Company Quick10K Filing
Quick10K
Security Federal
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-02-21 Officers
8-K 2019-01-28 Earnings, Exhibits
8-K 2018-10-29 Earnings, Exhibits
8-K 2018-10-18 Officers, Amend Bylaw, Exhibits
8-K 2018-07-30 Earnings, Exhibits
8-K 2018-04-30 Earnings, Exhibits
8-K 2018-04-19 Shareholder Vote
8-K 2018-03-29 Officers, Exhibits
8-K 2018-01-29 Earnings, Exhibits
ULPC Ultimate Products
FRHC Freedom Holding
KLXI KLX
SMRN Smartag International
ARGS Argos Therapeutics
XSNX Xsunx
GRBX Greenbox Pos
ACMC American Church Mortgage
WYTC Wytec
CTGO Contango Ore
SFDL 2018-09-30
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-20180930xex311.htm
EX-31.2 sfdl-20180930xex312.htm
EX-32 sfdl-20180930xex32.htm

Security Federal Earnings 2018-09-30

SFDL 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 sfdl-20180930x10q.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 SEPTEMBER 30, 2018
( ) 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    [ ]
 
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]
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
 
November 14, 2018
 
2,953,896
 




 
 
 
PART I.
FINANCIAL INFORMATION (UNAUDITED)
PAGE NO.
Item 1.
Financial Statements (unaudited):
3
 
Consolidated Balance Sheets at September 30, 2018 and December 31, 2017
3
 
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2018 and 2017
4
 
Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2018 and 2017
5
 
Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2018 and 2017
6
 
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017
7
 
Notes to Consolidated Financial Statements
9
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
33
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
47
Item 4.
Controls and Procedures
47
 
 
 
PART II.
OTHER INFORMATION
 
Item 1.
Legal Proceedings
48
Item 1A.
Risk Factors
48
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
48
Item 3.
Defaults Upon Senior Securities
48
Item 4.
Mine Safety Disclosures
48
Item 5.
Other Information
48
Item 6.
Exhibits
48
 
Signatures
50
 
 
 

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
 
September 30, 2018
 
December 31, 2017
 
(Unaudited)
 
(Audited)
ASSETS:
 
 
 
Cash and Cash Equivalents
$
20,109,901

 
$
10,319,624

Certificates of Deposit with Other Banks
1,950,010

 
1,950,010

Investment and Mortgage-Backed Securities:
 
 
 
Available For Sale ("AFS")
373,752,293

 
384,973,906

Held To Maturity ("HTM") (Fair Value of $21,700,031 and $27,054,934 at September 30, 2018 and December 31, 2017, Respectively)
22,292,027

 
27,080,970

Total Investments and Mortgage-Backed Securities
396,044,320

 
412,054,876

Loans Receivable, Net:
 
 
 
Held For Sale
737,098

 
3,051,950

Held For Investment (Net of Allowance of $8,602,078 and $8,221,618 at September 30, 2018 and December 31, 2017, Respectively)
423,242,690

 
387,441,247

Total Loans Receivable, Net
423,979,788

 
390,493,197

Accrued Interest Receivable:
 
 
 
Loans
1,197,332

 
1,067,657

Mortgage-Backed Securities
577,644

 
589,000

Investment Securities
1,750,315

 
1,699,961

Total Accrued Interest Receivable
3,525,291

 
3,356,618

Premises and Equipment, Net
24,060,662

 
22,797,844

Federal Home Loan Bank ("FHLB") Stock, at Cost
2,485,700

 
2,931,900

Other Real Estate Owned ("OREO")
858,242

 
1,115,671

Bank Owned Life Insurance ("BOLI")
21,102,893

 
18,797,893

Goodwill
1,199,754

 
1,199,754

Other Assets
6,918,380

 
3,795,212

Total Assets
$
902,234,941

 
$
868,812,599

LIABILITIES AND SHAREHOLDERS’ EQUITY:
 
 
 
Liabilities:
 
 
 
Deposit Accounts
$
750,998,309

 
$
702,106,619

Advance Payments By Borrowers for Taxes and Insurance
633,625

 
269,761

Advances From FHLB
39,000,000

 
51,680,000

Other Borrowings
12,652,270

 
11,307,161

Note Payable
3,900,000

 
8,500,000

Junior Subordinated Debentures
5,155,000

 
5,155,000

Senior Convertible Debentures
6,064,000

 
6,064,000

Other Liabilities
6,945,324

 
5,806,604

Total Liabilities
$
825,348,528

 
$
790,889,145

Shareholders' Equity:
 
 
 
Common Stock, $.01 Par Value; Authorized 5,000,000 Shares; Issued and Outstanding Shares, 3,154,357 and 2,953,424, Respectively, at September 30, 2018 and 3,153,907 and 2,952,974, Respectively, at December 31, 2017
$
31,544

 
$
31,539

Additional Paid-In Capital
12,223,149

 
12,212,844

Treasury Stock, at Cost (200,933 Shares)
(4,330,712
)
 
(4,330,712
)
Accumulated Other Comprehensive Income (Loss) ("AOCI")
(2,364,215
)
 
2,932,122

Retained Earnings
71,326,647

 
67,077,661

Total Shareholders' Equity
$
76,886,413

 
$
77,923,454

Total Liabilities and Shareholders' Equity
$
902,234,941

 
$
868,812,599


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

3


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Interest Income:
 
 
 
 
 
 
 
Loans
$
5,890,317

 
$
5,146,669

 
$
16,965,442

 
$
14,849,109

Mortgage-Backed Securities
1,351,134

 
1,274,753

 
3,943,521

 
3,552,887

Investment Securities
1,239,798

 
1,324,104

 
3,357,698

 
3,729,992

Other
25,228

 
6,295

 
42,384

 
34,804

Total Interest Income
8,506,477

 
7,751,821

 
24,309,045

 
22,166,792

Interest Expense:
 
 
 
 
 
 
 
NOW and Money Market Accounts
325,427

 
151,874

 
774,637

 
426,080

Statement Savings Accounts
14,120

 
10,726

 
38,420

 
30,000

Certificate Accounts
706,590

 
503,505

 
1,856,348

 
1,401,910

FHLB Advances and Other Borrowed Money
157,148

 
164,544

 
513,018

 
409,655

Note Payable
51,856

 
105,762

 
190,790

 
328,613

Senior Convertible Debentures
121,280

 
121,396

 
363,840

 
364,756

Junior Subordinated Debentures
53,218

 
38,975

 
147,234

 
110,863

Total Interest Expense
1,429,639

 
1,096,782

 
3,884,287

 
3,071,877

Net Interest Income
7,076,838

 
6,655,039

 
20,424,758

 
19,094,915

Provision For Loan Losses
150,000

 
100,000

 
150,000

 
100,000

Net Interest Income After Provision For Loan Losses
6,926,838

 
6,555,039

 
20,274,758

 
18,994,915

Non-Interest Income:
 
 
 
 
 
 
 
Gain on Sale of Investment Securities

 
79,363

 
436,304

 
707,902

Gain on Sale of Loans
345,396

 
373,636

 
999,045

 
894,053

Service Fees on Deposit Accounts
262,821

 
274,717

 
770,493

 
776,469

Commissions From Insurance Agency
196,817

 
172,074

 
525,153

 
451,311

Trust Income
249,000

 
186,000

 
725,000

 
554,000

BOLI Income
135,000

 
788,133

 
405,000

 
1,028,133

Check Card Fee Income
320,708

 
282,686

 
966,365

 
838,302

Grant Income
318,102

 

 
318,102

 

Other
241,837

 
205,524

 
712,785

 
542,250

Total Non-Interest Income
2,069,681

 
2,362,133

 
5,858,247

 
5,792,420

Non-Interest Expense:
 
 
 
 
 
 
 
Compensation and Employee Benefits
4,032,245

 
3,872,102

 
11,683,664

 
10,916,386

Occupancy
586,527

 
569,024

 
1,677,970

 
1,661,661

Advertising
181,663

 
120,033

 
455,753

 
391,742

Depreciation and Maintenance of Equipment
575,750

 
569,839

 
1,673,470

 
1,541,460

Federal Deposit Insurance Corporation ("FDIC") Insurance Premiums
72,837

 
64,518

 
206,218

 
168,707

Net Cost (Benefit) of Operation of OREO
(203,104
)
 
105,172

 
(362,864
)
 
(96,730
)
Other
1,171,664

 
1,268,449

 
3,842,576

 
3,681,552

Total Non-Interest Expense
6,417,582

 
6,569,137

 
19,176,787

 
18,264,778

Income Before Income Taxes
2,578,937

 
2,348,035

 
6,956,218

 
6,522,557

Provision For Income Taxes
471,245

 
445,133

 
1,298,455

 
1,513,090

Net Income
$
2,107,692

 
$
1,902,902

 
$
5,657,763

 
$
5,009,467

Net Income Per Common Share (Basic)
$
0.71

 
$
0.65

 
$
1.92

 
$
1.70

Net Income Per Common Share (Diluted)
$
0.68

 
$
0.61

 
$
1.82

 
$
1.61

Cash Dividend Per Share on Common Stock
$
0.09

 
$
0.09

 
$
0.09

 
$
0.27

Weighted Average Shares Outstanding (Basic)
2,953,424

 
2,945,474

 
2,953,340

 
2,945,215

Weighted Average Shares Outstanding (Diluted)
3,256,624

 
3,252,436

 
3,256,540

 
3,251,666


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

4


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
 
Three Months Ended September 30,
 
2018
 
2017
Net Income
$
2,107,692

 
$
1,902,902

Other Comprehensive Loss
 
 
 
Unrealized Losses on Securities:
 
 
 
Unrealized Holding Losses on Securities AFS, Net of Taxes of $(618,602) and $(39,600) at September 30, 2018 and 2017, Respectively
(1,888,549
)
 
(64,802
)
Reclassification Adjustment for Gains Included in Net Income, Net of Taxes of $30,158 at September 30, 2017

 
(49,205
)
Amortization of Unrealized Gains on AFS Securities Transferred to HTM, Net of Taxes of $(5,999) and $(14,084) at September 30, 2018 and 2017, Respectively
(17,998
)
 
(23,019
)
Other Comprehensive Loss
(1,906,547
)
 
(137,026
)
Comprehensive Income
$
201,145

 
$
1,765,876


 
Nine Months Ended September 30,
 
2018
 
2017
Net Income
$
5,657,763

 
$
5,009,467

Other Comprehensive (Loss) Income
 
 
 
Unrealized (Losses) Gains on Securities:
 
 
 
Unrealized Holding (Losses) Gains on Securities AFS Net of Taxes of $(1,804,885) and $1,892,760 at September 30, 2018 and 2017, Respectively
(5,515,962
)
 
3,080,485

Reclassification Adjustment for Gains Included in Net Income, Net of Taxes of $109,076 and $269,003 at September 30, 2018 and 2017, Respectively
(327,228
)
 
(438,899
)
Amortization of Unrealized Gains on AFS Securities Transferred to HTM, Net of Taxes of $(23,718) and $(50,102) at September 30, 2018 and 2017, Respectively
(64,238
)
 
(81,884
)
Other Comprehensive (Loss) Income
(5,907,428
)
 
2,559,702

Comprehensive (Loss) Income
$
(249,665
)
 
$
7,569,169


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


5


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
For the Nine Months Ended September 30, 2018 and 2017

 
 
 
Common
Stock
 
Unvested Restricted Stock
 
 
Additional
Paid – In
 Capital
 
 
 
Treasury
Stock
 
AOCI
 
 
 
Retained
Earnings
 
 
 
 
Total
Balance at December 31, 2016
$
31,464

 
$
(25,358
)
 
$
12,036,744

 
$
(4,330,712
)
 
$
1,180,086

 
$
62,220,050

 
$
71,112,274

Net Income

 

 

 

 

 
5,009,467

 
5,009,467

Other Comprehensive Income, Net of Tax

 

 

 

 
2,559,702

 

 
2,559,702

Vesting of Restricted Stock
 
 
25,358

 

 

 

 

 
25,358

Cash Dividends on Common Stock

 

 

 

 

 
(795,277
)
 
(795,277
)
Balance at September 30, 2017
$
31,464

 
$

 
$
12,036,744

 
$
(4,330,712
)
 
$
3,739,788

 
$
66,434,240

 
$
77,911,524



 
 
 
Common
Stock
 
 
Additional
Paid – In
 Capital
 
 
 
Treasury
Stock
 
AOCI
 
 
 
Retained
Earnings
 
 
 
 
Total
Balance at December 31, 2017
$
31,539

 
$
12,212,844

 
$
(4,330,712
)
 
$
2,932,122

 
$
67,077,661

 
$
77,923,454

Net Income

 

 

 

 
5,657,763

 
5,657,763

Other Comprehensive Income, Net of Tax

 

 

 
(5,907,428
)
 

 
(5,907,428
)
Reclassification of stranded tax effects from AOCI to Retained Earnings

 

 

 
611,091

 
(611,091
)
 

Stock Options Exercised
5

 
10,305

 

 

 

 
10,310

Cash Dividends on Common Stock

 

 

 

 
(797,686
)
 
(797,686
)
Balance at September 30, 2018
$
31,544

 
$
12,223,149

 
$
(4,330,712
)
 
$
(2,364,215
)
 
$
71,326,647

 
$
76,886,413


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

6


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)
 
Nine Months Ended September 30,
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net Income
$
5,657,763

 
$
5,009,467

Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
 
 
 
Depreciation Expense
1,062,542

 
1,101,900

Stock Option Compensation Expense

 
25,358

Discount Accretion and Premium Amortization
4,271,865

 
4,190,700

Provisions for Losses on Loans
150,000

 
100,000

Earnings on BOLI
(405,000
)
 
(374,000
)
Income Recognized From BOLI Death Benefit

 
(654,133
)
Gain on Sales of Loans
(999,045
)
 
(894,053
)
Gain on Sales of Mortgage-Backed Securities ("MBS")
(181,034
)
 
(250,149
)
Gain on Sales of Investment Securities
(255,270
)
 
(457,752
)
Gain on Sale of Premises and Equipment

 
(1,900
)
Gain on Sales of OREO
(547,685
)
 
(321,687
)
Write Down on OREO
56,000

 
68,121

Amortization of Deferred Loan Costs
73,163

 
127,058

Proceeds From Sale of Loans Held For Sale
38,316,435

 
33,301,781

Origination of Loans Held For Sale
(35,002,538
)
 
(29,434,231
)
(Increase) Decrease in Accrued Interest Receivable:
 
 
 
Loans
(129,675
)
 
102,016

MBS
11,356

 
17,509

Investment Securities
(50,354
)
 
(308,595
)
Increase in Advance Payments By Borrowers
363,864

 
408,911

(Increase) Decrease in Other, Net
(134,725
)
 
594,400

Net Cash Provided By Operating Activities
$
12,257,662

 
$
12,350,721

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchase of MBS AFS
$
(41,314,618
)
 
$
(42,875,234
)
Proceeds from Payments and Maturities of MBS AFS
28,033,612

 
28,487,010

Proceeds from Sale of MBS AFS
17,007,024

 
19,003,897

Proceeds from Payments and Maturities of MBS Held To Maturity ("HTM")
2,536,945

 
2,836,011

Purchase of Investment Securities AFS
(38,965,898
)
 
(75,688,312
)
Proceeds from Payments and Maturities of Investment Securities AFS
23,557,323

 
17,854,087

Proceeds from Sale of Investment Securities AFS
11,563,456

 
27,825,020

Purchase of Investment Securities HTM

 
(3,997,750
)
Proceeds from Payments and Maturities of Investment Securities HTM
2,000,000

 
1,000,000

Proceeds from Redemption of Certificates of Deposits with Other Banks

 
1,095,000

Purchase of FHLB Stock
(4,194,300
)
 
(5,129,700
)
Redemption of FHLB Stock
4,640,500

 
5,432,500

Purchase of BOLI
(1,900,000
)
 
(2,000,000
)
Proceeds From BOLI Death Benefit

 
1,463,285

Increase in Loans Receivable
(36,340,156
)
 
(19,680,925
)
Proceeds From Sale of OREO
1,064,664

 
1,558,891

Purchase and Improvement of Premises and Equipment
(2,325,360
)
 
(2,769,640
)
Proceeds From Sale of Premises and Equipment

 
1,900

Net Cash Used By Investing Activities
$
(34,636,808
)
 
$
(45,583,960
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Increase in Deposit Accounts
$
48,891,690

 
$
47,510,082

Proceeds from FHLB Advances
160,083,000

 
157,576,000

Repayment of FHLB Advances
(172,763,000
)
 
(164,971,000
)
Increase in Other Borrowings, Net
1,345,109

 
3,017,664

Repayment of Note Payable
(4,600,000
)
 
(3,300,000
)
Purchase of Senior Convertible Debentures

 
(20,000
)
Proceeds from Employee Stock Options Exercised
10,310

 

Dividends to Common Stock Shareholders
(797,686
)
 
(795,277
)
Net Cash Provided By Financing Activities
$
32,169,423

 
$
39,017,469


7


SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited) (Continued)
 
 
 
 
 
Nine Months Ended September 30,
 
2018
 
2017
Net Increase in Cash and Cash Equivalents
9,790,277

 
5,784,230

Cash and Cash Equivalents at Beginning of Period
10,319,624

 
9,374,549

Cash and Cash Equivalents at End of Period
$
20,109,901

 
$
15,158,779

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
Cash Paid During The Period For:
 
 
 
Interest
$
3,719,123

 
$
2,937,283

Income Taxes
$
992,273

 
$
1,162,000

Supplemental Schedule of Non Cash Transactions:
 
 
 
Transfers From Loans Receivable to OREO
$
315,550

 
$
491,748

Other Comprehensive (Loss) Income
$
(5,907,428
)
 
$
2,559,702


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 ("U.S. 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”) 2017 Annual Report to Shareholders which was filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 10-K”) when reviewing interim financial statements. The unaudited consolidated results of operations for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. 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”) 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. 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, 2017 included in our 2017 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 Common 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 September 30, 2018. All of the options outstanding at September 30, 2017 had an exercise price below the average market price during the three and nine months ended September 30, 2017. Therefore, these options were considered to be dilutive to EPS in those periods. Diluted EPS also assumes the convertible debentures were converted into 303,200 shares of common stock as of the beginning of the period. 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 September 30,
 
2018
 
2017
 
Income
 
Shares
 
Per Share Amounts
 
Income
 
Shares
 
Per Share Amounts
Basic EPS
$
2,107,692

 
2,953,424

 
$
0.71

 
$
1,902,902

 
2,945,474

 
$
0.65

Effect of Dilutive Securities:
 
 
 
 
 
 
 
 
 
 
 
Stock Options

 

 

 

 
3,762

 
(0.01
)
Senior Convertible Debentures
90,960

 
303,200

 
(0.03
)
 
75,266

 
303,200

 
(0.02)

Diluted EPS
$
2,198,652

 
3,256,624

 
$
0.68

 
$
1,978,168

 
3,252,436

 
$
0.61


10



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




4. Earnings Per Common Share, Continued

 
Nine Months Ended September 30,
 
2018
 
2017
 
Income
 
Shares
 
Per Share Amounts
 
Income
 
Shares
 
Per Share Amounts
Basic EPS
$
5,657,763

 
2,953,340

 
$
1.92

 
$
5,009,467

 
2,945,215

 
$
1.70

Effect of Dilutive Securities:
 
 
 
 
 
 
 
 
 
 
 
Stock Options

 

 

 

 
3,251

 
(0.01
)
Senior Convertible Debentures
272,880

 
303,200

 
(0.10)

 
226,149

 
303,200

 
(0.08)

Diluted EPS
$
5,930,643

 
3,256,540

 
$
1.82

 
$
5,235,616

 
3,251,666

 
$
1.61



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. The following is a summary of the activity under the Company’s stock option plans for the periods presented:
 
Three Months Ended September 30,
 
2018
 
2017
 
Shares
 
Weighted Average Exercise Price
 
Shares
 
Weighted Average Exercise Price
 
 
Balance, Beginning of Period
1,650

 
$22.91
 
19,500

 
$23.49
Options Forfeited
(1,650
)
 
22.91
 
(1,000
)
 
24.61
Balance, End of Period

 
 
18,500

 
$23.43
 
Nine Months Ended September 30,
 
2018
 
2017
 
Shares
 
Weighted Average Exercise Price
 
Shares
 
Weighted Average Exercise Price
 
 
 
 
Balance, Beginning of Period
4,500

 
$22.91
 
21,500

 
$23.57
Options Exercised
(450
)
 
22.91
 

 
Options Forfeited
(4,050
)
 
22.91
 
(3,000
)
 
24.43
Balance, End of Period

 

 
18,500

 
$23.43
 
 
 
 
 
 
 
 
Options Exercisable

 
 
 
18,500

 
 
 
 
 
 
 
 
 
 
Options Available For Grant
50,000

 
 
 
50,000

 
 

At September 30, 2018, the Company had no options outstanding.

 

11



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements



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:
 
September 30, 2018
 
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Student Loan Pools
$
12,957,559

 
$
33,076

 
$
9,096

 
$
12,981,539

Small Business Administration (“SBA”) Bonds
118,275,224

 
227,093

 
1,277,257

 
117,225,060

Tax Exempt Municipal Bonds
60,381,306

 
897,641

 
797,693

 
60,481,254

Taxable Municipal Bonds
3,007,036

 

 
66,401

 
2,940,635

Mortgage-Backed Securities
182,045,631

 
811,987

 
2,977,163

 
179,880,455

State Tax Credit
88,350

 

 

 
88,350

Equity Securities
155,000

 

 

 
155,000

Total Available For Sale
$
376,910,106

 
$
1,969,797

 
$
5,127,610

 
$
373,752,293

 
 
 
 
 
 
 
 
 
December 31, 2017
 
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Student Loan Pools
$
8,522,043

 
$
1,288

 
$
1,546

 
$
8,521,785

SBA Bonds
123,324,802

 
1,113,160

 
189,518

 
124,248,444

Tax Exempt Municipal Bonds
59,623,185

 
2,789,233

 
56,851

 
62,355,567

Taxable Municipal Bonds
2,016,833

 

 
19,703

 
1,997,130

Mortgage-Backed Securities
186,732,705

 
1,936,847

 
973,572

 
187,695,980

Equity Securities
155,000

 

 

 
155,000

Total Available For Sale
$
380,374,568

 
$
5,840,528

 
$
1,241,190

 
$
384,973,906


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 September 30, 2018, AFS GNMA mortgage-backed securities had an amortized cost and fair value of $82.1 million and $81.5 million, respectively, compared to an amortized cost and fair value of $101.3 million and $102.1 million, respectively, at December 31, 2017.

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 September 30, 2018 the Bank held AFS private label CMO mortgage-backed securities with an amortized cost and fair value of $29.9 million and $29.8 million, respectively, compared to an amortized cost and fair value of $26.9 million at December 31, 2017.











12



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




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

The amortized cost and fair value of investment and mortgage-backed securities available for sale at September 30, 2018 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.
 
September 30, 2018
Investment Securities:
Amortized Cost
 
Fair Value
One Year or Less
$
1,125,559

 
$
1,122,015

After One – Five Years
11,035,958

 
10,987,529

After Five – Ten Years
42,005,204

 
41,714,850

More Than Ten Years
140,697,754

 
140,047,444

Mortgage-Backed Securities
182,045,631

 
179,880,455

Total Available For Sale
$
376,910,106

 
$
373,752,293


At September 30, 2018 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 $118.9 million and $118 million, respectively, compared to an amortized cost and fair value of $99.2 million and $100.5 million, respectively, at December 31, 2017.

The Bank received $28.6 million and $46.8 million in gross proceeds from sales of available for sale securities during the nine months ended September 30, 2018 and 2017, respectively. As a result, the Bank recognized gross gains of $503,000 and $870,000, respectively, with $67,000 and $162,000 gross losses recognized for the same periods.
 
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.
 
September 30, 2018
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
Student Loan Pools
$
2,057,695

$
9,096

 
$

$

 
$
2,057,695

$
9,096

SBA Bonds
79,678,260

964,997

 
14,490,089

312,260

 
94,168,349

1,277,257

Tax Exempt Municipal Bonds
32,933,452

492,761

 
6,384,426

304,932

 
39,317,878

797,693

Taxable Municipal Bonds
1,969,285

32,952

 
971,350

33,449

 
2,940,635

66,401

Mortgage-Backed Securities
75,412,165

1,211,586

 
56,908,117

1,765,577

 
132,320,282

2,977,163

 
$
192,050,857

$
2,711,392

 
$
78,753,982

$
2,416,218

 
$
270,804,839

$
5,127,610

 
December 31, 2017
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
Student Loan Pools
$
7,556,014

$
1,546

 
$

$

 
$
7,556,014

$
1,546

SBA Bonds
24,433,422

151,459

 
5,588,532

38,059

 
30,021,954

189,518

Tax Exempt Municipal Bonds
4,406,162

13,852

 
4,328,229

42,999

 
8,734,391

56,851

Taxable Municipal Bond
1,997,130

19,703

 


 
1,997,130

19,703

Mortgage-Backed Securities
62,574,910

624,772

 
23,612,359

348,800

 
86,187,269

973,572

 
$
100,967,638

$
811,332

 
$
33,529,120

$
429,858

 
$
134,496,758

$
1,241,190



13



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




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

Securities classified as available for sale are recorded at fair market value.  At September 30, 2018 and December 31, 2017, 47.1% and 34.6% of the unrealized losses, representing 64 and 30 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”).

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 nine months ended September 30, 2018.

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

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of held to maturity securities at the dates indicated below were as follows:
 
September 30, 2018
 
 Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Federal Home Loan Mortgage Corporation ("FHLMC") Bond
$
998,434

 
$

 
$
32,813

 
$
965,621

Mortgage-Backed Securities (1)
21,293,593

 
69,733

 
628,916

 
20,734,410

Total Held To Maturity
$
22,292,027

 
$
69,733

 
$
661,729

 
$
21,700,031

 
 
December 31, 2017
 
 Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
FHLB Bonds
$
2,000,000

 
$

 
$
2,984

 
$
1,997,016

FHLMC Bond
998,102

 

 
12,588

 
985,514

Mortgage-Backed Securities (1)
24,082,868

 
120,843

 
131,307

 
24,072,404

Total Held To Maturity
$
27,080,970

 
$
120,843

 
$
146,879

 
$
27,054,934

(1) COMPRISED OF MORTGAGE-BACKED SECURITIES OF GSEs OR GNMA 
The FHLB, FHLMC and the Federal National Mortgage Association ("FNMA") are government sponsored enterprises ("GSEs") and the securities and bonds issued by GSEs are not backed by the full faith and credit of the United States government.  At September 30, 2018, the Bank held an amortized cost and fair value of $13.9 million and $13.5 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 $15.9 million and $15.9 million, respectively, at December 31, 2017. The Company has not invested in any private label mortgage-backed securities classified as held to maturity.

At September 30, 2018, 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 $20.4 million and $19.9 million, respectively, compared to an amortized cost and fair value of $22.3 million at December 31, 2017.



14



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements



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

The amortized cost and fair value of investment and mortgage-backed securities held to maturity at September 30, 2018 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.
 
September 30, 2018
Investment Securities:
Amortized Cost
 
Fair Value
One – Five Years
$
998,434

 
$
965,621

Mortgage-Backed Securities
21,293,593

 
20,734,410

 Total Held to Maturity
$
22,292,027

 
$
21,700,031


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.
 
September 30, 2018
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
FHLMC Bond
$

$

 
$
965,621

$
32,813

 
$
965,621

$
32,813

Mortgage-Backed Securities (1)
11,070,475

321,204

 
8,067,582

307,712

 
19,138,057

628,916

 
$
11,070,475

$
321,204

 
$
9,033,203

$
340,525

 
$
20,103,678

$
661,729

(1) COMPRISED OF MORTGAGE-BACKED SECURITIES OF GSEs OR GNMA 
 
December 31, 2017
 
Less than 12 Months
 
12 Months or More
 
Total
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
 
Fair
Value
Unrealized
Losses
FHLB Bond
$
1,997,016

$
2,984

 
$

$

 
$
1,997,016

$
2,984

FHLMC Bond
985,514

12,588

 


 
985,514

12,588

Mortgage-Backed Securities (1)
17,645,676

103,387

 
1,284,971

27,920

 
18,930,647

131,307

 
$
20,628,206

$
118,959

 
$
1,284,971

$
27,920

 
$
21,913,177

$
146,879

(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.


15



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements



8.    Loans Receivable, Net

Loans receivable, net, consisted of the following as of the dates indicated below:
 
September 30, 2018
 
December 31, 2017
Residential Real Estate Loans
$
85,193,491

 
$
81,255,167

Consumer Loans
57,962,835

 
56,761,695

Commercial Business Loans
27,407,959

 
26,777,893

Commercial Real Estate Loans
267,568,254

 
237,814,628

Total Loans Held For Investment
438,132,539

 
402,609,383

Loans Held For Sale
737,098

 
3,051,950

Total Loans Receivable, Gross
$
438,869,637

 
$
405,661,333

Less:
 
 
 
Allowance For Loan Losses
8,602,078

 
8,221,618

Loans in Process
6,048,974

 
6,804,533

Deferred Loan Fees
238,797

 
141,985

 
14,889,849

 
15,168,136

Total Loans Receivable, Net
$
423,979,788

 
$
390,493,197


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.

The tables below summarize the balance within each risk category by loan type, excluding loans held for sale, at September 30, 2018 and December 31, 2017.
September 30, 2018
 
Pass
 
 
Caution
 
Special
Mention
 
 
Substandard
 
 
Total Loans
Residential Real Estate
$
76,083,485

 
$
3,558,567

 
$
1,308,296

 
$
4,243,143

 
$
85,193,491

Consumer
49,309,083

 
5,848,589

 
479,473

 
2,325,690

 
57,962,835

Commercial Business
22,569,651

 
4,135,663

 
359,785

 
342,860

 
27,407,959

Commercial Real Estate
190,029,320

 
47,269,195

 
20,101,394

 
10,168,345

 
267,568,254

Total
$
337,991,539

 
$
60,812,014

 
$
22,248,948

 
$
17,080,038

 
$
438,132,539

December 31, 2017
 
Pass
 
 
Caution
 
Special
Mention
 
 
Substandard
 
 
Total Loans
Residential Real Estate
$
73,225,237

 
$
2,352,536

 
$
1,384,222

 
$
4,293,172

 
$
81,255,167

Consumer
52,249,017

 
1,862,340

 
344,361

 
2,305,977

 
56,761,695

Commercial Business
23,396,550

 
2,066,749

 
767,048

 
547,546

 
26,777,893

Commercial Real Estate
158,232,465

 
53,798,061

 
21,269,279

 
4,514,823

 
237,814,628

Total
$
307,103,269

 
$
60,079,686

 
$
23,764,910

 
$
11,661,518

 
$
402,609,383





16



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements



8.    Loans Receivable, Net, Continued

The following tables present an age analysis of past due balances, including loans on non-accrual status, by category at September 30, 2018 and December 31, 2017:
 
September 30, 2018
 
 
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
$
473,728

 
$

 
$
494,065

 
$
967,793

 
$
84,225,698

 
$
85,193,491

Consumer
275,395

 
164,359

 
908,797

 
1,348,551

 
56,614,284

 
57,962,835

Commercial Business
187,558

 
31,600

 
5,000

 
224,158

 
27,183,801

 
27,407,959

Commercial Real Estate
1,396,237

 
406,753

 
1,980,648

 
3,783,638

 
263,784,616

 
267,568,254

Total
$
2,332,918

 
$
602,712

 
$
3,388,510

 
$
6,324,140

 
$
431,808,399

 
$
438,132,539


 
December 31, 2017
 
 
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
$
395,763

 
$

 
$
948,875

 
$
1,344,638

 
$
79,910,529

 
$
81,255,167

Consumer
604,809

 
85,178

 
182,757

 
872,744

 
55,888,951

 
56,761,695

Commercial Business
185,526

 
102,244

 

 
287,770

 
26,490,123

 
26,777,893

Commercial Real Estate
2,207,655

 
364,515

 
1,919,292

 
4,491,462

 
233,323,166

 
237,814,628

Total
$
3,393,753

 
$
551,937

 
$
3,050,924

 
$
6,996,614

 
$
395,612,769

 
$
402,609,383


At September 30, 2018 and December 31, 2017, the Company did not have any loans that were 90 days or more past due and still accruing interest. Our strategy is to work with our borrowers to reach acceptable payment plans while protecting our interests in the existing collateral.  In the event an acceptable arrangement cannot be reached, we may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them.

The following table shows non-accrual loans by category at September 30, 2018 compared to December 31, 2017:

 
September 30, 2018
 
December 31, 2017
 
$
 
%
 
Amount
 
Percent (1)
 
Amount
 
Percent (1)
 
Increase (Decrease)
 
Increase (Decrease)
Non-accrual Loans:
 
 
 
 
 
 
 
 
 
 
 
Residential Real Estate
$
2,246,142

 
0.5
%
 
$
1,948,524

 
0.5
%
 
$
297,618

 
15.3%
Consumer
1,181,304

 
0.3

 
318,926

 
0.1

 
$
862,378

 
270.4
Commercial Business
83,006

 

 
109,401

 

 
(26,395
)
 
(24.1)
Commercial Real Estate
6,487,224

 
1.5

 
3,340,904

 
0.8

 
3,146,320

 
94.2
Total Non-accrual Loans
$
9,997,676

 
2.3
%
 
$
5,717,755

 
1.5
%
 
$
4,279,921

 
74.9%

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







17



SECURITY FEDERAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements




8.    Loans Receivable, Net, Continued

The following tables show the activity in the allowance for loan losses by category for the three and nine months ended September 30, 2018 and 2017:
 
Three Months Ended September 30, 2018
 
Residential
Real Estate
 
 
Consumer
 
Commercial
Business
 
Commercial
Real Estate
 
 
Total
Beginning Balance
$
1,309,069

 
$
1,213,774

 
$
1,077,433

 
$
5,010,900

 
$
8,611,176

Provision for Loan Losses
128,753

 
(21,106
)
 
(144,996
)
 
187,349

 
150,000

Charge-Offs
(27,489
)
 
(27,181
)
 

 
(117,822
)
 
(172,492
)
Recoveries

 
8,519

 

 
4,875

 
13,394

Ending Balance
$
1,410,333

 
$
1,174,006

 
$
932,437

 
$
5,085,302

 
$
8,602,078

 
 
Nine Months Ended September 30, 2018
 
Residential
Real Estate
 
 
Consumer
 
Commercial
Business
 
Commercial
Real Estate
 
 
Total
Beginning Balance
$
1,233,843

 
$
1,144,815

 
$
1,011,227

 
$
4,831,733

 
$
8,221,618

Provision for Loan Losses
217,702

 
51,275

 
(46,272
)
 
(72,705
)
 
150,000

Charge-Offs
(41,419
)
 
(118,207
)
 
(32,518
)
 
(127,712
)
 
(319,856
)
Recoveries
207

 
96,123

 

 
453,986

 
550,316

Ending Balance
$
1,410,333

 
$
1,174,006

 
$
932,437

 
$
5,085,302

 
$
8,602,078

 
Three Months Ended September 30, 2017
 
Residential
Real Estate
 
 
Consumer
 
Commercial
Business
 
Commercial
Real Estate
 
 
Total
Beginning Balance
$
1,450,176

 
$
1,122,473

 
$
880,642

 
$
4,749,341

 
$
8,202,632

Provision for Loan Losses
80,766

 
110,023

 
(842
)
 
(89,947
)
 
100,000

Charge-Offs
(114,869
)
 
(82,087
)
 

 
(62,482
)
 
(259,438
)
Recoveries
1,014

 
15,392

 

 
109,588

 
125,994

Ending Balance
$
1,417,087

 
$
1,165,801

 
$
879,800

 
$
4,706,500

 
$
8,169,188