SECURITY FEDERAL CORP
For the period ended Mar 31, 2025. Filed May 9, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001437749-24-034109
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001437749-25-015754
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 77 previous paragraphs and 64 current paragraphs.
22 unchanged; 25 reworded; 15 added; 27 removed; 3 previous and 2 current paragraphs rearranged.
Tables are not compared: 44 previous and 41 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Current report
Cash and cash equivalents decreased$45.2 million or 25.4% to$133.1 million at March 31, 2025 from$178.3 million at December 31, 2024, primarily due to the repayment of borrowings with the Federal Reserve Bank of Atlanta ("FRB") during thethree months ended March 31, 2025.
Current report
Other assets decreased $2.0 million or 11.8% to $14.8 million at March 31, 2025 from $16.8 million at December 31, 2024.
Current report
Deposit Accounts
Current report
Total deposits increased$21.5 million or 1.6% to$1.35 billion at March 31, 2025 from December 31, 2024, primarily due to increases in higher cost certificates of deposit and money market accounts, partially offset by a decrease in checking accounts. The Bank had$25.8 million in brokered time deposits at both March 31, 2025 and December 31, 2024. A portion of these brokered deposits include call options, giving the Bank the flexibility to redeem them early if interest rates move favorably. In addition, the Bank held$5.4 million of non-certificate brokered deposits at both March 31, 2025 and December 31, 2024.
Current report
Borrowings
Current report
We had no outstanding borrowings from the FRB at March 31, 2025, compared to $50.0 million at December 31, 2024. This decrease was primarily due to excess liquidity, which reduced the need for borrowed funds.
Current report
Total tax-equivalent interest income increased $490,000 or 2.6% to $19.2 million for the quarter ended March 31, 2025 compared to $18.7 million for the same period in 2024.
Current report
Interest expense on deposits increased $748,000 to $7.6 million for the quarter ended March 31, 2025, from $6.9 million for thefirst quarter of 2024, due to a $111.2 million increase in the average balance of interest-bearing deposit accounts, reflecting growth in higher cost certificate of deposit accounts, which was partially offset by a decrease of two basis points in the average cost of deposits.
Current report
Interest expense on FRB and other borrowings decreased $1.3 million to $160,000 for the quarter ended March 31, 2025, from $1.4 million for thefirst quarter of 2024, due to a decrease of $103.4 million in the average balance of these liabilities combined with a 212 basis point decrease in the average cost of these liabilities, reflecting lower market interest rates. The decrease in these liabilities was primarily due to the repayment of borrowings from the Federal Reserve Bank.
Current report
Non-interest income increased $122,000 or 5.3% to $2.4 million for the quarter ended March 31, 2025 compared to the quarter ended March 31, 2024, primarily due to a $128,000 increase in other non-interest income, which included a $60,000 increase in rental income and $62,000 gain on sale of land held for sale. During the first quarter of 2025, we purchased a multi-tenant property resulting in an increase to rental income, which is intended to be the future site of a full-service branch.
Current report
The largest increase in non-interest expense during thefirst quarter of 2025 was compensation and employee benefits expense, which increased $255,000 to $5.8 million for the quarter ended March 31, 2025, compared to $5.5 million during the same period in 2024. These increases were primarily the result of higher staffing levels and additional compensation-related costs to support our growth and operational needs.
Current report
During the first quarter of 2025, President Trump issued an Executive Order instr ucting the CDFI Fund to reduce its operations to the minimum needed to fulfill its statutory duties. The Company has been a participant in the CDFI and is monitoring these developments.
Current report
The FHLB of Atlanta has approved a line of credit of up to 25.0% of the Bank’s total assets, which, when utilized, is collateralized by a pledge against specific investment securities and/or eligible loans. The Bank had no outstanding FHLB advances at March 31, 2025 with$463.9 million in total borrowing capacity at the FHLB at that date, subject to collateral requirements. The Company's total pledged collateral for FHLB advances had an amortized cost and fair value of$46.4 million and$37.8 million at March 31, 2025.
Current report
We may borrow from the FRB discount window for periods as long as 90 days, and borrowings are prepayable and renewable by the borrower daily. At March 31, 2025, we had no outstanding borrowings from the FRB discount window, with pledged collateral for these borrowings investment securities with an amortized cost and fair value of$362.8 million and$337.3 million at that date. During 2023, we entered the FRB’s Borrower-In-Custody ("BIC") program, which allows for the pledging of various loan types to secure FRB borrowings. As of March 31, 2025, the Company had pledged loan collateral for FRB borrowings with an amortized cost and collateral value of $77.6 million and $61.2 million. Borrowing capacity provided by pledged loan collateral is included in the FRB discount window availability.
Removed paragraphs (27)
Previous report
Cash and cash equivalents increased$4.1 million or 3.2% to$132.4 million at September 30, 2024 compared to$128.3 million at December 31, 2023, primarily as a result of an increase in deposits during thenine months ended September 30, 2024 and the proceeds received from the sales, paydowns and maturities of securities.
Previous report
Other assets decreased $14.5 million or 49.5% to $14.8 million at September 30, 2024 from $29.2 million at December 31, 2023, primarily due to the collection of an outstanding receivable from a matured investment security, which was received in the first quarter of 2024 after being outstanding at the end of 2023.
Previous report
Total tax-equivalent interest income increased $2.7 million or 16.0% to $19.6 million for the quarter ended September 30, 2024 compared to $16.9 million for the same period in 2023.
Previous report
Interest expense on deposits increased $1.7 million to $7.8 million for the quarter ended September 30, 2024, from $6.1 million for thethird quarter of 2023, due to an increase of 46 basis points in the average cost combined with an $83.5 million increase in the average balance of interest-bearing deposit accounts, reflecting growth in higher cost money market and certificate of deposit accounts. Interest expense on FRB and other borrowings increased $59,000 to $1.4 million for the quarter ended September 30, 2024, from $1.3 million for thethird quarter of 2023, due to an increase of four basis points in the average cost of these liabilities, reflecting higher market interest rates, combined with a $1.4 million increase in the average balance of these liabilities.
Previous report
On January 1, 2023, the Company adopted Accounting Standards Update 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Accounting Standards Codification 326, which replaced the incurred loss methodology with the 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 held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit.
Previous report
Most of the increases in non-interest expenses during thethird quarter of 2024 were due to the overall growth of the Company, increased operations and the addition of our newest branch in Augusta, Georgia which opened in April 2023. The largest increase in non-interest expense during thethird quarter of 2024 was compensation and employee benefits expense, which increased $397,000 to $5.4 million for the quarter ended September 30, 2024, compared to $5.0 million during the same period in 2023. Cloud services increased $299,000 due to the reclassification of those expenses from depreciation and maintenance of equipment expense, which decreased $360,000 during the quarter ended September 30, 2024, compared to the same period in 2023.
Previous report
Net Income
Previous report
Net income available to common shareholders decreased $697,000, or 10.6%, to$5.9 million or$1.83 per basic common share for thenine months ended September 30, 2024, compared to$6.6 million or$2.02 per basic common share for thenine months ended September 30, 2023. The decrease in net income was primarily the result of increases in the provision for credit losses, non-interest expense and preferred stock dividends paid, partially offset by increases in net interest income and non-interest income.
Previous report
Net Interest Income
Previous report
Net interest income increased $1.8 million or 6.1% to $30.6 million during thenine months ended September 30, 2024, compared to $28.8 million for the same nine months in 2023, due to an increase in average interest-earning assets, partially offset by a decline in net interest margin. During thenine months ended September 30, 2024, average interest-earning assets increased $108.5 million or 8.1% to $1.45 billion from $1.34 billion for the same nine months in 2023, while average interest-bearing liabilities increased $116.0 million or 11.7% to $1.11 billion for thenine months ended September 30, 2024 from $992.8 million for the comparable nine months in 2023. The Company's net interest margin was 2.83% for thenine months ended September 30, 2024 compared to 2.88% for the comparable nine months in 2023, as higher funding costs continued to exert pressure on our net interest margin. The Company's net interest spread on a tax equivalent basis was 2.08% for thenine months ended September 30, 2024 compared to 2.26% for thenine months ended September 30, 2023.
Previous report
Interest Income
Previous report
Total tax-equivalent interest income increased $10.5 million or 22.4% to $57.2 million for thenine months ended September 30, 2024 compared to $46.7 million for the same period in 2023.
Previous report
Interest income from taxable investments increased $1.3 million or 6.4% to $22.4 million during thenine months ended September 30, 2024, from $21.0 million for thenine months of 2023, due to a 46 basis point increase in the average yield to 4.49%, reflecting higher market interest rates, which was partially offset by a $31.3 million decrease in the average balance of taxable investments. Tax equivalent interest income from non-taxable investments decreased $106,000 to $470,000 during thenine months ended September 30, 2024 primarily due to a $3.2 million decrease in the average balance of non-taxable investments and a 13 basis point decrease in the average yield.
Previous report
Interest income from deposits with other banks increased $2.9 million to $4.1 million during thenine months ended September 30, 2024, from $1.2 million for thenine months of 2023, due to a $69.6 million increase in the average balance of these assets combined with a 50 basis point increase in the average yield earned due to increased market interest rates.
Previous report
Interest Expense
Previous report
Total interest expense increased $8.7 million or 49.0% to $26.5 million for thenine months ended September 30, 2024 compared to $17.8 million for the same nine months in 2023 due to an increase in market interest rates combined with a $98.5 million increase in the average balance of these liabilities.
Previous report
Interest expense on deposits increased $7.8 million to $21.9 million for thenine months ended September 30, 2024, from $14.2 million for thenine months of 2023, due to an increase of 84 basis points in the average cost combined with a $98.5 million increase in the average balance of interest-bearing deposit accounts, reflecting growth in higher-cost money market and certificate of deposit accounts. Interest expense on FRB and other borrowings increased $929,000 to $4.6 million for thenine months ended September 30, 2024, from $3.6 million for thenine months of 2023, due to a $17.4 million increase in the average balance of these liabilities combined with an increase of 29 basis points in the average cost.
Previous report
Provision for Credit Losses
Previous report
The Company recorded a $1.2 million provision for credit losses on loans and a $110,000 reversal of provision for credit losses on unfunded commitments, resulting in a total provision for credit losses of $1.1 million during thenine months ended September 30, 2024, compared to a $376,000 provision for credit losses on loans and a $155,000 reversal of provision for credit losses on unfunded commitments, resulting in a total provision for credit losses of $221,000 during thenine months ended September 30, 2023. The increase in the provision during thenine months ended September 30, 2024, was primarily the result of loan growth and higher net charge-offs. Net charge-offs totaled $165,000 for the first nine months of 2024 compared to a net recovery of $10,000 during the first nine months of 2023. For additional information on the changes in the allowance for credit losses, see "Note 6 - Investments, AFS", "Note 7 - Investments, HTM, and “Note 8 - Loans Receivable" of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Previous report
Non-Interest Income
Previous report
Non-interest income increased $780,000 or 11.8% to $7.4 million for thenine months ended September 30, 2024 compared to $6.6 million for thenine months ended September 30, 2023. The increase was primarily due to a $480,000 increase in trust income. Additional changes in non-interest income for thenine months ended September 30, 2024 compared to thenine months ended September 30, 2023 included a $55,000 increase in commissions on insurance and a $75,000 increase in ATM and check card fee income, as well as smaller increase in other categories. For additional details of the changes in non-interest income, see “Note 14 - Non-Interest Income” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Previous report
Non-Interest Expense
Previous report
Non-interest expense increased $1.8 million or 6.5% to $28.6 million for thenine months ended September 30, 2024 compared to $26.9 million for thenine months ended September 30, 2023. The following table summarizes the changes in non-interest expense:
Previous report
Most of the increases in non-interest expenses during thenine months of 2024 were due to overall growth of the Company, increased operations and the addition of our newest branch in Augusta, Georgia which opened in April 2023. The largest increase in non-interest expense during thenine months of 2024 was compensation and employee benefits expense, which increased $1.2 million to $16.4 million for thenine months ended September 30, 2024, compared to $15.2 million during the same period in 2023. In addition, cloud services increased $703,000 due to the reclassification of those expenses from depreciation and maintenance of equipment expense, which decreased $547,000 during thenine months ended September 30, 2024, compared to the same period in 2023. Other expenses increased $154,000 or 4.2% to $3.8 million for thenine months ended September 30, 2024, compared to the same period in 2023.
Previous report
Provision For Income Taxes
Previous report
The provision for income taxes increased $103,000 or 5.8% to $1.9 million for thenine months ended September 30, 2024, up from $1.8 million for the same period in 2023. The Company’s combined federal and state effective income tax rate was 22.7% and 21.3% for thenine months ended September 30, 2024 and 2023, respectively.
Previous report
Additionally, Security Federal Corporation will redeem all of the Company’s outstanding 10-Year Notes, having an aggregate principal amount of $16.5 million, on November 22, 2024. The total redemption price will be 100% of the aggregate principal amount of the 10-Year Notes, plus accrued and unpaid interest to, but excluding, the redemption date. The Company will utilize excess cash on hand for the redemption payment
Reworded paragraphs (25)
Previous wording
**Assets -**Total assets increased$26.7 million to$1.58 billion at September 30, 2024 from$1.55 billion at December 31, 2023. This increase was primarily due to increases in loans receivable, net, and cash and cash equivalents, partially offset by decreases in HTM and AFS securities and other assets. Changes in total assets are shown below.
Current wording
**Assets -**Total assets decreased$26.3 million to$1.59 billion at March 31, 2025 from$1.61 billion at December 31, 2024. This decrease was primarily due to a decrease in cash and cash equivalents, partially offset by an increase in AFS securities and, to a lesser extent loans receivable, net, and premises and equipment, net. Changes in total assets are shown below.
Previous wording
AFS securities decreased$3.4 million or 0.6% to$534.2 million at September 30, 2024 from$537.6 million at December 31, 2023 as sales, maturities and principal paydowns of AFS securities exceeded purchases during thenine months ended September 30, 2024. HTM securities decreased$25.2 million to$137.9 million at September 30, 2024, from$163.1 million at December 31, 2023, as a result of paydowns and maturities exceeding purchases during the nine months ended September 30, 2024.
Current wording
AFS securities increased$15.1 million or 2.9% to$540.8 million at March 31, 2025 from$525.6 million at December 31, 2024 purchases of AFS securities exceeded sales, maturities and principal paydowns during thethree months ended March 31, 2025. HTM securities decreased$1.4 million to$133.8 million at March 31, 2025, from$135.2 million at December 31, 2024, due to paydowns and maturities exceeding purchases during the three months ended March 31, 2025.
Previous wording
Total loans receivable, net, including loans held for sale, increased$64.2 million or 10.3% to$686.7 million at September 30, 2024 from$622.5 million at December 31, 2023, primarily due to increases in real estate loans originated during thenine months ended September 30, 2024. Residential mortgage loans increased$27.6 million or 16.0% to$200.5 million at September 30, 2024 from$172.9 million at December 31, 2023. Commercial real estate loans increased$28.4 million or 10.7% to$293.2 million at September 30, 2024 from$264.8 million at December 31, 2023. Construction loans increased$10.2 million or 9.8% to$114.7 million at September 30, 2024 from$104.5 million at December 31, 2023. Additionally, consumer home equity lines of credit increased$1.6 million or 4.8% to$36.1 million at September 30, 2024 from$34.5 million at December 31, 2023. Commercial and agricultural loans decreased$2.9 million or 8.6% to$30.4 million at September 30, 2024 from$33.3 million at December 31, 2023 and other consumer loans decreased slightly to $23.9 million at September 30, 2024 compared to$24.5 million at December 31, 2023. Loans held for sale increased to$1.6 million at September 30, 2024 from$967,000 at December 31, 2023.
Current wording
Total loans receivable, net, including loans held for sale, increased$2.8 million or 0.4% to$689.9 million at March 31, 2025 from$687.1 million at December 31, 2024, primarily due to increases in real estate loans originated during thethree months ended March 31, 2025. Residential mortgage loans increased$4.4 million or 2.2% to$208.1 million at March 31, 2025 from$203.7 million at December 31, 2024. Commercial real estate loans increased$1.7 million or 0.6% to$290.2 million at March 31, 2025 from$288.5 million at December 31, 2024. Construction loans increased$477,000 or 433920.4% to$110.4 million at March 31, 2025 from$109.9 million at December 31, 2024. Additionally, consumer home equity lines of credit increased$1.5 million or 3.9% to$39.3 million at March 31, 2025 from$37.8 million at December 31, 2024. Offsetting these increases, commercial and agricultural loans decreased$5.4 million or 14.6% to$31.5 million at March 31, 2025 from$36.9 million at December 31, 2024. Other consumer loans remained relatively unchanged at$23.8 million at March 31, 2025 and December 31, 2024. Loans held for sale increased to $825,000 at March 31, 2025 from$599,000 at December 31, 2024.
Previous wording
Premises and equipment, net increased$908,000 or 3.2% to$29.5 million at September 30, 2024 from$28.6 million at December 31, 2023 as a result of improvements made to existing branches.
Current wording
Premises and equipment, net increased$4.2 million or 14.5% to$33.6 million at March 31, 2025 from$29.3 million at December 31, 2024 as a result of improvements made to existing branches and future branch opportunities.
Previous wording
**Deposit Accounts -**Total deposits increased$62.3 million or 5.2% to$1.26 billion at September 30, 2024 from December 31, 2023, due to increases in higher cost certificates of deposit and money market accounts, partially offset by decreases in checking and savings accounts. The Bank had$25.8 million in brokered time deposits at September 30, 2024 compared to $5.2 million at December 31, 2023. Most of the Bank’s deposits are originated within the Bank’s immediate market area; however, the Bank uses brokered time deposits to manage interest rate risk because they are accessible in bulk at rates typically only slightly higher than those in our market areas. A portion of these brokered time deposits give the Bank a call option that allows the Bank the choice to redeem them early should rates change. In addition, the Bank had$5.2 million and $5.0 million in other brokered deposits at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024, the Bank had no deposit relationships greater than 5% of outstanding deposits, compared to one deposit relationship totaling approximately 5.2% of outstanding deposits at December 31, 2023. At September 30, 2024, approximately$330.6 million or 26.3% of our$1.26 billion deposit portfolio was uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements. For additional details of deposits, see “Note 9 – Deposits” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Current wording
At March 31, 2025 and December 31, 2024, we had no deposit relationships greater than 5% of outstanding deposits. At March 31, 2025, approximately$341.3 million or 25.4% of our$1.35 billion deposit portfolio was uninsured. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements. For additional details of deposits, see “Note 9 – Deposits” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Previous wording
**Borrowings -**The Bank had $65.0 million in borrowings from the Federal Reserve Bank of Atlanta (“FRB”) at September 30, 2024, compared to $119.2 million at December 31, 2023. During the first quarter of 2023, the Bank elected to participate in the Federal Reserve's Bank Term Funding Program (“BTFP”), allowing the Bank to refinance its existing FRB borrowings. The Bank also had$24.3 million in other borrowings at September 30, 2024, compared to$19.2 million and December 31, 2023, which consisted of short-term repurchase agreements with certain commercial demand deposit customers for sweep accounts. For additional information, see “Note 10 – Borrowings” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Current wording
We also had$24.2 million in other borrowings at March 31, 2025, compared to$27.8 million and December 31, 2024, which consisted of short-term repurchase agreements with certain commercial demand deposit customers for sweep accounts. For additional information, see “Note 10 – Borrowings” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Previous wording
At both September 30, 2024 and December 31, 2023, the Company had$5.2 million in junior subordinated debentures and$26.5 million in subordinated debentures outstanding. Subsequent to the quarter ended September 30, 2024, the Company notified holders that it will redeem on November 22, 2024 all of the Company’s outstanding 10-Year Notes due November 22, 2029, having an aggregate principal amount of $16.5 million, in accordance with the terms of the 10-Year Notes. The total redemption price will be 100% of the aggregate principal amount of the 10-Year Notes, plus accrued and unpaid interest to, but excluding, the redemption date. See “Note 11 - Subordinated Debentures” and “Note 17 Subsequent Events” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report for additional information.
Current wording
At both March 31, 2025 and December 31, 2024, the Company had$5.2 million in junior subordinated debentures and$10.0 million in subordinated debentures outstanding. See “Note 11 - Subordinated Debentures” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report for additional information.
Previous wording
Shareholders’ equity increased$12.7 million or 7.4% to$185.1 million at September 30, 2024 from$172.4 million at December 31, 2023. The increase was attributable to$5.9 million of net income and a$9.0 million reduction in accumulated other comprehensive loss, partially offset by $1.4 million in dividends paid to common shareholders, $512,000 in preferred dividends paid, and$829,000 in Company stock repurchases during thenine months ended September 30, 2024.
Current wording
Shareholders’ equity increased$5.8 million or 3.2% to$188.2 million at March 31, 2025 from$182.4 million at December 31, 2024. The increase was attributable to$2.6 million of net income available to common shareholders and a$3.7 million reduction in accumulated other comprehensive loss. The improvement in AOCL was primarily due to favorable changes in market interest rates, which positively impacted the fair value of AFS securities. These increases were partially offset by $478,000 in common stock dividends paid and $415,000 in preferred stock dividends paid to shareholders during thethree months ended March 31, 2025.
Previous wording
Net income available to common shareholders decreased $127,000, or 6.0%, to$2.0 million or$0.62 per basic common share for the quarter ended September 30, 2024, compared to$2.1 million or$0.65 per basic common share for the quarter ended September 30, 2023. The decrease in net income available to common shareholders was primarily the result of increases in non-interest expense, the provision for credit losses and preferred stock dividends paid during thethird quarter of 2024 compared to thethird quarter of 2023, partly offset by higher net interest income and non-interest income.
Current wording
Net income available to common shareholders increased $838,000, or 47.8%, to$2.6 million or$0.81 per basic common share for the quarter ended March 31, 2025, compared to$1.8 million or$0.54 per basic common share for the quarter ended March 31, 2024. The increase was the result ofincreases in net interest income and non-interest income, as well as a decrease in the provision for credit losses, which were partially offset by increases in non-interest expense, provision for income taxes and the payment of preferred stock dividends during the first quarter of 2025.
Previous wording
Net interest income increased $965,000 or 10.2% to $10.4 million during the quarter ended September 30, 2024, compared to $9.4 million for the same quarter in 2023 due to increases in both average interest-earning assets and net interest margin. During the quarter ended September 30, 2024, average interest-earning assets increased $82.6 million or 6.0% to $1.46 billion from $1.37 billion for the same quarter in 2023, while average interest-bearing liabilities increased $84.9 million or 8.3% to $1.11 billion for the quarter ended September 30, 2024 from $1.03 billion for the comparable quarter in 2023. The Company's net interest margin was 2.87% for the quarter ended September 30, 2024 compared to 2.76% for the comparable quarter in 2023. The Company's net interest spread on a tax equivalent basis was 2.10% for the quarter ended September 30, 2024 compared to 2.04% for the quarter ended September 30, 2023.
Current wording
Net interest income increased $1.2 million or 12.5% to $11.2 million during the quarter ended March 31, 2025, compared to $10.0 million for the same quarter in 2024 due to increases in both average interest-earning assets and net interest margin. During the quarter ended March 31, 2025, average interest-earning assets increased $14.4 million or 1.0% to $1.47 billion from $1.46 billion for the same quarter in 2024, while average interest-bearing liabilities decreased $8.7 million or 0.8% to $1.11 billion for the quarter ended March 31, 2025 from $1.12 billion for the comparable quarter in 2024. The Company's net interest margin was 3.05% for the quarter ended March 31, 2025 compared to 2.75% for the comparable quarter in 2024. The Company's net interest spread on a tax equivalent basis was 2.35% for the quarter ended March 31, 2025 compared to 2.03% for the quarter ended March 31, 2024.
Previous wording
Interest income on loans increased $2.2 million or 26.1% to $10.6 million for the quarter ended September 30, 2024 from $8.4 million for thethird quarter of 2023. The increase was the result of a $79.4 million increase in the average loan portfolio balance combined with a 63 basis point increase in the average yield on loans receivable as adjustable-rate loans reset and new loans were originated at higher market interest rates.
Current wording
Interest income on loans increased $1.6 million or 16.6% to $11.1 million for the quarter ended March 31, 2025 from $9.6 million for thefirst quarter of 2024. The increase was the result of a $58.2 million increase in the average loan portfolio balance combined with a 41 basis point increase in the average yield on loans receivable as adjustable-rate loans reset and new loans were originated at higher market interest rates.
Previous wording
Interest income from taxable investments decreased $160,000 or 2.1% to $7.4 million during the quarter ended September 30, 2024, from $7.6 million for thethird quarter of 2023, due to a $38.9 million decrease in the average balance of taxable investments, which was partially offset by a 16 basis point increase in the average yield to 4.52%, reflecting higher market interest rates. Tax equivalent interest income from non-taxable investments decreased $70,000 to $89,000 during the quarter ended September 30, 2024 primarily due to a $7.8 million decrease in the average balance of non-taxable investments, reflecting investment sales during the third quarter of 2024.
Current wording
Interest income from taxable investments decreased $585,000 or 7.8% to $6.9 million during the quarter ended March 31, 2025, from $7.5 million for thefirst quarter of 2024, due to a $20.0 million decrease in the average balance of taxable investments combined with a 22 basis point decrease in the average yield to 6.33%. Tax equivalent interest income from non-taxable investments decreased $139,000 to $39,000 during the quarter ended March 31, 2025 primarily due to a $14.3 million decrease in the average balance of non-taxable investments.
Previous wording
Interest income from deposits with other banks increased $748,000 to $1.5 million during the quarter ended September 30, 2024, from $703,000 for thethird quarter of 2023, due to a $49.8 million increase in the average balance of these assets combined with a 47 basis point increase in the average yield earned on these assets due to increased market interest rates.
Current wording
Interest income from deposits with other banks decreased $374,000 to $1.1 million during the quarter ended March 31, 2025, from $1.5 million for thefirst quarter of 2024, due to a $9.5 million decrease in the average balance of these assets combined with a 96 basis point decrease in the average yield earned on these assets due to decreased market interest rates.
Previous wording
Total interest expense increased $1.7 million or 23.7% to $9.1 million for the quarter ended September 30, 2024 compared to $7.4 million for the same quarter in 2023 due to an increase in market interest rates combined with a $84.9 million increase in the average balance of these liabilities.
Current wording
Total interest expense decreased $733,000 or 8.4% to $8.0 million for the quarter ended March 31, 2025 compared to $8.7 million for the same quarter in 2024 due to an $8.7 million decrease in the average balance of these liabilities combined with a decrease in market interest rates.
Previous wording
The Company recorded a $725,000 provision for credit losses on loans and a $145,000 reversal of provision for credit losses on unfunded commitments, resulting in a total provision for credit losses of $580,000 during the quarter ended September 30, 2024, compared to no provision for credit losses during the quarter ended September 30, 2023. The increase in the provision during the three months ended September 30, 2024, was primarily the result of loan growth and, to a less extent, higher charge-offs. Net charge-offs totaled $79,000 for thethird quarter of 2024 compared to a net recovery of $15,000 during thethird quarter of 2023. For additional information on the changes in the allowance for credit losses, see "Note 6 - Investments, AFS", "Note 7 - Investments, HTM, and “Note 8 - Loans Receivable" of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Current wording
The Company recorded no provision for credit losses during the quarter ended March 31, 2025, compared to $300,000 in provision for credit losses on loans and a $35,000 provision for credit losses on unfunded commitments, resulting in a total provision for credit losses of $335,000 during the quarter ended March 31, 2024. Net recoveries totaled $111,000 for thefirst quarter of 2025 compared to $15,000 during thefirst quarter of 2024. For additional information on the changes in the allowance for credit losses, see "Note 6 - Investments, AFS", "Note 7 - Investments, HTM, and “Note 8 - Loans Receivable" of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Previous wording
Non-interest income increased $457,000 or 21.1% to $2.6 million for the quarter ended September 30, 2024 compared to $2.2 million for the quarter ended September 30, 2023. The increase was due to increases in all non-interest income line items except for service fees on deposit accounts during the quarter ended September 30, 2024 when compared to the quarter ended September 30, 2023. The largest increase came from trust income, which increased $263,000 to $721,000 for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023. Additional changes in non-interest income for the quarter ended September 30, 2024 compared to the quarter ended September 30, 2023 included a $48,000 increase in commission on insurance, a $74,000 increase in gain on sale of loans and a $37,000 gain on sales of AFS securities, as well as smaller increases in other categories. For additional details of the changes in non-interest income, see “Note 14 - Non-Interest Income” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Current wording
For additional details of the changes in non-interest income, see “Note 14 - Non-Interest Income” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Previous wording
Non-interest expense increased $389,000 or 4.4% to $9.3 million for the quarter ended September 30, 2024 compared to $8.9 million for the quarter ended September 30, 2023. The following table summarizes the changes in non-interest expense:
Current wording
Non-interest expense increased $205,000 or 2.1% to $9.8 million for the quarter ended March 31, 2025 compared to $9.6 million for the quarter ended March 31, 2024. The following table summarizes the changes in non-interest expense:
Previous wording
The provision for income taxes increased 28.9% to $732,000 for the quarter ended September 30, 2024, from $568,000 for the same period in 2023, due to higher pre-tax net income. Pre-tax net income was $3.1 million for the quarter ended September 30, 2024 compared to $2.7 million for thethird quarter of 2023. The Company’s combined federal and state effective income tax rate was 23.3% and 21.1% for the quarters ended September 30, 2024 and 2023, respectively.
Current wording
The provision for income taxes increased 42.4% to $826,000 for the quarter ended March 31, 2025, from $580,000 for the same period in 2024, due to higher pre-tax net income. Pre-tax net income was $3.0 million for the quarter ended March 31, 2025 compared to $1.8 million for thefirst quarter of 2024. The Company’s combined federal and state effective income tax rate was 21.6% and 24.9% for the quarters ended March 31, 2025 and 2024, respectively.
Previous wording
The U.S. Department of the Treasury’s Community Development Financial Institutions ("CDFI") Fund released a revised CDFI Certification Application on December 7, 2023. On June 20, 2024, the CDFI announced an extension to the recertification filing deadline that now requires applications to be submitted by December 31, 2025. The Company is currently in the process of evaluating the revised Certification Application requirements and completing its recertification as a CDFI. Being a CDFI certified institution offers several benefits, including, among others:
Current wording
The U.S. Department of the Treasury’s Community Development Financial Institutions ("CDFI") Fund released a revised CDFI Certification Application on December 7, 2023. On June 20, 2024, the CDFI announced an extension to the recertification filing deadline that now requires applications to be submitted by December 31, 2025. The Company is currently in the process of evaluating the revised Certification Application requirements and completing its recertification as a CDFI. Being a certified CDFI offers several benefits, including, among others:
Previous wording
The Bank's primary sources of funds include deposits, scheduled loan and investment securities repayments, including interest payments, maturities and sales of loans and investment securities, advances from the FRB, and cash flow generated from operations. The sources of funds, together with retained earnings and equity, are used to make loans, acquire investment securities and other assets, and fund continuing operations. While maturities and the scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage repayments are greatly influenced by the level of interest rates, economic conditions, and competition. Management believes that the Company’s current liquidity position and its forecasted operating results are sufficient to fund all its existing commitments. The Bank had$148.1 million in unused commitments to extend credit and standby letters of credit at September 30, 2024.
Current wording
Our primary sources of funds include deposits, scheduled loan and investment repayments, including interest payments, maturities and sales of loans and investment securities, advances from the FRB, and cash flow generated from operations. The sources of funds, together with retained earnings and equity, are used to make loans, acquire investment securities and other assets, and fund continuing operations. While maturities and the scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage repayments are greatly influenced by the level of interest rates, economic conditions, and competition. Management believes that the Company’s current liquidity position and its forecasted operating results are sufficient to fund all its existing commitments. The Bank had$152.7 million in unused commitments to extend credit and standby letters of credit at March 31, 2025.
Previous wording
During thenine months ended September 30, 2024, loan disbursements exceeded loan repayments resulting in a $64.7 million increase in total net loans receivable. Also, during thenine months ended September 30, 2024, deposits increased $62.3 million. The Bank had no outstanding FHLB advances at September 30, 2024 with$443.8 million in total borrowing capacity at the FHLB at that date. The Bank had $65.0 million of outstanding borrowings from the FRB discount window at September 30, 2024, which was collateralized by investments with a fair market value of $361.4 million at that date. The Bank also had a$50.0 million unused Fed Funds facility with Pacific Coast Bankers Bank at September 30, 2024. Subject to market conditions, we expect to utilize these borrowing facilities from time to time in the future to fund loan originations and deposit withdrawals, to satisfy other financial commitments, repay maturing debt and to take advantage of investment opportunities to the extent feasible.
Current wording
During thethree months ended March 31, 2025, loan disbursements exceeded loan repayments resulting in a $2.8 million increase in total net loans receivable. Also, during thethree months ended March 31, 2025, deposits increased $21.5 million.
Previous wording
The Bank's liquid assets in the form of cash and cash equivalents, certificates of deposits with other banks and AFS investments totaled$640.9 million at September 30, 2024. Certificates of deposit that are scheduled to mature in less than one year from September 30, 2024 totaled$222.0 million. Historically, the Bank has been able to retain a significant amount of its deposits as they mature.
Current wording
The Bank's liquid assets in the form of cash and cash equivalents, certificates of deposits with other banks and AFS securities totaled$643.9 million at March 31, 2025. Certificates of deposit that are scheduled to mature in less than one year from March 31, 2025 totaled$278.8 million. Historically, the Bank has been able to retain a significant amount of its deposits as they mature.
Previous wording
Security Federal is a separate legal entity from the Bank and must provide for its own liquidity. At September 30, 2024, Security Federal had liquid assets of$50.3 million. In addition to its operating expenses, Security Federal is responsible for paying any dividends declared, if any, to its shareholders, funds paid for Security Federal stock repurchases, and payments on trust-preferred securities and subordinated debentures held at the Company level. Security Federal's main source of funds are dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends. We currently expect to continue our current practice of paying quarterly cash dividends on our common stock subject to our Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. Our current quarterly common stock dividend rate is$0.14 per share which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of our cash to our shareholders. Assuming continued payment during 2024 at this rate of$0.14 per share, our average total dividend paid each quarter would be approximately $484,000 based on the number of outstanding shares at September 30, 2024.
Current wording
Security Federal is a separate legal entity from the Bank and must provide for its own liquidity. At March 31, 2025, Security Federal had liquid assets of$34.1 million. In addition to its operating expenses, Security Federal is responsible for funding dividend payments to its shareholders, repurchases of its common stock, and payments on its trust-preferred securities and subordinated debentures held at the Company level. Security Federal's main source of funds are dividends or capital distributions from the Bank; however, there are regulatory restrictions on the Bank's ability to pay dividends to the Company. We currently expect to continue our current practice of paying quarterly cash dividends on our common stock subject to our Board of Directors’ discretion to modify or terminate this practice at any time and for any reason without prior notice. Our current quarterly common stock dividend rate is$0.15 per share which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in the Bank, and returning a substantial portion of our cash to our shareholders. Assuming continued payment during 2025 at this rate of$0.15 per share, our average total dividend paid each quarter would be approximately $519,000 based on the number of outstanding shares at March 31, 2025.
Previous wording
In June 2023, the Company announced that its Board of Directors approved a share repurchase program for the purchase of up to three percent, or approximately 97,612 shares, of the Company’s outstanding common stock as of that date. On August 19, 2024 the Company's Board of Directors announced an additional 100,000 shares available to be purchased under the program. In general, stock-repurchase plans allow us to proactively manage our capital position and return excess capital to shareholders. During the quarter ended September 30, 2024, the Company repurchased 2,500 shares of its common stock at an aggregate cost of $60,000, leaving 35,276 shares available for further repurchase under the existing stock repurchase program at September 30, 2024. The repurchase program does not obligate the Company to purchase any particular number of shares. For additional information, see Part II, Item 2 - “Unregistered Sales of Equity Securities and Use of Proceeds.”
Current wording
In June 2023, the Company announced that its Board of Directors approved a share repurchase program for the purchase of up to three percent, or approximately 97,612 shares, of the Company’s outstanding common stock as of that date. On August 19, 2024, the Company's Board of Directors authorized an increase in the repurchase program, adding an additional 100,000 shares to the total shares available for repurchase. In general, stock-repurchase plans allow us to proactively manage our capital position and return excess capital to shareholders. During the quarter ended March 31, 2025, the Company repurchased 25 shares of its common stock at an aggregate cost of less than $1,000, leaving 127,041 shares available for further repurchase under the existing stock repurchase program at March 31, 2025. The repurchase program does not obligate the Company to purchase any particular number of shares. For additional information, see Part II, Item 2 - “Unregistered Sales of Equity Securities and Use of Proceeds.”
Previous wording
At September 30, 2024, the Bank exceeded all regulatory capital requirements with Common Equity Tier 1 Capital (CET1), Tier 1 leverage-based capital, Tier 1 risk-based capital, and total risk-based capital ratios of 18.0%,10.3%,18.0%, and 19.2%, respectively. To be categorized as “well capitalized” under the prompt corrective action provisions the Bank must maintain minimum CET1, total risk based capital, Tier 1 risk-based capital and Tier 1 leverage capital ratios of 6.5%, 10.0%, 8.0% and 5.0%, respectively. In addition to the minimum capital requirements, the Bank must maintain a capital conservation buffer, which consists of additional CET1 capital greater than 2.5% of risk weighted assets above the required minimum levels to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At September 30, 2024 the Bank’s conservation buffer was 11.2%. For additional details, see “Note 12 - Regulatory Matters” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Current wording
At March 31, 2025, the Bank exceeded all regulatory capital requirements with Common Equity Tier 1 Capital (CET1), Tier 1 leverage-based capital, Tier 1 risk-based capital, and total risk-based capital ratios of 18.9%,10.6%,18.9%, and 20.2%, respectively. To be categorized as “well capitalized” under the prompt corrective action provisions the Bank must maintain minimum CET1, total risk based capital, Tier 1 risk-based capital and Tier 1 leverage capital ratios of 6.5%, 10.0%, 8.0% and 5.0%, respectively. In addition to the minimum capital requirements, the Bank must maintain a capital conservation buffer, which consists of additional CET1 capital greater than 2.5% of risk weighted assets above the required minimum levels to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At March 31, 2025 the Bank’s conservation buffer was 12.2%. For additional details, see “Note 12 - Regulatory Matters” of the Notes to Consolidated Financial Statements included in Part I. Item 1 of this report.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The Bank also had a$50.0 million unused Fed Funds facility with Pacific Coast Bankers Bank at March 31, 2025.
Current report — wording carried from elsewhere
Subject to market conditions, we expect to utilize these borrowing facilities from time to time in the future to fund loan originations and deposit withdrawals, to satisfy other financial commitments, repay maturing debt and to take advantage of investment opportunities to the extent feasible.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Results of Operations for the Nine Months Ended September 30, 2024 and 2023
Previous report — wording carried elsewhere
The following table compares detailed average balances, average yields on interest-earning assets, average costs of interest-bearing liabilities and the resulting changes in interest income and expense for thenine months ended September 30, 2024 and 2023. The average balances were derived from the daily balances throughout the periods indicated. The average yields or costs were calculated by dividing the income or expense by the average balance of the corresponding assets or liabilities. Nonaccrual loans are included in earning assets in the following table. Loan yields have been reduced to reflect the negative impact on our earnings of loans on nonaccrual status. Interest income from non-taxable investments is calculated on a tax equivalent basis, which recognizes the income tax savings when comparing taxable and tax-exempt assets and was calculated using the effective tax rate for thenine months ended September 30, 2024 and 2023.
Previous report — wording carried elsewhere
Interest income on loans increased $6.3 million or 26.4% to $30.2 million for thenine months ended September 30, 2024 from $23.9 million for thenine months of 2023. The increase was the result of a $73.4 million increase in the average loan portfolio balance combined with a 66 basis point increase in the average yield on loans receivable as adjustable-rate loans reset and new loans were originated at higher market interest rates.