Company Quick10K Filing
Security Federal
Price34.35 EPS2
Shares3 P/E14
MCap112 P/FCF13
Net Debt-14 EBIT17
TEV98 TEV/EBIT6
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-14
10-K 2019-12-31 Filed 2020-03-20
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-13
10-Q 2019-03-31 Filed 2019-05-14
10-K 2018-12-31 Filed 2019-03-22
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-13
10-Q 2018-03-31 Filed 2018-05-14
10-K 2017-12-31 Filed 2018-03-20
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-11
10-Q 2017-03-31 Filed 2017-05-12
10-K 2016-12-31 Filed 2017-03-20
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-12
10-Q 2016-03-31 Filed 2016-05-12
10-K 2015-12-31 Filed 2016-03-21
10-Q 2015-09-30 Filed 2015-11-12
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-13
10-K 2014-12-31 Filed 2015-03-20
10-Q 2014-09-30 Filed 2014-11-12
10-Q 2014-06-30 Filed 2014-08-13
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-03-25
10-Q 2013-09-30 Filed 2013-11-13
10-Q 2013-06-30 Filed 2013-08-12
10-Q 2013-03-31 Filed 2013-05-14
10-Q 2012-09-30 Filed 2012-11-14
10-Q 2012-06-30 Filed 2012-08-14
10-K 2012-03-31 Filed 2012-06-25
10-Q 2011-12-31 Filed 2012-02-13
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-K 2011-03-31 Filed 2011-06-22
10-Q 2010-12-31 Filed 2011-02-14
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-13
10-K 2010-03-31 Filed 2010-06-25
10-Q 2009-12-31 Filed 2010-02-12
8-K 2020-06-03
8-K 2020-05-21
8-K 2020-05-01
8-K 2020-02-03
8-K 2020-01-02
8-K 2019-11-22
8-K 2019-10-28
8-K 2019-07-29
8-K 2019-06-11
8-K 2019-04-29
8-K 2019-04-18
8-K 2019-02-21
8-K 2019-01-28
8-K 2018-10-29
8-K 2018-10-18
8-K 2018-07-30
8-K 2018-04-30
8-K 2018-04-19
8-K 2018-03-29
8-K 2018-01-29

SFDL 10Q Quarterly Report

Part 1. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii: Other Information
Item 1 Legal Proceedings
Item 1A Risk Factors
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 Defaults Upon Senior Securities
Item 4 Mine Safety Disclosures
Item 5 Other Information
Item 6 Exhibits
EX-31.1 sfdl-20200331xex311.htm
EX-31.2 sfdl-20200331xex312.htm
EX-32 sfdl-20200331xex32.htm

Security Federal Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

10-Q 1 sfdl-20200331x10q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10 – Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD:
FROM:
 
TO:
 
COMMISSION FILE NUMBER: 000-16120
SECURITY FEDERAL CORPORATION
(Exact name of registrant as specified in its charter)
 
South Carolina
 
57-0858504
 
 
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
 
238 RICHLAND AVENUE NORTHWEST, AIKEN, SOUTH CAROLINA 29801
(Address of principal executive office and Zip Code)
(803) 641-3000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes [ X ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filed    [ ]
 
Smaller reporting company [ X ]
 
 
Non-accelerated filer    [ X ]
 
Emerging growth company [ ]
 
 
Accelerated filer [ ]
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
YES
 
 
 
NO
 
 
Indicate by check mark whether the registrant is a shell corporation (defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Securities registered pursuant to Section 12(b) of the Act: None
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
 
CLASS:
 
OUTSTANDING SHARES AT:
 
SHARES:
 
 
Common Stock, par value $0.01 per share
 
May 14, 2020
 
3,252,884
 




 
 
 
PART I.
FINANCIAL INFORMATION (UNAUDITED)
PAGE NO.
Item 1.
Financial Statements (unaudited):
3
 
Consolidated Balance Sheets at March 31, 2020 and December 31, 2019
3
 
Consolidated Statements of Income for the Three Months Ended March 31, 2020 and 2019
4
 
Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2020 and 2019
5
 
Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2020 and 2019
6
 
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019
7
 
Notes to Consolidated Financial Statements
9
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
41
Item 4.
Controls and Procedures
42
 
 
 
PART II.
OTHER INFORMATION
 
Item 1.
Legal Proceedings
42
Item 1A.
Risk Factors
42
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
44
Item 3.
Defaults Upon Senior Securities
44
Item 4.
Mine Safety Disclosures
44
Item 5.
Other Information
44
Item 6.
Exhibits
44
 
Signatures
46
 
 
 

SCHEDULES OMITTED

All schedules other than those indicated above are omitted because of the absence of the conditions under which they are required or because the information is included in the consolidated financial statements and related notes.





SECURITY FEDERAL CORPORATION AND SUBSIDIARIES


Part 1. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
 
March 31, 2020
 
December 31, 2019
 
(Unaudited)
 
(Audited)
ASSETS:
 
 
 
Cash and Cash Equivalents
$
15,462,336

 
$
12,536,311

Certificates of Deposit with Other Banks
950,005

 
950,005

Investment and Mortgage-Backed Securities:
 
 
 
Available For Sale ("AFS")
469,324,205

 
414,644,840

Held To Maturity ("HTM") (Fair Value of $19,196,143 and $19,805,841 at March 31, 2020 and December 31, 2019, Respectively)
18,286,574

 
19,246,935

Total Investments and Mortgage-Backed Securities
487,610,779

 
433,891,775

Loans Receivable, Net:
 
 
 
Held For Sale
5,408,570

 
3,990,606

Held For Investment (Net of Allowance of $9,871,838 and $9,225,574 at March 31, 2020 and December 31, 2019, Respectively)
454,557,940

 
448,868,129

Total Loans Receivable, Net
459,966,510

 
452,858,735

Accrued Interest Receivable:
 
 
 
Loans
1,332,054

 
1,211,826

Mortgage-Backed Securities
619,704

 
551,214

Investment Securities
1,583,949

 
1,635,497

Total Accrued Interest Receivable
3,535,707

 
3,398,537

Operating Lease Right-of-Use Assets
2,625,530

 
2,718,676

Premises and Equipment, Net
27,041,941

 
27,219,883

Federal Home Loan Bank ("FHLB") Stock, at Cost
4,086,200

 
2,536,500

Other Real Estate Owned ("OREO")
647,740

 
677,740

Bank Owned Life Insurance ("BOLI")
21,636,647

 
21,501,647

Goodwill
1,199,754

 
1,199,754

Other Assets
5,010,812

 
3,737,978

Total Assets
$
1,029,773,961

 
$
963,227,541

LIABILITIES AND SHAREHOLDERS’ EQUITY:
 
 
 
Liabilities:
 
 
 
Deposit Accounts
$
775,999,946

 
$
771,407,482

Advance Payments By Borrowers for Taxes and Insurance
379,176

 
207,582

Advances from FHLB
75,769,000

 
38,138,000

Borrowings from Federal Reserve Bank ("FRB")
19,900,000

 

Other Borrowings
17,006,411

 
11,579,819

Junior Subordinated Debentures
5,155,000

 
5,155,000

Senior Convertible Debentures

 
6,044,000

Subordinated Debentures
30,000,000

 
30,000,000

Operating Lease Liabilities
2,646,578

 
2,733,531

Other Liabilities
6,655,461

 
6,204,122

Total Liabilities
$
933,511,572

 
$
871,469,536

Shareholders' Equity:
 
 
 
Common Stock, $.01 Par Value; Authorized 5,000,000 Shares; Issued and Outstanding Shares, 3,453,817 and 3,252,884, Respectively, at March 31, 2020 and 3,157,787 and 2,956,854, Respectively, at December 31, 2019
$
34,538

 
$
31,578

Additional Paid-In Capital
18,230,187

 
12,308,179

Treasury Stock, at Cost (200,933 Shares)
(4,330,712
)
 
(4,330,712
)
Accumulated Other Comprehensive Income ("AOCI")
2,308,164

 
4,467,527

Retained Earnings
80,020,212

 
79,281,433

Total Shareholders' Equity
$
96,262,389

 
$
91,758,005

Total Liabilities and Shareholders' Equity
$
1,029,773,961

 
$
963,227,541


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

3


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
Interest Income:
 
 
 
Loans
$
6,121,871

 
$
6,003,502

Mortgage-Backed Securities
1,650,086

 
1,549,122

Investment Securities
1,280,142

 
1,413,993

Other
43,028

 
64,205

Total Interest Income
9,095,127

 
9,030,822

Interest Expense:
 
 
 
NOW and Money Market Accounts
449,275

 
485,473

Savings Accounts
20,616

 
16,326

Certificate Accounts
974,038

 
912,660

FHLB Advances and Other Borrowed Money
255,675

 
157,110

Note Payable

 
23,777

Senior Convertible Debentures
81,796

 
120,880

Subordinated Debentures
393,750

 

Junior Subordinated Debentures
44,186

 
57,410

Total Interest Expense
2,219,336

 
1,773,636

Net Interest Income
6,875,791

 
7,257,186

Provision For Loan Losses
700,000

 
100,000

Net Interest Income After Provision For Loan Losses
6,175,791

 
7,157,186

Non-Interest Income:
 
 
 
Gain on Sale of Investment Securities
706,743

 
290,768

Gain on Sale of Loans
502,851

 
174,283

Service Fees on Deposit Accounts
285,075

 
252,017

Commissions From Insurance Agency
148,031

 
151,300

Trust Income
299,325

 
258,600

BOLI Income
135,000

 
135,000

Check Card Fee Income
354,099

 
342,334

Grant Income
58,340

 
259,615

Other
306,426

 
331,915

Total Non-Interest Income
2,795,890

 
2,195,832

Non-Interest Expense:
 
 
 
Compensation and Employee Benefits
4,674,047

 
4,179,034

Occupancy
591,609

 
552,233

Advertising
263,003

 
172,684

Depreciation and Maintenance of Equipment
690,930

 
610,357

Federal Deposit Insurance Corporation ("FDIC") Insurance Premiums
16,080

 
73,176

Net Cost (Recovery) of Operation of OREO
12,740

 
(92,114
)
Other
1,395,177

 
1,249,145

Total Non-Interest Expense
7,643,586

 
6,744,515

Income Before Income Taxes
1,328,095

 
2,608,503

Provision For Income Taxes
263,908

 
519,630

Net Income
1,064,187

 
2,088,873

Net Income Per Common Share (Basic)
$
0.34

 
$
0.71

Net Income Per Common Share (Diluted)
$
0.34

 
$
0.67

Cash Dividend Per Share on Common Stock
$
0.10

 
$
0.09

Weighted Average Shares Outstanding (Basic)
3,092,455

 
2,954,515

Weighted Average Shares Outstanding (Diluted)
3,092,455

 
3,256,715


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

4


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
Net Income
$
1,064,187

 
$
2,088,873

Other Comprehensive (Loss) Income:
 
 
 
Unrealized Holding (Losses) Gains on Securities AFS, Net of Taxes of $(541,264) and $998,996 at March 31, 2020 and 2019, Respectively
(1,623,967
)
 
3,046,017

Reclassification Adjustment for Gains Included in Net Income, Net of Taxes of $176,686 and $72,692 at March 31, 2020 and 2019, Respectively
(530,057
)
 
(218,076
)
Amortization of Unrealized Gains on AFS Securities Transferred to HTM, Net of Taxes of $(1,780) and $(3,341) at March 31, 2020 and 2019, Respectively
(5,339
)
 
(10,024
)
Other Comprehensive (Loss) Income, Net of Tax
(2,159,363
)
 
2,817,917

Comprehensive (Loss) Income
$
(1,095,176
)
 
$
4,906,790


 

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


5


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
For the Three Months Ended March 31, 2020 and 2019

 
Common
Stock
 
Additional Paid – In Capital
 
Treasury Stock
 
AOCI
 
Retained Earnings
 
Total
Balance at December 31, 2018
$
31,548

 
$
12,235,341

 
$
(4,330,712
)
 
$
(27,909
)
 
$
72,610,165

 
$
80,518,433

Net Income

 

 

 

 
2,088,873

 
2,088,873

Other Comprehensive Income, Net of Tax

 

 

 
2,817,917

 

 
2,817,917

Employee Stock Purchases
5

 
12,004

 

 

 

 
12,009

Redemption of Convertible Debentures
10

 
19,990

 

 

 

 
20,000

Cash Dividends on Common Stock

 

 

 

 
(265,982
)
 
(265,982
)
Balance at March 31, 2019
$
31,563

 
$
12,267,335

 
$
(4,330,712
)
 
$
2,790,008

 
$
74,433,056

 
$
85,191,250



 
Common
Stock
 
Additional Paid – In Capital
 
Treasury Stock
 
AOCI
 
Retained Earnings
 
Total
Balance at December 31, 2019
$
31,578

 
$
12,308,179

 
$
(4,330,712
)
 
$
4,467,527

 
$
79,281,433

 
$
91,758,005

Net Income

 

 

 

 
1,064,187

 
1,064,187

Other Comprehensive Loss, Net of Tax

 

 

 
(2,159,363
)
 

 
(2,159,363
)
Employee Stock Purchases
4

 
12,964

 

 

 

 
12,968

Redemption of Convertible Debentures
2,956

 
5,909,044

 

 

 

 
5,912,000

Cash Dividends on Common Stock

 

 

 

 
(325,408
)
 
(325,408
)
Balance at March 31, 2020
$
34,538

 
$
18,230,187

 
$
(4,330,712
)
 
$
2,308,164

 
$
80,020,212

 
$
96,262,389


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

6


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net Income
$
1,064,187

 
$
2,088,873

Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
 
 
 
Depreciation Expense
464,387

 
390,743

Discount Accretion and Premium Amortization
1,185,119

 
1,292,404

Provision for Loan Losses
700,000

 
100,000

Earnings on BOLI
(135,000
)
 
(135,000
)
Gain on Sales of Loans
(502,851
)
 
(174,283
)
Gain on Sales of Investment Securities
(706,843
)
 
(290,768
)
Gain on Sales of OREO
(3,291
)
 
(110,302
)
Amortization of Operating Lease Right-of-Use Assets
93,146

 
98,141

Amortization of Deferred Loan Costs
69,236

 
41,739

Proceeds From Sale of Loans Held For Sale
16,882,646

 
7,131,184

Origination of Loans Held For Sale
(17,797,759
)
 
(7,611,361
)
(Increase) Decrease in Accrued Interest Receivable:
 
 
 
Loans
(120,228
)
 
(71,426
)
MBS
(68,490
)
 
(12,411
)
Investment Securities
51,548

 
(2,704
)
Increase in Advance Payments By Borrowers
171,594

 
154,037

(Increase) Decrease in Other, Net
(195,838
)
 
736,821

Net Cash Provided By Operating Activities
$
1,151,563

 
$
3,625,687

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchase of MBS AFS
$
(42,508,264
)
 
$
(13,971,139
)
Proceeds from Payments and Maturities of MBS AFS
5,698,171

 
7,665,227

Proceeds from Payments and Maturities of MBS Held To Maturity ("HTM")
901,954

 
149,162

Purchase of Investment Securities AFS
(41,965,408
)
 
(21,531,244
)
Proceeds from Payments and Maturities of Investment Securities AFS
9,655,542

 
7,989,484

Proceeds from Sale of Investment Securities AFS
11,148,752

 
6,555,400

Proceeds from Redemption of Certificates of Deposits with Other Banks

 
250,000

Purchase of FHLB Stock
(5,069,100
)
 
(1,698,100
)
Redemption of FHLB Stock
3,519,400

 
1,975,700

(Increase) Decrease in Loans Receivable
(6,459,047
)
 
812,445

Proceeds From Sale of OREO
33,291

 
463,603

Purchase and Improvement of Premises and Equipment
(286,445
)
 
(1,435,353
)
Net Cash Used By Investing Activities
$
(65,331,154
)
 
$
(12,774,815
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Increase in Deposit Accounts
$
4,592,464

 
$
21,351,459

Proceeds from FHLB Advances
163,155,000

 
54,180,000

Repayment of FHLB Advances
(125,524,000
)
 
(62,210,000
)
Increase in Other Borrowings, Net
5,426,592

 
3,345,823

Repayment of Note Payable

 
(850,000
)
Redemption of Senior Convertible Debentures
(132,000
)
 

Proceeds from FRB Borrowings
19,900,000

 

Proceeds from Employee Stock Purchases
12,968

 
12,009

Dividends to Common Stock Shareholders
(325,408
)
 
(265,982
)
Net Cash Provided By Financing Activities
$
67,105,616

 
$
15,563,309

Net Increase in Cash and Cash Equivalents
2,926,025

 
6,414,181

Cash and Cash Equivalents at Beginning of Period
12,536,311

 
12,705,910

Cash and Cash Equivalents at End of Period
$
15,462,336

 
$
19,120,091

 
 
 
 

7


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

 
 
 
 
Consolidated Statements of Cash Flows (Unaudited) (Continued)
 
 
 
 
 
Three Months Ended March 31,
 
2020
 
2019
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
Cash Paid for Interest
$
1,902,816

 
$
1,401,916

Non-Cash Transactions:
 
 
 
Initial Recognition of Operating Lease Right-of-Use Assets
$

 
$
3,090,512

Initial Recognition of Operating Lease Liabilities
$

 
$
3,090,512

Transfers From Loans Receivable to OREO
$

 
$
440,200

Other Comprehensive (Loss) Income
$
(2,159,363
)
 
$
2,817,917


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


8



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




1. Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and accounting principles generally accepted in the United States of America ("GAAP"); therefore, they do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows.  Such statements are unaudited but, in the opinion of management, reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of results for the selected interim periods.  Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the audited consolidated financial statements appearing in Security Federal Corporation’s (the “Company”) 2019 Annual Report to Shareholders which was filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 10-K”) when reviewing interim financial statements. The unaudited consolidated results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

2. Principles of Consolidation

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Security Federal Bank (the “Bank”) and the Bank’s wholly owned subsidiaries, Security Federal Insurance, Inc. (“SFINS”), Security Federal Investments, Inc. ("SFINV") and Security Financial Services Corporation (“SFSC”). SFINS is an insurance agency offering auto, business, health and home insurance.  SFINS has a wholly owned subsidiary, Collier Jennings Financial Corporation, which has as subsidiaries Security Federal Auto Insurance, The Auto Insurance Store Inc., and Security Federal Premium Pay Plans Inc. Security Federal Premium Pay Plans Inc. has one wholly owned premium finance subsidiary and also has an ownership interest in four other premium finance subsidiaries. SFINV was formed to hold investment securities and allow for better management of the securities portfolio. SFSC is currently inactive. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company has a wholly owned subsidiary, Security Federal Statutory Trust (the “Trust”), which issued and sold fixed and floating rate capital securities of the Trust.  However, under current accounting guidance, the Trust is not consolidated in the Company’s financial statements.  The Bank is primarily engaged in the business of accepting savings and demand deposits and originating mortgage loans and other loans to individuals and small businesses for various personal and commercial purposes.

3. Critical Accounting Policies

The Company has adopted various accounting policies, which govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements.  Our significant accounting policies are described in the footnotes to the audited consolidated financial statements at December 31, 2019 included in our 2019 Annual Report to Shareholders.  Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities, and, as such, have a greater possibility of producing results that could be materially different than originally reported.  We consider these accounting policies to be critical accounting policies.  The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances.  Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.

The Company believes the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of the consolidated financial statements.  The impact of an unexpected and sudden large loss could deplete the allowance and potentially require increased provisions to replenish the allowance, which would negatively affect earnings. The Company provides for loan losses using the allowance method.  Accordingly, all loan losses are charged to the related allowance and all recoveries are credited to the allowance for loan losses.  Additions to the allowance for loan losses are provided by charges to operations based on various factors, which, in management’s judgment, deserve current recognition in estimating possible losses.  Such factors considered by management include the fair value of the underlying collateral, stated guarantees by the borrower (if applicable), the borrower’s ability to repay from other economic resources, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to the outstanding loans, loss experience, delinquency trends, and general economic conditions.  Management evaluates the carrying value of the loans periodically and the allowance is adjusted accordingly.

9



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements



 
3. Critical Accounting Policies, Continued

While management uses the best information available to make evaluations, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in making these evaluations.  The allowance for loan losses is subject to periodic evaluations by our bank regulatory agencies, including the Board of Governors of the Federal Reserve System ("Federal Reserve"), the FDIC and the South Carolina Board of Financial Institutions, that may require adjustments to be made to the allowance based upon the information that is available at the time of their examination.

The Company values impaired loans at the loan’s fair value if it is probable that the Company will be unable to collect all amounts due according to the terms of the loan agreement at the present value of expected cash flows, the market price of the loan, if available, or the value of the underlying collateral.  Expected cash flows are required to be discounted at the loan’s effective interest rate.  When the ultimate collectibility of an impaired loan’s principal is in doubt, wholly or partially, all cash receipts are applied to principal.  When this doubt does not exist, cash receipts are applied under the contractual terms of the loan agreement first to interest and then to principal.  Once the recorded principal balance has been reduced to zero, future cash receipts are applied to interest income to the extent that any interest has been foregone.  Further cash receipts are recorded as recoveries of any amounts previously charged off.

The Company uses assumptions and estimates in determining income taxes payable or refundable for the current year, deferred income tax liabilities and assets for events recognized differently in its financial statements and income tax returns, and income tax expense. Determining these amounts requires analysis of certain transactions and interpretation of tax laws and regulations. The Company exercises considerable judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments and estimates are reevaluated on a continual basis as regulatory and business factors change. No assurance can be given that either the tax returns submitted by us or the income tax reported on the Consolidated Financial Statements will not be adjusted by either adverse rulings by the United States Tax Court, changes in the tax code, or assessments made by the Internal Revenue Service.

4. Earnings Per Share

Accounting guidance specifies the computation, presentation and disclosure requirements for earnings per share (“EPS”) for entities with publicly held common stock or potential common stock such as options, warrants, convertible securities or contingent stock agreements if those securities trade in a public market. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding.  Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive common shares had been issued.  The dilutive effect of options outstanding under the Company’s stock option plan is reflected in diluted EPS by application of the treasury stock method. There were no stock options outstanding at March 31, 2020 or March 31, 2019; and therefore, no dilutive options in the calculation of diluted EPS for those periods. Diluted EPS also assumes the convertible debentures were converted into 302,200 shares of common stock at the beginning of the three month period ended March 31, 2019. The related interest expense recorded during the period is added back to the EPS numerator while the underlying shares are added to the denominator.

The following tables include a summary of the Company's basic and diluted EPS for the periods indicated.
 
Three Months Ended March 31,
 
2020
 
2019
 
Income
 
Shares
 
Per Share Amounts
 
Income
 
Shares
 
Per Share Amounts
Basic EPS
$
1,064,187

 
3,092,455

 
$
0.34

 
$
2,088,873

 
2,954,515

 
$
0.71

Effect of Dilutive Securities:
 
 
 
 
 
 
 
 
 
 
 
Senior Convertible Debentures

 

 

 
90,660

 
302,200

 
(0.04)

Diluted EPS
$
1,064,187

 
3,092,455

 
$
0.34

 
$
2,179,533

 
3,256,715

 
$
0.67

 






10



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




5. Stock-Based Compensation

Certain officers and directors of the Company participate in incentive and non-qualified stock option plans. Options are granted at exercise prices not less than the fair value of the Company’s common stock on the date of the grant. At March 31, 2020 and 2019, the Company had no options outstanding and there was no activity during the three months ended March 31, 2020 and 2019. At those dates, there were 50,000 options available for grants.
 
 
6. Investment and Mortgage-Backed Securities, Available For Sale

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of investment and mortgage-backed securities available for sale at the dates indicated were as follows:
 
March 31, 2020
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Student Loan Pools
$
51,954,147

 
$

 
$
4,154,233

 
$
47,799,914

Small Business Administration (“SBA”) Bonds
116,275,454

 
677,769

 
598,900

 
116,354,323

Tax Exempt Municipal Bonds
36,159,875

 
4,115,386

 

 
40,275,261

Taxable Municipal Bonds
27,911,455

 
106,427

 
503,698

 
27,514,184

Mortgage-Backed Securities
233,945,687

 
5,622,860

 
2,188,024

 
237,380,523

Total Available For Sale
$
466,246,618

 
$
10,522,442

 
$
7,444,855

 
$
469,324,205

 
 
 
 
 
 
 
 
 
December 31, 2019
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Student Loan Pools
$
41,088,231

 
$

 
$
856,401

 
$
40,231,830

SBA Bonds
111,927,938

 
622,105

 
656,944

 
111,893,099

Tax Exempt Municipal Bonds
43,153,086

 
4,088,408

 

 
47,241,494

Taxable Municipal Bonds
15,169,737

 
35,359

 
364,686

 
14,840,410

Mortgage-Backed Securities
197,356,288

 
3,664,621

 
582,902

 
200,438,007

Total Available For Sale
$
408,695,280

 
$
8,410,493

 
$
2,460,933

 
$
414,644,840


Student Loan Pools are typically 97% guaranteed by the United States government while SBA bonds are 100% backed by the full faith and credit of the United States government. Included in the tables above and below in mortgage-backed securities are Government National Mortgage Association ("GNMA") mortgage-backed securities, which are also backed by the full faith and credit of the United States government.  At March 31, 2020, AFS GNMA mortgage-backed securities had an amortized cost and fair value of $69.9 million and $70.2 million, respectively, compared to an amortized cost and fair value of $63.2 million and $63.9 million, respectively, at December 31, 2019.

Also included in mortgage-backed securities in the tables above and below are private label collateralized mortgage obligation ("CMO") securities, which are issued by non-governmental real estate mortgage investment conduits and are not backed by the full faith and credit of the United States government.  At March 31, 2020 the Bank held AFS private label CMO mortgage-backed securities with an amortized cost and fair value of $28.0 million and $27.1 million, respectively, compared to an amortized cost and fair value of $15.8 million and $16.1 million, respectively, at December 31, 2019.

The amortized cost and fair value of investment and mortgage-backed securities available for sale at March 31, 2020 are shown below by contractual maturity.  Expected maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without call or prepayment penalties. Since mortgage-backed securities are not due at a single maturity date, they are disclosed separately, rather than allocated over the maturity groupings set forth in the table below.




11



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




6. Investment and Mortgage-Backed Securities, Available For Sale, Continued
 
March 31, 2020
Investment Securities:
Amortized Cost
 
Fair Value
One Year or Less
$
22,564

 
$
22,471

After One – Five Years
5,723,428

 
5,774,746

After Five – Ten Years
66,054,005

 
66,119,094

More Than Ten Years
160,500,934

 
160,027,371

Mortgage-Backed Securities
233,945,687

 
237,380,523

Total Available For Sale
$
466,246,618

 
$
469,324,205


At March 31, 2020 the amortized cost and fair value of investment and mortgage-backed securities available for sale pledged as collateral for certain deposit accounts, FHLB advances and other borrowings were $204.5 million and $210.5 million, respectively, compared to an amortized cost and fair value of $171.4 million and $173.1 million, respectively, at December 31, 2019.

The Company received $11.1 million and $6.6 million in gross proceeds from sales of available for sale securities during the three months ended March 31, 2020 and 2019, respectively. As a result, the Company recognized gross gains of $707,000 and $299,000 and gross losses of $0 and $8,000 during the three months ended March 31, 2020 and 2019, respectively.
 
The following tables show gross unrealized losses and fair value, aggregated by investment category, and length of time that the individual available for sale securities were in a continuous unrealized loss position at the dates indicated.
 
March 31, 2020
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
Student Loan Pools
$
28,402,671

$
2,305,196

 
$
19,397,243

$
1,849,037

 
$
47,799,914

$
4,154,233

SBA Bonds
28,353,399

174,615

 
42,900,499

424,285

 
71,253,898

598,900

Taxable Municipal Bonds
16,813,764

503,698

 


 
16,813,764

503,698

Mortgage-Backed Securities
79,832,042

1,954,994

 
8,080,882

233,030

 
87,912,924

2,188,024

 
$
153,401,876

$
4,938,503

 
$
70,378,624

$
2,506,352

 
$
223,780,500

$
7,444,855

 
December 31, 2019
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
Student Loan Pools
$
30,079,497

$
534,048

 
$
10,152,333

$
322,353

 
$
40,231,830

$
856,401

SBA Bonds
13,844,666

106,110

 
47,395,036

550,834

 
61,239,702

656,944

Taxable Municipal Bond
13,810,279

364,686

 


 
13,810,279

364,686

Mortgage-Backed Securities
55,326,064

480,958

 
7,975,863

101,944

 
63,301,927

582,902

 
$
113,060,506

$
1,485,802

 
$
65,523,232

$
975,131

 
$
178,583,738

$
2,460,933


Securities classified as available for sale are recorded at fair market value.  At March 31, 2020 and December 31, 2019, 33.7% and 39.6% of the unrealized losses, representing 72 and 69 individual securities, respectively, consisted of securities in a continuous loss position for 12 months or more. The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature.  The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary. The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”).

12



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements



6. Investment and Mortgage-Backed Securities, Available For Sale, Continued

Additional deterioration in market and economic conditions related to COVID-19 pandemic may, however, have an adverse impact on credit quality in the future and result in OTTI charges. Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospects of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value. If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or the Company may recognize a portion in other comprehensive income. The fair value of investments on which OTTI is recognized then becomes the new cost basis of the investment. There was no OTTI recognized during the three months ended March 31, 2020.

7. Investment and Mortgage-Backed Securities, Held to Maturity

At March 31, 2020 and December 31, 2019, the Company's entire held to maturity portfolio was comprised of mortgage-backed securities. The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of held to maturity securities at those dates were as follows:
 
March 31, 2020
 
 Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Mortgage-Backed Securities (1)
$
18,286,574

 
$
910,708

 
$
1,139

 
$
19,196,143

Total Held To Maturity
$
18,286,574

 
$
910,708

 
$
1,139

 
$
19,196,143

 
 
December 31, 2019
 
 Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Mortgage-Backed Securities (1)
$
19,246,935

 
$
560,067

 
$
1,161

 
$
19,805,841

Total Held To Maturity
$
19,246,935

 
$
560,067

 
$
1,161

 
$
19,805,841

(1) COMPRISED OF MORTGAGE-BACKED SECURITIES OF GSEs OR GNMA 

At March 31, 2020, the Bank held an amortized cost and fair value of $10.7 million and $11.2 million, respectively, in GNMA mortgage-backed securities classified as held to maturity, which are included in the table above, compared to an amortized cost and fair value of $11.3 million and $11.6 million, respectively, at December 31, 2019. The Company has not invested in any private label mortgage-backed securities classified as held to maturity.

At March 31, 2020, the amortized cost and fair value of mortgage-backed securities held to maturity that were pledged as collateral for certain deposit accounts, FHLB advances and other borrowings were $16.7 million and $17.6 million, respectively, compared to an amortized cost and fair value of $17.5 million and $18 million, respectively, at December 31, 2019.
 
The following tables show gross unrealized losses, fair value, and length of time that individual held to maturity securities have been in a continuous unrealized loss position at the dates indicated below.
 
March 31, 2020
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
Mortgage-Backed Securities (1)
$

$

 
$
812,158

$
1,139

 
$
812,158

$
1,139

 
$

$

 
$
812,158

$
1,139

 
$
812,158

$
1,139

(1) COMPRISED OF MORTGAGE-BACKED SECURITIES OF GSEs OR GNMA 



13



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




7. Investment and Mortgage-Backed Securities, Held to Maturity, Continued
 
December 31, 2019
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
Mortgage-Backed Securities (1)
$

$

 
$
820,313

$
1,161

 
$
820,313

$
1,161

 
$

$

 
$
820,313

$
1,161

 
$
820,313

$
1,161

(1) COMPRISED OF MORTGAGE-BACKED SECURITIES OF GSEs OR GNMA 

The Company’s held to maturity portfolio is recorded at amortized cost.  The Company has the ability and intent to hold these securities to maturity.


8.    Loans Receivable, Net

Loans receivable, net, consisted of the following as of the dates indicated below:
 
March 31, 2020
 
December 31, 2019
Residential Real Estate Loans
$
86,708,745

 
$
86,404,304

Consumer Loans
59,064,397

 
56,331,013

Commercial Business Loans
24,221,626

 
22,234,189

Commercial Real Estate Loans
305,483,071

 
303,550,905

Total Loans Held For Investment
475,477,839

 
468,520,411

Loans Held For Sale
5,408,570

 
3,990,606

Total Loans Receivable, Gross
$
480,886,409

 
$
472,511,017

Less:
 
 
 
Allowance For Loan Losses
9,871,838

 
9,225,574

Loans in Process
10,622,153

 
9,957,140

Deferred Loan Fees
425,908

 
469,568

 
20,919,899

 
19,652,282

Total Loans Receivable, Net
$
459,966,510

 
$
452,858,735


The Company uses a risk based approach based on the following credit quality measures when analyzing the loan portfolio: pass, caution, special mention, and substandard. These indicators are used to rate the credit quality of loans for the purposes of determining the Company’s allowance for loan losses. Pass loans are loans that are performing and are deemed adequately protected by the net worth of the borrower or the underlying collateral value. These loans are considered to have the least amount of risk in terms of determining the allowance for loan losses. Loans that are graded as substandard are considered to have the most risk. These loans typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value. All loans 90 days or more past due are automatically classified in this category. The caution and special mention categories fall in between the pass and substandard grades and consist of loans that do not currently expose the Company to sufficient risk to warrant adverse classification but possess weaknesses.


14



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements



8.    Loans Receivable, Net, Continued

The tables below summarize the balance within each risk category by loan type, excluding loans held for sale, at March 31, 2020 and December 31, 2019.
March 31, 2020
 
Pass
 
 
Caution
 
Special
Mention
 
 
Substandard
 
 
Total Loans
Residential Real Estate
$
76,650,860

 
$
5,302,605

 
$
1,060,055

 
$
3,695,225

 
$
86,708,745

Consumer
45,658,549

 
10,769,030

 
780,448

 
1,856,370

 
59,064,397

Commercial Business
18,275,291

 
5,074,669

 
438,534

 
433,132

 
24,221,626

Commercial Real Estate
236,711,024

 
52,122,797

 
14,162,480

 
2,486,770

 
305,483,071

Total
$
377,295,724

 
$
73,269,101

 
$
16,441,517

 
$
8,471,497

 
$
475,477,839

December 31, 2019
 
Pass
 
 
Caution
 
Special
Mention
 
 
Substandard
 
 
Total Loans
Residential Real Estate
$
76,674,539

 
$
4,612,182

 
$
1,155,802

 
$
3,961,781

 
$
86,404,304

Consumer
44,294,400

 
9,617,301

 
624,248

 
1,795,064

 
56,331,013

Commercial Business
16,140,592

 
5,486,393

 
301,462

 
305,742

 
22,234,189

Commercial Real Estate
230,810,756

 
56,025,352

 
14,285,015

 
2,429,782

 
303,550,905

Total
$
367,920,287

 
$
75,741,228

 
$
16,366,527

 
$
8,492,369

 
$
468,520,411


The following tables present an age analysis of past due balances by loan category at March 31, 2020 and December 31, 2019:
 
March 31, 2020
 
 
30-59 Days
Past Due
 
 
60-89 Days
Past Due
 
90 Days or
More Past Due
 
 
Total Past
Due
 
 
 
Current
 
 
Total Loans
Receivable
Residential Real Estate
$
493,064

 
$

 
$
706,590

 
$
1,199,654

 
$
85,509,091

 
$
86,708,745

Consumer
386,364

 
198,759

 
95,369

 
680,492

 
58,383,905

 
59,064,397

Commercial Business
751,042

 
23,257

 
169,506

 
943,805

 
23,277,821

 
24,221,626

Commercial Real Estate
4,508,722

 
138,935

 
1,226,852

 
5,874,509

 
299,608,562

 
305,483,071

Total
$
6,139,192

 
$
360,951

 
$
2,198,317

 
$
8,698,460

 
$
466,779,379

 
$
475,477,839

 
December 31, 2019
 
 
30-59 Days
Past Due
 
 
60-89 Days
Past Due
 
90 Days or
More Past
Due
 
 
Total Past
Due
 
 
 
Current
 
 
Total Loans
Receivable
Residential Real Estate
$

 
$
355,290

 
$
144,209

 
$
499,499

 
$
85,904,805

 
$
86,404,304

Consumer
422,443

 
217,542

 
81,736

 
721,721

 
55,609,292

 
56,331,013

Commercial Business
147,959

 
76,515

 
20,316

 
244,790

 
21,989,399

 
22,234,189

Commercial Real Estate
3,849,424

 

 
1,352,716

 
5,202,140

 
298,348,765

 
303,550,905

Total
$
4,419,826

 
$
649,347

 
$
1,598,977

 
$
6,668,150

 
$
461,852,261

 
$
468,520,411


At March 31, 2020 and December 31, 2019, the Company did not have any loans that were 90 days or more past due and still accruing interest. The Company's strategy is to work with its borrowers to reach acceptable payment plans while protecting its interests in the existing collateral.  In the event an acceptable arrangement cannot be reached, the Company may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them.


15



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




8.    Loans Receivable, Net, Continued

The following table shows non-accrual loans by category at March 31, 2020 compared to December 31, 2019:
 
March 31, 2020
 
December 31, 2019
 
$
 
%
 
Amount
 
Percent (1)
 
Amount
 
Percent (1)
 
Increase (Decrease)
 
Increase (Decrease)
Non-accrual Loans:
 
 
 
 
 
 
 
 
 
 
 
Residential Real Estate
$
1,773,173

 
0.4
%
 
$
1,520,485

 
0.3
%
 
$
252,688

 
16.6%
Consumer
402,084

 
0.1

 
319,280

 
0.1

 
82,804

 
25.9
Commercial Business
278,817

 
0.1

 
122,605

 

 
156,212

 
127.4
Commercial Real Estate
1,341,406

 
0.3

 
1,474,036

 
0.3

 
(132,630
)
 
(9.0)
Total Non-accrual Loans
$
3,795,480

 
0.9
%
 
$
3,436,406

 
0.7
%
 
$
359,074

 
10.4%

(1) PERCENT OF TOTAL LOANS HELD FOR INVESTMENT, NET OF DEFERRED FEES AND LOANS IN PROCESS. 

The following tables show the activity in the allowance for loan losses by category for the three months ended March 31, 2020 and 2019:
 
Three Months Ended March 31, 2020
 
Residential
Real Estate
 
 
Consumer
 
Commercial
Business
 
Commercial
Real Estate
 
 
Total
Beginning Balance
$
1,390,594

 
$
1,210,849

 
$
544,764

 
$
6,079,367

 
$
9,225,574

Provision for Loan Losses
79,144

 
141,944

 
103,002

 
375,910

 
700,000

Charge-Offs

 
(47,107
)
 
(35,048
)
 

 
(82,155
)
Recoveries
600

 
22,599

 

 
5,220

 
28,419

Ending Balance
$
1,470,338

 
$
1,328,285

 
$
612,718

 
$
6,460,497

 
$
9,871,838

 
 
Three Months Ended March 31, 2019
 
Residential
Real Estate
 
 
Consumer
 
Commercial
Business
 
Commercial
Real Estate
 
 
Total
Beginning Balance
$
1,191,443

 
$
1,203,593

 
$
923,600

 
$
5,853,081

 
$
9,171,717

Provision for Loan Losses
(12,650
)
 
4,806

 
55,446

 
52,398

 
100,000

Charge-Offs
(34,599
)
 
(130,194
)
 
(1,132
)
 
(400,085
)
 
(566,010
)
Recoveries
3,476

 
43,000

 
14,068

 
32,304

 
92,848

Ending Balance
$
1,147,670

 
$
1,121,205

 
$
991,982

 
$
5,537,698

 
$
8,798,555

 


16



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




8.    Loans Receivable, Net, Continued

The following tables present information related to impaired loans evaluated individually and collectively for impairment in the allowance for loan losses at the dates indicated:
 
Allowance For Loan Losses
March 31, 2020
Individually Evaluated For
Impairment
 
Collectively Evaluated For
Impairment
 
 
Total
Residential Real Estate
$

 
$
1,470,338

 
$
1,470,338

Consumer

 
1,328,285

 
1,328,285

Commercial Business

 
612,718

 
612,718

Commercial Real Estate

 
6,460,497

 
6,460,497

Total
$

 
$
9,871,838

 
$
9,871,838

 
Allowance For Loan Losses
December 31, 2019
Individually Evaluated For
Impairment
 
Collectively Evaluated For
Impairment
 
 
Total
Residential Real Estate
$

 
$
1,390,594

 
$
1,390,594

Consumer

 
1,210,849

 
1,210,849

Commercial Business

 
544,764

 
544,764

Commercial Real Estate

 
6,079,367

 
6,079,367

Total
$

 
$
9,225,574

 
$
9,225,574


The following tables present information related to impaired loans evaluated individually and collectively for impairment in loans receivable at the dates indicated:
 
Loans Receivable
March 31, 2020
Individually Evaluated For
Impairment
 
Collectively Evaluated For
Impairment
 
 
Total
Residential Real Estate
$
1,175,502

 
$
85,533,243

 
$
86,708,745

Consumer
180,171

 
58,884,226

 
59,064,397

Commercial Business
64,406

 
24,157,220

 
24,221,626

Commercial Real Estate
1,854,023

 
303,629,048

 
305,483,071

Total
$
3,274,102

 
$
472,203,737

 
$
475,477,839

 
Loans Receivable
December 31, 2019
Individually Evaluated For
Impairment
 
Collectively Evaluated For
Impairment
 
 
Total
Residential Real Estate
$
1,086,433

 
$
85,317,871

 
$
86,404,304

Consumer
184,402

 
56,146,611

 
56,331,013

Commercial Business
64,406

 
22,169,783

 
22,234,189

Commercial Real Estate
1,894,642

 
301,656,263

 
303,550,905

Total
$
3,229,883

 
$
465,290,528

 
$
468,520,411





17



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements



8.    Loans Receivable, Net, Continued

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired management measures the impairment and records the loan at fair value. Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sell, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and, if it is over 24 months old, will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to perform an internal analysis. The average balance of impaired loans was $3.3 million for the three months ended March 31, 2020 compared to $6.7 million for the three months ended March 31, 2019.

The following tables present information related to impaired loans by loan category at March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019. There was no allowance recorded related to any impaired loans at March 31, 2020 and December 31, 2019.
 
March 31, 2020
 
December 31, 2019
Impaired Loans
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
 
Recorded
Investment
Unpaid
Principal
Balance
 
Related
Allowance
With No Related Allowance Recorded:
 
 
 
 
 
 
Residential Real Estate
$
1,175,502

$
1,175,502

$

 
$
1,086,433

$
1,086,433

$

Consumer
180,171

188,471


 
184,402

192,702


Commercial Business
64,406

959,406


 
64,406

959,406


Commercial Real Estate
1,854,023

2,026,242


 
1,894,642

2,066,862


Total
$
3,274,102

$
4,349,621

$

 
$
3,229,883

$
4,305,403

$


 
Three Months Ended March 31,
 
2020
 
2019
Impaired Loans
Average
Recorded
Investment
Interest
Income
Recognized
 
Average
Recorded
Investment
Interest
Income
Recognized
With No Related Allowance Recorded:
 
 
 
 
 
Residential Real Estate
$
1,185,056

$
1,195

 
$
1,361,079

$

Consumer
182,282


 
984,528


Commercial Business
64,406


 
77,206


Commercial Real Estate
1,874,528

15,560

 
2,884,732

14,247

With an Allowance Recorded:
 
 
 
 
 
Consumer


 
72,651


Commercial Real Estate


 
1,319,274


Total