.9 million and letters of credit of $5.1 million and $3.4 million at* December 31, 2024and2023*, respectively. These loan and letter of credit commitments are subject to the same credit policies and reviews as loans on the balance sheet. Collateral, both the amount and nature, is obtained based upon management's assessment of the credit risk. Since many of the extensions of credit are expected to expire without being drawn, the total commitment amounts donot necessarily represent future cash requirements.

Included in the loan commitments noted above were unused credit card loan commitments of $13.4 million and $11.3 million and undisbursed loans in process of $11.3 million and $13.3 million at* December 31, 2024and2023*, respectively. The Bank also had $1.1 million in outstanding commitments on mortgage loans approved butnot yet closed at* December 31, 2024* compared to $2.2 million at* December 31, 2023*. These commitments, which are funded subject to certain limitations, extend over varying periods of time with the majority being funded within45 days.

At* December 31, 2024and2023*, the Bank had outstanding commitments to sell approximately $599,000 and $967,000 of loans, respectively, which encompassed the Bank’s held for sale loans. The Bank also has commitments to sell mortgage loansnot yet closed, on a best efforts basis. Under this arrangement, the Bank suffersno penalty if it is unable to deliver the loans to potential buyers. The fair value of the Bank’s commitment to originate mortgage loans at committed interest rates and to sell such loans to permanent investors is deemed insignificant.

NOTE19 - RELATED PARTY TRANSACTIONS

Certain directors, executive officers and companies with which they are affiliated are customers of, and have banking transactions with, the Bank in the ordinary course of business. Loans to directors, executive officers and their affiliates are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable arms-length transactions. A summary of loan transactions with directors, executive officers and their affiliates for the years indicated, is as follows:

Loans to all employees, officers, and directors of the Company constituted approximately 3.04% and 3.44% of the Company’s total shareholders' equity at* December 31, 2024and2023*, respectively. Deposits from executive officers and directors of the Company and their related interests were approximately $21.9 million and $21.0 million at* December 31, 2024and2023* and have substantially the same terms, including interest rates, as those prevailing at the time with other non-related depositors.

The Company leased office space from a related party during the years ended* December 31, 2024and2023*. The lease is with a company in which the related party, who is a director of the Company, has an ownership interest. The Company incurred rent expense of $108,000 and $110,000 for the years ended* December 31, 2024and2023*, respectively, related to this lease. We believe the transactions with respect to this lease were made on terms that are comparable to those which would be made with unaffiliated persons.

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NOTE20 - PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS

The following is condensed financial information of Security Federal Corporation (Parent Company only). The primary asset is its investment in the Bank subsidiary and the principal source of income for the Company is equity in undistributed earnings from the Bank.

Condensed Balance Sheet Data

Condensed Statements of Income Data

Condensed Statements of Cash Flow Data

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NOTE21 - CARRYING AMOUNTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

GAAP requires the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet and to measure that fair value using an exit price notion, the price that would be received for an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date under current market conditions.

Accounting guidance emphasizes that fair value is a market-based measurement,not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels1 and2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level3 of the hierarchy).

The followingthree levels of inputs* may*be used to measure fair value:

Level1 - Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasuries and money market funds.

Level2 - Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, mortgage-backed securities, municipal bonds, corporate debt securities and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts.

Level3 - Valuation is generated from model-based techniques that use at leastone significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following is a description of the valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities AFS

Investment securities AFS are recorded at fair value on a recurring basis. At* December 31, 2024*, the Company’s investment portfolio was comprised of student loan pools, government and agency bonds, MBS issued by government sponsored agencies or GSEs, private label CMO securities and municipal securities. Fair value measurement is based upon prices obtained fromthird party pricing services that use independent pricing models which rely on a variety of factors including reported trades, broker/dealer quotes, benchmark yields, economic and industry events and other relevant market information. As such, these securities are classified as Level2.

Mortgage Loans Held for Sale

The Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed butnot yet settled with institutional investors are carried in the Company’s loans held for sale portfolio. These loans are fixed rate residential loans that have been originated in the Company’s name and have closed. Virtually all of these loans have commitments to be purchased by investors and the majority of these loans were locked in by price with the investors on the same day or shortly thereafter that the loan was locked in with the Company’s customers. Therefore, these loans present very little market risk for the Company.

The Company usually delivers to, and receives funding from, the investor within30 days. Commitments to sell these loans to the investor are considered derivative contracts and are sold to investors on a “best efforts" basis. The Company isnot obligated to deliver a loan or pay a penalty if a loan isnot delivered to the investor. As a result of the short-term nature of these derivative contracts, the fair value of the mortgage loans held for sale in most cases is the same as the value of the loan amount at its origination*.* These loans are classified as Level2.

Land Held for Sale

Land held for sale is reported at the lower of the carrying amount or fair value less costs to sell. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the collateral value less estimated selling costs. The Company records land held for sale as nonrecurring level3.

Collateral Dependent Loans

The Company doesnot record loans held for investment at fair value on a recurring basis. However, from time to time, the Company designates individually evaluated loans with higher risk as collateral dependent loans and an allowance for credit losses is established as necessary. Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. These loans donot share common risk characteristics and arenot included within the collectively evaluated loans for determining the allowance for credit losses. Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for estimated costs to sell, and amortized cost. If the fair value of the collateral exceeds the amortized cost,no allowance is required.

Fair value is estimated usingone of the following methods: fair value of the collateral less estimated costs to sell, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and if it is over24 months old will request a newthird party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management* mayorder an independent appraisal immediately or, in some instances, mayelect to perform an internal analysis. For instance, in scenarios where the collateral on a nonperforming commercial real estate loan is outside the Company’s primary market area, management would usually order an independent appraisal promptly - either at the time the loan becomes nonperforming or immediately following the determination that the loan is collateral dependent. Conversely, for a nonperforming commercial real estate loan where management is familiar with the property and surrounding areas, and the original appraisal value significantly exceeds the recorded investment in the loan, management may*choose to perform an internal analysis. This involves reviewing and adjusting the previous appraisal value for current conditions, including recent sales of similar properties in the area and relevant economic trends. These valuations are reviewed at a minimum on a quarterly basis.

Those collateral dependent loansnot requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At* December 31, 2024*, all collateral dependent loans were evaluated based on the fair value of the collateral. Loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The Company records collateral dependent loans as nonrecurring Level3.

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The tables below present the balances of assets measured at fair value on a recurring basis at the dates indicated. There wereno liabilities measured at fair value on a recurring basis as of* December 31, 2024and2023*.

The Company* maybe required, from time to time, to measure certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. The table below presents assets measured at fair value on a nonrecurring basis at the dates indicated, aggregated by the level in the fair value hierarchy within which those measurements fall. There wereno* liabilities measured at fair value on a nonrecurring basis as of* December 31, 2024and2023*.

For Level3 assets measured at fair value on a recurring or non-recurring basis, the significant unobservable inputs used in the fair value measurements at the dates indicated were as follows:

For assets and liabilitiesnot presented on the balance sheet at fair value, the following methods are used to determine fair value:

Cash and cash equivalents—The carrying amount of these financial instruments approximates fair value. All mature within90 days and donot present unanticipated credit concerns.

Certificates of deposits with other banks—Fair value is based on market prices for similar assets.

Investment Securities HTM—Valued at quoted market prices or dealer quotes.

Loans Receivable, Net—The fair value of loans is estimated using an exit price notion. The exit price notion uses a discounted cash flows technique to calculate the present value of expected future cash flows for a financial instrument and incorporates other factors, such as enhanced credit risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets. The credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: commercial real estate, commercial and agricultural, residential real estate, construction, consumer HELOCs and all other consumer loans. The results are then adjusted to account for credit risk as described above. A further credit risk discount must be applied using a discounted cash flow model to compensate for illiquidity risk, based on certain assumptions included within the discounted cash flow model, primarily the use of discount rates that better capture inherent credit risk over the lifetime of a loan. This consideration of enhanced credit risk provides an estimated exit price for the Company’s loan portfolio. For variable-rate loans that reprice frequently and haveno significant change in credit risk, fair values approximate carrying values.

FHLB Stock—The fair value approximates the carrying value.

Deposits—The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities.

FHLB Advances and Borrowings from the FRB—Fair value is estimated using discounted cash flows with current market rates for borrowings with similar terms.

Other Borrowed Money—The carrying value of these short term borrowings approximates fair value.

Subordinated Debentures—The fair value is estimated by discounting the future cash flows using the current rates at which similar debenture offerings with similar terms and maturities would be issued by similar institutions. As discount rates are based on current debenture rates as well as management estimates, the fair values presented* may**not* be indicative of the value negotiated in an actual sale.

Junior Subordinated Debentures—The carrying value of junior subordinated debentures approximates fair value.

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The following tables summarize the carrying value and estimated fair value of the Company’s financial instruments at the dates indicated, presented in accordance with the applicable accounting guidance.

At* December 31, 2024*, the Company had $152.1 million of off-balance sheet financial commitments. These commitments are to originate loans and unused consumer lines of credit and credit card lines. Because these obligations are based on current market rates, if funded, the original principal is considered to be a reasonable estimate of fair value.

Fair value estimates are made on a specific date, based on relevant market data and information about the financial instrument. These estimates donot reflect any premium or discount that could result from offering for sale the Bank’s entire holdings of a particular financial instrument.

Becauseno active market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, current interest rates and prepayment trends, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in any of these assumptions used in calculating fair value would also significantly affect the estimates. Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that arenot considered financial instruments. For example, the Company has significant assets and liabilities that arenot considered financial assets or liabilities including deposit franchise values, loan servicing portfolios, deferred tax liabilities, and premises and equipment.

In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and havenot been considered in any of these estimates. The Company has used management’s best estimate of fair value on the above assumptions. Thus, the fair values presented* may**not* be the amounts which could be realized in an immediate sale or settlement of the instrument. In addition, any income taxes or other expenses that would be incurred in an actual sale or settlement arenot taken into consideration in the fair value presented.

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NOTE22 - NON-INTEREST INCOME

The following table presents non-interest income for the years indicated. All revenue from contracts with customers within the scope of ASUNo. 2014-09, Revenue from Contracts with Customers (Topic606) is recognized in non-interest income, except for gains on the sale of OREO, which are included in non-interest expense when applicable.

(1)Not within the scope of ASC606

Revenue Recognition

The following is a discussion of key revenues within the scope of the current revenue guidance.

In accordance with Topic606, revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration the Bank expects to be entitled to in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic606, management performs the followingfive steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the performance obligation is satisfied.

Thefive-step model is only applied to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic606, the Bank assesses the goods or services that are promised within each contract and identifies those that contain performance obligations, and assesses whether each promised good or service is distinct. The amount of the transaction price that is allocated to the respective performance obligation is recognized as revenue when (or as) the performance obligation is satisfied.

Service Fees on Deposit Accounts

The Bank earns fees from its deposit customers for account maintenance, transaction-based and overdraft services. Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts monthly. The performance obligation is satisfied and the fees are recognized monthly as the service period is completed. Transaction-based fees on deposits accounts are charged to deposit customers for specific services provided to the customer, such as non-sufficient funds fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

Trust Income

Trust income includes monthly advisory fees that are based on assets under management and certain transaction fees that are assessed and earned monthly, concurrently with the investment management services provided to the customer. The Bank doesnot charge performance based fees for its trust services and doesnot currently have any institutional clients, hedge funds or mutual funds.

ATM and Check Card Fee Income

Check card fee income represents fees earned when a debit card issued by the Bank is used. The Bank earns interchange fees from debit cardholder transactions through the Mastercard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the card. Certain expenses directly associated with the debit card are recorded on a net basis with the fee income.

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NOTE23 - PREFERRED STOCK

On* May 24, 2022,the Company entered into a Letter Agreement (the "initial Agreement”) with the U.S. Department of Treasury under the Emergency Capital Investment Program (“ECIP”). Established by the Consolidated Appropriations Act,2021, the ECIP was created to encourage low- and moderate-income community financial institutions and minority depository institutions to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially low-income and underserved communities, including counties with persistent poverty, that may*be disproportionately impacted by the economic effect of the COVID-19 pandemic by providing direct and indirect capital investments in low- and moderate-income community financial institutions.

Pursuant to the initial Agreement, the Company agreed to issue and sell 82,949 shares of Preferred Stock for an aggregate purchase price of $82.9 million in cash. This ECIP investment is treated as tier1 capital. The Preferred Stock bearsno dividend for thefirst 24 months following the investment date. Thereafter, the dividend rate will be adjusted,not higher than2%, based on the lending growth criteria listed in the initial Agreement. After thetenth anniversary of the investment date, the dividend rate will be fixed based on the average annual amount of lending in yearstwo through10. Dividends will be payable quarterly in arrears on* March 15,** June 15,** September 15,and December 15.*

The Preferred Stock* maybe redeemed at the option of the Company on or after thefifth* anniversary of issuance (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in accordance with the federal banking agencies’ regulatory capital regulations. The Preferred Stock is reported on the Consolidated Balance Sheets as Senior Non-Cumulative Perpetual Preferred Stock, Series ECIP.

On* January 10, 2025,the Company entered into an ECIP Securities Purchase Option Agreement (the “Agreement”) with the Treasury. Pursuant to the Agreement, Treasury granted the Company an option to purchase all of the Preferred Stock during the Option Period, which is thefirst* fifteen years following the Original Closing Date. The purchase price for the Preferred Stock pursuant to the purchase option is determined based on a formula equal to the present value of the Preferred Stock, calculated as set forth in the Agreement, together with any accrued and unpaid dividends thereon, as of the closing date. Subject to variations in interest rates and the equity risk premium, which are components included in the purchase price calculation, the Company presently expects that the purchase price will be at a substantial discount from the face value of the Preferred Stock.

The purchase option* may**not* be exercised during the ECIP period, which is thefirst ten years following the Original Closing Date unless and until at leastone of the Threshold Conditions under the Agreement has been met. The Threshold Conditions are as follows: during theten years that follow the Original Closing Date (the “ECIP Period”) either (1) over anysixteen consecutive quarters, an average of at least60% of the Company’s Total Originations, as defined pursuant to the terms of the ECIP, qualifies as “Deep Impact Lending,” as defined pursuant to the terms of the ECIP (the “Deep Impact Condition”); (2) over anytwenty-four consecutive quarters, an average of at least85% of the Company’s Total Originations qualifies as “Qualified Lending,” as defined pursuant to the terms of the ECIP (the “Qualified Lending Condition”); or (3) the Preferred Stock has a dividend rate ofno more than0.5%, which dividend rate is calculated pursuant to the ECIP and the terms thereof, at each ofsix consecutive Reset Dates, as defined in the ECIP.

The earliest possible date by which a Threshold Condition* maybe met is June 30, 2026,which is the end of thesixteenth* consecutive quarter following the Original Closing Date. However, the Company doesnot currently meet any of the Threshold Conditions to exercise the purchase option, and there can beno assurance if and when the Threshold Conditions will be met. At present, the Company has reportedno consecutive quarters for which it has met both the Deep Impact and Qualified Lending Conditions. The Preferred Stock currently has a dividend rate of2.0%.

In addition to the requirement that a Threshold Condition be met, the Agreement requires that the Company meet certain other eligibility conditions in order to exercise the purchase option in the future, including compliance with the terms of the original ECIP purchase agreement and the terms of the Preferred Stock, maintaining qualification as either a CDFI or an MDI, and meeting other legal and regulatory criteria. Although the Company currently meets the general eligibility criteria, other than satisfyingone of the Threshold Conditions, there can beno assurance that the Company will meet such criteria in the future.

NOTE24 - SUBSEQUENT EVENTS

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that didnot exist at the date of the balance sheet but arose after that date.

Management has reviewed the events occurring through the date the financial statements were issued andno additional subsequent events occurred requiring accrual or disclosure.