Zacks Initiates Coverage of Security Federal With Outperform Rating

Core Viewpoint - Zacks Investment Research has initiated coverage of Security Federal Corporation (SFDL) with an "Outperform" recommendation, highlighting the company's resilient fundamentals, solid earnings trajectory, and strong balance sheet for sustainable long-term growth [1] Financial Performance - For the first half of 2025, Security Federal's net income increased by 28% year over year to $5 million, raising earnings per share from $1.20 to $1.56 [2] - Net interest income rose by 11.8% year over year to $22.5 million, driven by expanding loan yields and lower funding costs [3] - Deposits grew by 4.5% to $1.38 billion, while borrowings declined by more than half, indicating a shift towards lower-cost funding sources [3] Asset Quality and Risk Management - Non-performing assets decreased to 0.37% of total assets, with no provision for credit losses recorded in the first half of 2025 [4] - The allowance for credit losses stands at 2% of gross loans, reinforcing investor confidence in the company's conservative risk posture [4] Capital Strength and Growth Drivers - Book value per share increased by 9% to $34.02 by mid-2025, with common equity Tier 1 and Tier 1 leverage ratios at 19.2% and 10.5%, respectively, both above regulatory requirements [5] - The company is diversifying beyond traditional lending, with non-interest income rising by 5.5% year over year, supported by rental income and land sales [6] Market Positioning - Security Federal operates 19 full-service branches across South Carolina and Georgia, enhancing customer relationships and reducing cyclicality [6] - Shares trade at 0.90X trailing book value and 9.8X earnings, both below industry averages, suggesting attractive upside potential [8]