Shares of Security Federal Corporation (SFDL Quick QuoteSFDL - Free Report) have risen 1.7% since reporting results for the third quarter of 2025. This compares to the S&P 500 index’s flat performance over the same time frame. Over the past month, the stock has gained 1.4%, underperforming the S&P 500’s 2.9% rally, reflecting a relatively modest post-earnings performance amid a broader market advance.

Security Federal reported strong third-quarter results, with net income available to common shareholders increasing to $3.2 million, or $1.01 per share, from $2 million, or 62 cents per share, in the same period a year earlier. This represents a 59% increase in its quarterly earnings per share.

For the nine months ended Sept. 30, 2025, net income available to common shareholders totaled $8.1 million, or $2.57 per share, up from $5.9 million, or $1.83 per share, in the year-ago period. The improvement stemmed primarily from higher net interest income and a reversal of credit loss provisions, partially offset by elevated non-interest expenses.

Other Key Business Metrics

Net interest income for the third quarter grew 16% year over year to $12.1 million, supported by a 3.1% rise in total interest income to $20.1 million and an 11.7% decline in total interest expenses to $8.1 million. The decline in interest expenses reflected the repayment of borrowings from the Federal Reserve, reducing the average balance of interest-bearing liabilities. Net interest income climbed 13.2% from the start of the year to $34.6 million in the third quarter, while total interest income rose 3.1% to $58.8 million and total interest expenses fell 8.7% to $24.2 million.

Non-interest income was largely stable, increasing 0.3% year over year to $2.6 million in the quarter. In the first nine months of 2025, it rose 3.7% to $7.7 million, aided by gains in rental income and fee-based services, including ATM and check card fees, as well as a $62,000 gain from the sale of land. These were partially offset by lower trust income. Meanwhile, non-interest expenses increased 11.2% year over year to $10.4 million in the quarter and 6.8% to $30.6 million in the first nine months of 2025, driven by higher salaries, benefits and occupancy costs.

Credit Quality & Risk Management

The company’s asset quality continued to improve. A $200,000 net reversal in credit loss provisions was recorded for the first nine months of 2025 compared with a $1.1-million provision in the same period of 2024. Non-performing assets declined to $5.7 million on Sept. 30, 2025, from $6.8 million a year earlier and $7.6 million at the end of 2024. The allowance for credit losses to gross loans was stable at 1.97%, indicating a disciplined risk posture.

Balance Sheet Trends

Security Federal’s total assets reached $1.61 billion at the end of the third quarter, marking a 2.3% year-over-year increase. The composition of the balance sheet shifted notably during the year. Cash and cash equivalents dropped 70.9% to $51.8 million due to securities purchases and debt repayments, while investment securities rose 19.1% to $789.3 million. Total loans receivable declined slightly to $678.1 million, reflecting slower loan demand or portfolio runoff.

In the first nine months of 2025, deposits increased 3.1% to $1.37 billion, underscoring stable customer funding.Borrowings declined 58% to $39 million after the full repayment of Federal Reserve advances, strengthening the balance sheet and reducing interest expenses.

Capital ratios remained robust. The company’s total risk-based capital ratio improved to 20.46% from 19.21% a year ago, while the common equity Tier 1 capital ratio stood at 19.20%. Book value per share rose to $35.80 from $31.97 in the prior year, reflecting retained earnings growth and stronger capital formation.

Management Commentary & Outlook

Management credited the strong performance for the third quarter and the first nine months of 2025to a combination of higher net interest margins and disciplined expense management despite inflationary pressures. The release highlighted the positive impacts of repaying high-cost borrowings, which lowered interest expenses and the contribution from investment income growth.

The modest increase in non-interest income, particularly from rental and fee-based activities, also underscored progress in diversifying revenue sources. However, rising personnel and occupancy costs continue to pressure margins.

In its forward-looking statements, management cautioned that economic uncertainty, inflation, potential recessionary trends, and competitive banking conditions may affect future results. The company emphasized continued focus on deposit growth, loan quality and strategic capital deployment, while acknowledging risks tied to regulatory changes, technology disruptions and broader macroeconomic headwinds.

Other Developments

In the first quarter of 2025, Security Federal purchased a multi-tenant property intended to serve as the site of a future full-service branch. This acquisition contributed to higher rental income during the reporting period and aligns with the bank’s ongoing branch network expansion across South Carolina and Georgia.

The company continues to operate 19 full-service branches in Aiken, Columbia, and surrounding areas, offering trust, investment and insurance services through its wholly owned subsidiary, Security Federal Insurance, Inc.

In summary, Security Federal delivered strong third-quarter results for 2025, driven by expanding net interest income and improved credit quality. The balance sheet showed a healthier funding mix and robust capital position. While non-interest expenses rose, the company maintained profitability momentum, reflecting sound management execution in a challenging rate and regulatory environment.