Security Federal Q4 Earnings Rise Y/Y on Higher Income, Lower Costs

Core Viewpoint - Security Federal Corporation reported a significant increase in net income for the fourth quarter and full year of 2025, driven by higher net interest income and non-interest income, despite facing challenges from lower market interest rates [2][3][7]. Financial Performance - For Q4 2025, net income available to common shareholders was $3.9 million, or $1.24 per share, a 29% increase from $3 million, or 94 cents per share, in the same quarter of the previous year [2]. - For the full year 2025, net income rose about 35% to $12 million, or $3.80 per share, compared to $8.9 million, or $2.77 per share, in 2024 [3]. Income Breakdown - Net interest income in Q4 2025 increased by $1.3 million, or 11.5%, year over year to $12.6 million, despite a 2.2% decline in total interest income due to lower market interest rates [4]. - Non-interest income rose 35.4% in Q4 to $3.9 million, with full-year non-interest income increasing 12.5% to $11.5 million, largely due to higher grant and rental income [5]. Expense Analysis - Non-interest expenses increased by 16% in Q4 and 9.1% for the year, primarily driven by higher salaries, employee benefits, and occupancy costs [5]. - The company experienced a favorable swing in credit loss provisions, recording a reversal of $235,000 in 2025 compared to a provision of $1.4 million in 2024 [6]. Asset Quality - Non-performing assets decreased to $5.8 million at the end of 2025 from $7.6 million a year earlier, with the allowance for credit losses to gross loans remaining stable at 1.97% [6]. Management Insights - Management attributed the earnings increase to improved net interest income, higher non-interest income, and lower credit loss provisions, while noting the impact of lower market interest rates on interest income and expenses [7][9]. - The positive contribution from Community Development Financial Institution (CDFI) grants was highlighted as a support for community development financing initiatives [8][10]. Strategic Developments - In 2025, Security Federal completed the purchase of a multi-tenant property for a future bank branch, contributing to higher rental income [12]. - The company reduced borrowings significantly, repaying all outstanding Federal Reserve borrowings and redeeming junior subordinated debentures, while deposits grew 3.6% year over year to $1.37 billion [12][13].