SECURITY FEDERAL CORP
For the period ended Jun 30, 2025. Filed Aug 12, 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.
Jun 30, 2025 · Filed Aug 12, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious 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 OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-12.
0001437749-25-026114
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 64 previous paragraphs and 93 current paragraphs.
31 unchanged; 30 reworded; 24 added; 3 removed; 0 previous and 8 current paragraphs rearranged.
Tables are not compared: 41 previous and 45 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 (24)
Current report
At June 30, 2025 and 2024, the allowance for credit losses on loans as a percentage of total loans was 2.00% and 1.95%, and as a percentage of nonperforming loans was 0.85% and 1.07%, respectively. Loans past due 30 days or more decreased to $7.3 million or 1.0% of total loans at June 30, 2025, compared to $12.6 million, or 1.8%, at December 31, 2024. The decline in past due balances was primarily as a result of improvements in construction real estate, which decreased from $4.9 million to $1.9 million, and residential real estate, which decreased from $3.3 million to $1.3 million. Past due balances also improved across commercial and agricultural and commercial real estate portfolios. Current loans totaled $692.3 million, compared to $688.0 million at December 31, 2024. This improvement reflects a combination of successful loan repayments, active collection efforts, and generally favorable credit conditions in the Company’s lending markets during the first half of 2025.
Current report
Loans held for sale increased to $2.2 million at June 30, 2025 from$599,000 at December 31, 2024, primarily due to higher residential mortgage originations designated for sale during the six months ended June 30, 2025. The increase also reflects stronger secondary market demand and seasonal growth in home purchase activity during the spring and early summer months, which led to a higher volume of loans being originated with the intent to sell.
Current report
Other assets decreased $2.1 million or 12.5% to $14.7 million at June 30, 2025 from $16.8 million at December 31, 2024, primarily due to a $1.8 million decrease in the deferred tax asset associated with the unrealized loss on our AFS securities portfolio.
Current report
The increase in the net interest margin was the result of several key factors. Primarily, the yield on loans improved by 24 basis points due to a combination of adjustable-rate loan repricing as interest rates increased in the market and the origination of new loans at higher rates. Additionally, the reduction in interest expense on borrowings, particularly a significant decrease in the average balance and cost of FRB borrowings and repurchase agreements, contributed to lower funding costs. Although interest expense on certificates of deposit increased as a result of a higher average balance and rates paid on those deposits, the overall cost of interest-bearing liabilities declined due to the lower cost and balances of other borrowing types and decreases in deposit rates on checking and savings accounts. The favorable mix of higher-yielding earning assets combined with lower overall funding costs resulted in an improved net interest spread and net interest margin.
Current report
Total tax-equivalent interest income increased $607,000 or 3.2% to $19.5 million for the quarter ended June 30, 2025 compared to $18.9 million for the same period in 2024.
Current report
Interest income from deposits with other banks increased $257,000 to $1.4 million during the quarter ended June 30, 2025, from $1.2 million for thesecond quarter of 2024, due to a $41.8 million increase in the average balance of these assets.
Current report
Total interest expense decreased $502,000 or 5.8% to $8.1 million for the quarter ended June 30, 2025 compared to $8.6 million for the same quarter in 2024 primarily due toan $800,000 reduction in interest expense on other borrowings resulting from lower average balances and lower rates. This decline was partially offset by higher interest expense on certificates of deposit as a result of significant growth in average balances and slightly higher rates. Additionally, interest expense on checking, savings and money market accounts decreased due to lower rates.
Current report
The Company recorded no provision for credit losses during the quarter ended June 30, 2025, compared to $175,000 in total provision for credit losses of $335,000 during the quarter ended June 30, 2024. The absence of a provision in the current quarter reflects stable credit quality, minimal net charge-offs, and management’s determination that the existing allowance for credit losses was adequate based on current portfolio performance, economic conditions, and loan loss expectations. Net recoveries totaled $3,000 for thesecond quarter of 2025 compared to net charge-offs of $59,000 during thesecond 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.
Current report
Occupancy expense increased $124,000, or 15.3%, due to higher building maintenance, utility costs, and lease-related expenses. Debit card expense increased $152,000, or 38.2%, due to higher transaction volumes and increased network processing fees. These increases were partially offset by a $125,000 decrease in depreciation and maintenance of equipment, or 23.8%, as certain assets reached full depreciation and equipment replacement activity was lower.
Current report
Net Income
Current report
Net Interest Income
Current report
Net interest income on a tax equivalent basis increased $2.3 million or 11.5% to $22.6 million during thesix months ended June 30, 2025, compared to $20.2 million for the samesix months in 2024 due to increases in both average interest-earning assets and net interest margin. During thesix months ended June 30, 2025, average interest-earning assets increased $43.7 million or 3.0% to $1.49 billion from $1.44 billion for the firstsix months in 2024, while average interest-bearing liabilities increased $12.3 million or 1.1% to $1.12 billion for thesix months ended June 30, 2025 from $1.11 billion for the comparablesix months in 2024. The Company's net interest margin was 3.03% for thesix months ended June 30, 2025 compared to 2.80% for the comparablesix months in 2024. The Company's net interest spread on a tax equivalent basis was 2.33% for thesix months ended June 30, 2025 compared to 2.07% for thesix months ended June 30, 2024.
Current report
Interest Income
Current report
Total tax-equivalent interest income increased $1.1 million or 2.9% to $38.7 million for thesix months ended June 30, 2025 compared to $37.6 million for the same period in 2024.
Current report
Interest income from taxable investments decreased $1.2 million or 7.8% to $13.8 million during thesix months ended June 30, 2025, from $15.0 million for thesix months of 2024, due to a $8.6 million decrease in the average balance of taxable investments combined with a 30 basis point decrease in the average yield to 4.18%. Tax equivalent interest income from non-taxable investments decreased $276,000 to $81,000 during thesix months ended June 30, 2025 primarily due to a $14.1 million decrease in the average balance of non-taxable investments.
Current report
Interest Expense
Current report
Provision for Credit Losses
Current report
Non-Interest Income
Current report
Non-Interest Expense
Current report
Non-interest expense increased $898,000 or 4.7% to $20.2 million for the six months ended June 30, 2025 compared to $19.3 million for the six months ended June 30, 2024. The following table summarizes the changes in non-interest expense:
Current report
Debit card expense increased $197,000, or 26.7%, due to higher transaction volumes and increased network processing fees, while data processing expense rose $134,000, or 19.8%, driven by expanded digital banking services and vendor cost increases. Cloud services expense increased $74,000, or 18.3%, as the Company continued to migrate and scale its technology infrastructure to cloud-based solutions. These increases were partially offset by decreases in depreciation and maintenance of equipment, which fell $214,000, or 21.4%, due to fewer capitalized equipment replacements and the full depreciation of certain assets, and advertising expense, which decreased $90,000, or 18.0%.
Current report
Provision For Income Taxes
Current report
The provision for income taxes increased 38.0% to $1.6 million for the six months ended June 30, 2025, from $1.1 million for the same period in 2024, due to higher pre-tax net income. Pre-tax net income was $7.4 million for the six months ended June 30, 2025 compared to $5.1 million for the six months of 2024. The Company’s combined federal and state effective income tax rate was 21.3% and 20.2% for the six months ended June 30, 2025 and 2024, respectively.
Current report
During the first quarter of 2025, an Executive Order was issued directing the CDFI Fund to limit its operations to those necessary to fulfill statutory obligations. The Company, which participates in CDFI programs, is evaluating the potential impact of these actions. The CDFI Fund provides programs and financial incentives intended to support lending and investment in low-to-moderate income communities. While the Company has not experienced any immediate impact, reductions in CDFI funding or program support could limit access to certain grants, awards, or other benefits in future periods. The Company will continue to monitor these developments and assess any potential effects on its operations or financial performance.
Removed paragraphs (3)
Previous 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.
Previous 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.
Previous 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.
Reworded paragraphs (30)
Previous wording
Any of the forward-looking statements that we make in this quarterly report on Form 10-Q and in other public reports and statements we make may turn out to be inaccurate as a result of our beliefs and assumptions we make in connection with the factors set forth above or because of other unidentified and unpredictable factors. Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements and you should not rely on such statements. The Company undertakes no obligation to publish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof. These factors could cause our actual results for 2025 and beyond to differ materially from those expressed in any forward-looking statements by or on behalf of us, and could negatively affect the Company’s consolidated financial condition, consolidated results of operations, liquidity and stock price performance.
Current wording
Any of the forward-looking statements that we make in this quarterly report on Form 10-Q and in other public reports and statements we make may turn out to be inaccurate as a result of the beliefs and assumptions we make in connection with the factors set forth above or because of other unidentified and unpredictable factors. Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements and you should not rely on such statements. The Company undertakes no obligation to publish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof. These factors could cause our actual results for 2025 and beyond to differ materially from those expressed in any forward-looking statements by or on behalf of us, and could negatively affect the Company’s consolidated financial condition, consolidated results of operations, liquidity and stock price performance.
Previous 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.
Current wording
**Assets -**Total assets increased$13.5 million to$1.63 billion at June 30, 2025 from$1.61 billion at December 31, 2024. This increase was primarily due to an increase in AFS securities, partially offset by a decrease in cash and cash equivalents and HTM securities. Changes in total assets are shown below.
Previous wording
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 wording
Cash and cash equivalents decreased$36.1 million or 20.2% to$142.2 million at June 30, 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 thesix months ended June 30, 2025.
Previous 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.
Current wording
AFS securities increased$62.6 million or 11.9% to$588.2 million at June 30, 2025 from$525.6 million at December 31, 2024 due to purchases of AFS securities exceeding sales, maturities and principal paydowns during thesix months ended June 30, 2025. HTM securities decreased$15.8 million to$119.4 million at June 30, 2025, from$135.2 million at December 31, 2024, due to paydowns and maturities exceeding purchases during thesix months ended June 30, 2025. The increase in AFS securities reflects reinvestment of maturing HTM securities into higher-yielding instruments amid a favorable interest rate environment.
Previous 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.
Current wording
Total loans, excluding loans held for sale, decreased $1.0 million, or 0.1%, to$699.7 million at June 30, 2025 from$700.6 million at December 31, 2024, primarily reflecting decreases in construction loans and commercial and agricultural loans, partially offset by increases in consumer home equity lines of credit (HELOCs) and residential and commercial real estate loans originated during thesix months ended June 30, 2025. Residential real estate loans increased$2.4 million, or 1.2%, to$206.0 million at June 30, 2025 from$203.7 million at December 31, 2024. Commercial real estate loans increased$3.2 million, or 1.1%, to$291.7 million at June 30, 2025 from$288.5 million at December 31, 2024. Additionally, consumer HELOCs increased$3.0 million, or 8.0%, to$40.9 million at June 30, 2025 from$37.8 million at December 31, 2024. Offsetting these increases, construction loans decreased$5.2 million, or 4.8%, to$104.7 million at June 30, 2025 from$109.9 million at December 31, 2024 while commercial and agricultural loans decreased$4.6 million, or 12.6%, to$32.2 million at June 30, 2025 from$36.9 million at December 31, 2024. Other consumer loans increased slightly to $24.2 million at June 30, 2025 compared to$23.8 million at December 31, 2024.
Previous 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.
Current wording
Premises and equipment, net increased$4.1 million or 13.9% to$33.4 million at June 30, 2025 from$29.3 million at December 31, 2024, as a result of improvements made to existing branches and future branch opportunities.
Previous wording
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 wording
Total deposits increased$59.2 million or 4.5% to$1.38 billion at June 30, 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 savings accounts. The growth in certificates of deposits was largely driven by targeted promotions to retain and attract customers amid heightened competition for deposits as market interest rates stabilized, while savings accounts declined as customers sought higher-yield alternatives. The Bank had$25.8 million in brokered time deposits at both June 30, 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$5.5 million of non-certificate brokered deposits at both June 30, 2025 and December 31, 2024.
Previous 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.
Current wording
At June 30, 2025 and December 31, 2024, we had no deposit relationships greater than 5% of outstanding deposits. At June 30, 2025, approximately$342.6 million or 24.8% of our$1.38 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
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.
Current wording
We also had$24.4 million in other borrowings at June 30, 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
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.
Current wording
Shareholders’ equity increased$8.9 million or 4.9%, to$191.3 million at June 30, 2025 from$182.4 million at December 31, 2024. The increase was primarily attributable to$5.0 million in net income earned during the period and a$5.3 million reduction in accumulated other comprehensive loss (AOCL), driven by unrealized gains on AFS securities as market conditions improved. These increases were partially offset by $1.3 million in common stock dividends paid and $415,000 in preferred stock dividends paid to shareholders during thesix months ended June 30, 2025.
Previous 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.
Current wording
Net income available to common shareholders increased $247,000, or 11.6%, to$2.4 million or$0.75 per basic common share for the quarter ended June 30, 2025, compared to$2.1 million or$0.66 per basic common share for the quarter ended June 30, 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 second quarter of 2025.
Previous 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.
Current wording
Net interest income increased $1.1 million or 11.1% to $11.3 million during the quarter ended June 30, 2025, compared to $10.2 million for the same quarter in 2024 due to increases in both average interest-earning assets and net interest margin. During the quarter ended June 30, 2025, average interest-earning assets increased $72.8 million or 5.1% to $1.50 billion from $1.43 billion for the same quarter in 2024, while average interest-bearing liabilities increased $33.1 million or 3.0% to $1.13 billion for the quarter ended June 30, 2025 from $1.09 billion for the comparable quarter in 2024. The Company's net interest margin was 3.02% for the quarter ended June 30, 2025 compared to 2.86% for the comparable quarter in 2024. The Company's net interest spread on a tax equivalent basis was 2.29% for the quarter ended June 30, 2025 compared to 2.12% for the quarter ended June 30, 2024.
Previous 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.
Current wording
Interest income on loans increased $1.1 million or 10.7% to $11.1 million for the quarter ended June 30, 2025 from $10.0 million for thesecond quarter of 2024. The increase was the result of a $42.3 million increase in the average loan portfolio balance combined with a 24 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 $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.
Current wording
Interest income from taxable investments decreased $583,000 or 7.8% to $6.9 million during the quarter ended June 30, 2025, from $7.5 million for thesecond quarter of 2024, due to a 37 basis point decrease in the average yield to 4.16%. Tax equivalent interest income from non-taxable investments decreased $137,000 to $42,000 during the quarter ended June 30, 2025 primarily due to a $14.0 million decrease in the average balance of non-taxable investments.
Previous 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:
Current wording
Non-interest expense increased $692,000 or 7.2% to $10.4 million for the quarter ended June 30, 2025 compared to $9.7 million for the quarter ended June 30, 2024. The following table summarizes the changes in non-interest expense:
Previous wording
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 wording
The largest increase in non-interest expense during thesecond quarter of 2025 was compensation and employee benefits expense, which increased $332,000 or 6.0% to $5.9 million for the quarter ended June 30, 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.
Previous 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.
Current wording
The provision for income taxes increased 33.8% to $756,000 for the quarter ended June 30, 2025, from $565,000 for the same period in 2024, due to higher pre-tax net income. Pre-tax net income was $3.5 million for the quarter ended June 30, 2025 compared to $2.8 million for thesecond quarter of 2024. The Company’s combined federal and state effective income tax rate was 21.3% and 20.2% for the quarters ended June 30, 2025 and 2024, respectively.
Previous 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.
Current wording
Interest income from deposits with other banks decreased $116,000 to $2.6 million during thesix months ended June 30, 2025, from $2.7 million for thesix months of 2024, due to a 96 basis point decrease in the average yield earned on these assets reflecting lower market interest rates, which was partially offset by a 16.2 million increase in the average balance of these assets.
Previous 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.
Current wording
Total interest expense decreased $1.2 million or 7.1% to $16.1 million for thesix months ended June 30, 2025 compared to $17.4 million for the samesix months in 2024, primarily due to the payoff of borrowings from the FRB combined with a decrease in market interest rates.
Previous wording
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 wording
Interest expense on deposits increased $1.3 million to $15.5 million for thesix months ended June 30, 2025, from $14.2 million for thesix months of 2024, due to a $111.4 million increase in the average balance of interest-bearing deposits, particularly certificates of deposit accounts, which increased $80.7 million, which was partially offset by a decrease of seven basis points in the average cost of deposits.
Previous wording
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 wording
Interest expense on FRB and other borrowings decreased $2.1 million to $250,000 for thesix months ended June 30, 2025, from $2.3 million for the firstsix months of 2024. This decrease was primarily due to the repayment of FRB borrowings and lower utilization of repurchase agreements, resulting in an $82.6 million decrease in average balances and a 236 basis point reduction in the average cost of these borrowings to 1.82% for the six months ended June 30, 2025, from 4.18% for the same period in 2024, reflecting lower market interest rates.
Previous 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.
Current wording
The Company recorded no provision for credit losses during thesix months ended June 30, 2025, compared to a $475,000 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 $510,000 during thesix months ended June 30, 2024. Net recoveries totaled $114,000 for thesix months of 2025 compared to net charge-offs of $86,000 during the firstsix months 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 $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 wording
Non-interest income increased $264,000 or 5.5% to $5.0 million for thesix months ended June 30, 2025 compared to $4.8 million for thesix months ended June 30, 2024, primarily due to a $220,000 increase in other non-interest income, which included a $166,000 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.
Previous 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.
Current wording
During thesix months ended June 30, 2025, loan disbursements exceeded loan repayments resulting in a $581,000 increase in total net loans receivable. Also, during thesix months ended June 30, 2025, deposits increased $59.2 million.
Previous wording
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 wording
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 of specific investment securities and/or eligible loans. The Bank had no outstanding FHLB advances at June 30, 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$45.4 million and$36.8 million at June 30, 2025.
Previous wording
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.
Current wording
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 June 30, 2025, we had no outstanding borrowings from the FRB discount window, with investment securities pledged as collateral having an amortized cost and fair value of$338.7 million and$314.8 million, respectively. The Company participates inthe FRB’s Borrower-In-Custody ("BIC") program, which allows for the pledging of various loan types to secure FRB borrowings. As of June 30, 2025, the Company had pledged loan collateral for FRB borrowings with an amortized cost and fair value of $75.6 million and $59.9 million, respectively. Borrowing capacity provided by pledged loan collateral is included in the FRB discount window availability.
Previous 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.
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 June 30, 2025. Certificates of deposit that are scheduled to mature in less than one year from June 30, 2025 totaled$292.9 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 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.
Current wording
Security Federal is a separate legal entity from the Bank and must provide for its own liquidity. At June 30, 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 common stock dividend paid each quarter would be approximately $519,000 based on the number of outstanding shares at June 30, 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 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.”
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 June 30, 2025, the Company repurchased 3,000 shares of its common stock at an aggregate cost of $90,000, leaving 124,041 shares available for further repurchase under the existing stock repurchase program at June 30, 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 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.
Current wording
At June 30, 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 19.2%,10.5%,19.2%, and 20.5%, 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 June 30, 2025 the Bank’s conservation buffer was 12.5%. 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 (8)
Current report — wording carried from elsewhere
Non-interest income increased $141,000 or 5.7% to $2.6 million for the quarter ended June 30, 2025 compared to $2.5 million for the quarter ended June 30, 2024, primarily due to a $107,000 increase in rental income, which is included in other non-interest expense. 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 — wording carried from elsewhere
Results of Operations for the Six Months Ended June 30, 2025 and 2024
Current report — wording carried from elsewhere
Net income available to common shareholders increased $1.1 million, or 27.9%, to$5.0 million or$0.75 per basic common share for the six months ended June 30, 2025, compared to$3.9 million or $1.20 per basic common share for the six months ended June 30, 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 second quarter of 2025.
Current report — wording carried from 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 the six months ended June 30, 2025 and 2024. 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 the six months ended June 30, 2025 and 2024.
Current report — wording carried from elsewhere
Interest income on loans increased $2.7 million or 13.6% to $22.2 million for thesix months ended June 30, 2025 from $19.6 million for thesix months of 2024. The increase was the result of a $50.2 million increase in the average loan portfolio balance combined with a 33 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 report — wording carried from elsewhere
The amount of the provision and the adequacy of the allowance for credit losses for loans and unfunded commitments is determined by management’s on-going monthly analysis. The Company has policies and procedures in place for evaluating and monitoring the overall credit quality of the loan portfolio and for timely identification of potential problem loans including internal and external loan reviews. The adequacy of the allowance for credit losses is reviewed monthly by the Asset Classification Committee and quarterly by the Board of Directors.
Current report — wording carried from elsewhere
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 report — wording carried from elsewhere
The largest increase in non-interest expense during the six months of 2025 was compensation and employee benefits expense, which increased $587,000 or 5.3% to $11.7 million for the six months ended June 30, 2025, compared to $11.1 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.