SECURITY FEDERAL CORP Annual Report - How They Did This Year

Hey there! Thinking about SECURITY FEDERAL CORP? Let's break down their past year. You'll get a good feel for how they're doing. I'll explain things simply, like we're chatting over coffee.

1. What does this company do and how did they perform this year? SECURITY FEDERAL CORP is a local bank. It takes money from people (deposits). It also uses its own earnings. Then it lends this money out as various loans. Its main business is offering financial services. It focuses heavily on loans secured by real estate. This past year, the company grew its main loan types. Construction, home, and commercial property loans all increased significantly.

2. How much money did they make? We can see how the company did by looking at its loan growth. More loans mean more future earnings from interest. All numbers are in thousands of dollars:

   • Construction Loans: These grew a lot. They jumped from $271,479 in 2024 to $345,545 in 2025. That's a healthy 27.3% increase!
   • Home Loans: This is a big part of their business. It grew well, from $3,113,843 in 2024 to $3,459,388 in 2025. That's an 11.1% increase.
   • Commercial Property Loans: These loans also grew strongly. They rose from $3,186,571 in 2024 to $3,458,050 in 2025, up 8.5%.
   • Home Equity Loans: This segment shrank. It dropped from $130,902 in 2024 to $111,009 in 2025. That's a 15.2% decrease.
   • Business and Farm Loans: These stayed mostly flat. They dipped slightly from $13,894 to $13,529, a 2.6% decrease.
   • Other Consumer Loans: These stayed the same at $82,949 for both years. No change here.

   Overall, the company grew its main real estate and construction loans. This shows strong business activity. It also means more potential earnings from interest in the future. The total loan amount, not counting home equity, grew significantly. This shows where the company is focusing its efforts.

3. Major wins and challenges this year

   • Major Win: Excellent Loan Quality! This is great news for a bank. Almost all their loans are "Pass" rated. This means they are performing well. No loans were significantly late on payments in 2024 or 2025. This includes construction, home, commercial property, business, farm, home equity, and other consumer loans. This shows a very strong and healthy loan book. It's great for the bank's financial health. Only $1,338 of home loans moved to "Caution" in 2025. This is a tiny amount compared to the total.
   • Challenge: Home Equity loans dropped 15.2%. They went from $130,902 to $111,009. This is a notable challenge or a change in strategy. Rising interest rates might make these loans less appealing. More competition from other lenders could also be a factor. Or, SECURITY FEDERAL CORP might be focusing less on these loans. They might see them as riskier or less profitable than other growing loans.

4. How healthy is the bank? (Cash, debt, ability to pay) The quality of SECURITY FEDERAL CORP's loans shows its financial strength. Most loans are "Pass" rated, and few are late. This means the bank lends responsibly. Borrowers are also paying back their loans well. This strength is vital for the bank's long-term ability to pay its debts and stay in business. The Secured Overnight Financing Rate (SOFR) stayed at 5.25% in 2024 and 2025. But the Federal Funds Effective Swap Rate rose a lot. It went from 0% in 2024 to 1.49% in 2025. This big rate change could affect the bank in two ways. It might make borrowing money more expensive for the bank if its own debts are tied to this rate. Or, it could boost the bank's earnings from interest if many of its loans have variable rates that adjust upwards.

5. Key risks that could hurt the stock price

   • Cybersecurity Risks: The company actively manages cyber risks. An experienced committee oversees security checks, rules, training, and reports. This helps protect the company and its customers from online threats. Cyber threats are a growing concern for all businesses, especially banks.
   • Interest Rate Changes: As a bank, SECURITY FEDERAL CORP is very sensitive to interest rate changes. SOFR stayed stable. But the Federal Funds Effective Swap Rate rose notably from 0% to 1.49%. This highlights the risk. Rate changes can greatly affect the bank's net interest margin (NIM). NIM is the profit difference between interest earned on loans and interest paid on deposits. If the cost of deposits rises faster than loan interest, NIM shrinks. This directly hurts profit. It also happens if many loans are fixed-rate while deposits are variable. But a good rate environment could boost NIM. Smart management of assets and debts is key to lowering this risk.
   • Economic Downturn: Loan quality is currently excellent. But a wider economic slowdown could stress borrowers. This might increase late loan payments in the future. This is especially true for construction and commercial property loans. These loans are more sensitive to economic ups and downs.

6. How do they stack up against competitors? SECURITY FEDERAL CORP's strong loan growth shows it's active and competitive. Construction loans grew 27.3%. Home loans grew 11.1%. Commercial property loans grew 8.5%. This growth means the company attracts borrowers well. It might be gaining market share in these key loan areas. It could be doing better than some rivals or seizing market chances.

7. Leadership or strategy changes SECURITY FEDERAL CORP's leaders are proactive in managing risks. They created an active Information Technology Steering Committee. This committee, made of experienced officers, oversees cyber security. It handles assessments, policies, training, and reports. This formal setup shows a commitment to strong operations. It also protects sensitive customer and company data. This is vital in banking today. This focus on tech and security shows a forward-thinking team. They are adapting to new digital threats.

8. What's next for the company? The company grew its main loan types a lot. This includes construction, home, and commercial property loans. This suggests a good future for business growth. This is true if the economy stays strong and loan quality remains high.

9. Market trends or rule changes affecting them Interest rates like SOFR and the Federal Funds Effective Swap Rate are important. They show that market interest rate trends directly affect the bank's business. These trends can change how much the bank pays for money. They also affect how it prices its loans.